Dave Swenson Department of Economics
Transcript of Dave Swenson Department of Economics
7/30/2021
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Industry Trends & Iowa’s Economy
Dave Swenson
Department of Economics
• Nationally – The pandemic did unprecedented short‐term and, we suppose, longer‐term damage to the U.S. economy. Some industries fared better than others. Some geographies did as well.
• State – Iowa’s economic experiences both tracked and diverged from the national pattern.
• Labor – The pandemic damaged the nation’s labor force; what that means for Iowa is not well understood of yet.
• Outlook – Huge wildcard. Depends on where we were pre‐pandemic, what the pandemic has altered, and what opportunities emerge
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The pandemic job decline was harsh
Massive increase in unemployment and collapsing business activity required unprecedented action at the federal level
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The objective of federal spending was to sustain firms and households and prevent economic collapse
• Payments to individuals
• Emergency unemployment assistance / unemployment assistance to proprietors (gig workers)
• Paycheck protection program
• Huge flow of funds to corporations considered essential or who were hardest hit
• Additional resources for small businesses
• S&L government support
• And initial pandemic public health outlays
These programs prevented further economic collapse and helped maintain households and firms:
Real Personal Expenditures
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Followed by 2nd and 3rd rounds of pandemic relief
• Round 2 in late 2020: Additional assistance to individuals, the unemployed, re‐opened the PPP, rental assistance, small business loans, and more
• Rounds 3 and more are products of the American Rescue Plan– Enhanced vaccination and public health spending
– Additional aid to individuals
– Child Care Tax Credit
– Relief for landlords and renters
– Aid to S&L governments
– Programs focused on public education reopening
Robust government spending on households also sharply reduced poverty levels
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Federal spending, coupled with pronounced public health interventions have allowed for a robust recovery to date: Real GDP
In terms of job loss, here’s how we compare to previous recessions: The “very scary” graph
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Longer term job consequences vary widely
Minority workers are more likely to work in sectors that have highest job losses
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While nonfarm jobs have persistently recovered, the U.S. labor supply effectively stopped recovering a year ago
What about inflation?
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Jan2010
Jan2011
Jan2012
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Jan2015
Jan2016
Jan2017
Jan2018
Jan2019
Jan2020
U.S. Consumer Price Index(1982‐1984 = 100)
U.S. cities monthly data, all items
12 month moving average0.00
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10 Year Treasury Note Yields
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National Summary
• Economy was harmed by the pandemic
• It has recovered substantially but has a long way to go
• Government spending prevented an economic catastrophe
• Differential outcomes by industry
• Differential outcomes by race
• Differential outcomes by region
• GDP recovery has been robust
• Recovery of all lost jobs is still a long way away
• Job destruction will also take a while to undo
• Will pandemic resurgence slow national recovery?
• Aha, but what about inflation?
Iowa’s Situation
• Where were we prior to the pandemic?
• What happened during the initial downturn?
