Top Iowa business leaders are still optimistic, but less so than three months ago

Expectations for sales, capital investment and employment for the next six months are down among executives at some of Iowa’s top employers.

The Iowa Business Council has released its second quarter Economic Outlook Survey for 2024, and while the overall index, at 55.26, is still considered optimistic, it is down 7.9 points from the previous quarter and 5.17 from the historical average of 60.43. It is also the lowest score since the business downturn that followed the arrival in Iowa of the COVID-19 pandemic more than four years ago.

“While IBC members continue to view Iowa’s economy in a positive light, we are clear-eyed with respect to the persistent challenges facing our companies," Phil Jasper, president of Raytheon in Cedar Rapids and chair of the council, said in a news release. "Whether that be navigating stressed supply chains, continued workforce shortages, or combatting inflation, Iowa companies are not immune to challenges on a national scale and that sentiment is reflected in the latest survey results.”

The survey showed:

• Sales expectations were down 9.21 points from the first quarter to a score of 57.89.
• Capital spending expectations also were down 9.21 points, to a score of 53.9.
• Employment expectations were down 5.26 points to a score of 53.95.

Although expectations for hiring are down, workforce retention and attraction remains the No. 1 concern of the Iowa executives in the survey, with 63% of the respondents saying it is the top challenge they face. From a workforce perspective, 68% of IBC executives reported it is somewhat to very difficult to currently hire employees, down from 85% in the 2023 fourth-quarter survey.

According to Iowa State University economist Peter Orazem, 38% of Iowa's population growth since 2000 has been the result of immigration. IBC President Joe Murphy told the Des Moines Register the organization recognizes the need to attract immigration to fill jobs and is urging the state's congressional delegation to support visa reforms to reduce the time and red tape surrounding their hiring.

“As an economy, allocations of visas were established many, many years ago. Things have changed, particularly of late, and so we need to reevaluate the whole visa structure, the allotment of visas, to reflect the modern-day economy,” Murphy said.

He said Iowa also needs to work on retaining more of its college graduates, including foreign students.

"If you're graduating from a university in the state of Iowa as a foreign student, our perspective would be that there should be a green card stapled to that diploma, right?," he said. "Quite literally we're educating the next generation of world leaders in academia, oftentimes in Iowa, and I think that’s an important step to take so that we don’t lose that talent. They want to be here.”

He said council members also recognize the responsibility they have in welcoming immigrants to Iowa.

“From a business perspective it's up to our businesses to make sure that they're providing welcoming and inclusive places to work and to live and to be part of a community broader than just the business, and that's what we'll continue to do,” he said.

New issue, concern about the domestic economy, emerges in survey

Rounding out the top three business concerns, 47% of IBC executives in the survey cited an unfavorable business climate, the product of national supply chain and infrastructure issues and federal regulations. And 32% pointed to inflation and growing concerns about the domestic economy.

Murphy said was not an issue IBC has seen show up on previous surveys. Orazem said only three other states — Kansas and North and South Dakota — had steeper declines in gross state product in the first quarter of 2024 than Iowa’s 3.3% drop. Bureau of Economic Analysis reports show Iowa was one of only 10 states that experienced a drop during that period.

Orazem also pointed out that Iowa trailed the rest of the U.S. in employment growth in all but four of 16 sectors from 2019 to 2023.

“We are badly lagging the rest of the country and have been for several years. Weakness in ag is at least partly responsible, but Iowa is lagging the rest of the country in most sectors,” he said,

U.S. Bureau of Labor Statistics data show the four sectors where Iowa experienced employment gains above the U.S. average were in manufacturing, durable goods, non-durable goods and general merchandise stores. Both in Iowa and in the U.S., employment in retail trade dropped during that time, but the decrease in Iowa was just 0.3%, far less than the nationwide decrease of 1.7%.

While the overall score in the survey remained positive, the downward trends are worth noting, Murphy said.

“There's some yellow lights out there, some cautionary lights out there that that I think business leaders are seeing and they are reacting accordingly,” he said.

“These macro national trends that are impacting the U.S. economy will at some point have an impact on Iowa and Iowa business leaders and so this indicates to us that those situations are being felt here in Iowa now, or at least being aware business leaders are taking them into account as they're making decisions,” he said.

Murphy said current national and international economic conditions have some industries like manufacturing looking for more information on where the economy is headed before making long-term plans while others, such as health care, “would really like to hire as many folks as they possibly can.”

IBC member have completed the Economic Outlook on a quarterly basis since 2004. Employing more than 160,000 Iowans, they are Alliant Energy; Atlantic Coca-Cola Bottling Co.; Casey’s General Stores Inc.; Collins Aerospace; Corteva Agriscience; Deere & Company; Fareway; HNI Corp.; Hy-Vee Inc.; the Iowa Bankers Association; Kent Corp.; MercyOne; MidAmerican Energy Co.; Pella Corp.; Principal Financial; Ruan Transportation Management Systems; The Weitz Co.; UnityPoint Health; Vermeer Corp.; Wellmark Blue Cross Blue Shield of Iowa; Wells Enterprises Inc; and Workiva.

Previous Economic Outlook Surveys can be found at iowabusinesscouncil.org/news/eos .

Kevin Baskins covers jobs and the economy for the Des Moines Register. Reach him at kbaskins@registermedia.com .

This article originally appeared on Des Moines Register: Top Iowa business leaders are still optimistic, but less so than three months ago