• Post‐crash outcomes and prospects
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Iowa: nonfarm jobs
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Iowa and Neighboring States Payroll Job Growth, January 2011 = 1.0
Illinois Minnesota Missouri Nebraska South Dakota Wisconsin Iowa
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31-33 Manufacturing 12,400
48-49 Transportation and warehousing 3,686
62 Health care and social assistance 2,127
55 Management of companies and enterprises 1,609
52 Finance and insurance 1,317
11 Agriculture, forestry, fishing and hunting 1,271
54 Professional and technical services 1,049
71 Arts, entertainment, and recreation 897
72 Accommodation and food services 718
53 Real estate and rental and leasing 522
21 Mining, quarrying, and oil and gas extraction 211
22 Utilities ‐261
42 Wholesale trade ‐534
61 Educational services ‐750
81 Other services, except public administration ‐1,155
51 Information ‐1,254
56 Administrative and waste services ‐1,887
23 Construction ‐2,668
44-45 Retail trade ‐7,504
Iowa Payroll Employment Change, 2016‐2019 by Major Industrial Sector
21 Mining, quarrying, and oil and gas extraction 9.7%
55 Management of companies and enterprises 8.4%
48-49 Transportation and warehousing 6.5%
11 Agriculture, forestry, fishing and hunting 6.4%
31-33 Manufacturing 5.8%
71 Arts, entertainment, and recreation 4.4%
53 Real estate and rental and leasing 3.6%
54 Professional and technical services 2.0%
52 Finance and insurance 1.4%
62 Health care and social assistance 1.1%
72 Accommodation and food services 0.6%
42 Wholesale trade ‐0.8%
81 Other services, except public administration ‐2.6%
61 Educational services ‐2.7%
56 Administrative and waste services ‐2.8%
23 Construction ‐3.3%
22 Utilities ‐4.0%
44-45 Retail trade ‐4.1%
51 Information ‐5.5%
Iowa Payroll Employment Percentage Change, 2016‐2019 by Major
Industrial Sector
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We decompose job change in terms of national growth, industrial mix, and competitive performance
Expected growth at national rate 63,263
Growth due to industrial mix ‐1,570
Growth due to competitive share ‐51,899
Actual Change, 2016‐2019 9,794
Decomposing Iowa's Growth, 2016 ‐ 2019
23 Construction ‐11,917
62 Health care and social assistance ‐10,899
72 Accommodation and food services ‐5,807
44-45 Retail trade ‐4,947
48-49 Transportation and warehousing ‐4,928
56 Administrative and waste services ‐4,385
54 Professional and technical services ‐3,061
81 Other services, except public administration ‐2,803
61 Educational services ‐2,467
52 Finance and insurance ‐1,920
51 Information ‐1,676
71 Arts, entertainment, and recreation ‐839
42 Wholesale trade ‐811
53 Real estate and rental and leasing ‐594
22 Utilities ‐211
21 Mining, quarrying, and oil and gas extraction ‐9
55 Management of companies and enterprises 97
11 Agriculture, forestry, fishing and hunting 1,213
31-33 Manufacturing 4,066
Sectoral Contributions to Iowa's Competitive Share Deficit, 2016‐
2019
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Iowa’s pandemic compared to the nation
Initial sectoral job impacts and current impacts
Leisure & Hospitality ‐46%
Other Services ‐17%
Retail ‐13%
Education and Health Svcs ‐13%
All Nonfarm ‐11%
Information ‐9%
Professional & Business Svcs ‐7%
Durable Mfg ‐5%
Government ‐5%
Nondurable Mfg ‐5%
Trans., Warehouse, & Util. ‐4%
Wholesale ‐3%
Financial Activities ‐2%
Iowa Job Declines, February ‐ April 2020Information ‐14%
Leisure & Hospitality ‐13%
Education and Health Svcs ‐8%
All Nonfarm ‐4%
Durable Mfg ‐4%
Trans., Warehouse, & Util. ‐3%
Wholesale ‐3%
Professional & Business Svcs ‐3%
Government ‐3%
Other Services ‐3%
Retail ‐2%
Financial Activities 0%
Nondurable Mfg 1%
Iowa Job Deficits, February 2020 to June 2021
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Leisure & Hospitality29%
Education and Health Svcs28%Government
12%
Durable Mfg7%
Professional & Business Svcs6%
Retail4%
Information4%
Trans., Warehouse, & Util.3%
Wholesale3%
Other Services3%
Financial Activities1%
Distribution of Remaining Job Deficits by Industry Comparing February 2020 with June 2021
Iowa’s biggest issue is labor supply
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And Iowa’s labor supply issue has diverged from the national pattern
Iowa Summary
• Iowa mimicked the national pandemic experience, though not contracting as much.
– Some sectors were pandemic immune (e.g., ag and ag linkages)
– And the pandemic drove up demand for food goods
– IA is not a tourism destination – leisure and hospitality losses were smaller fractions of the state’s economy
• IA’s nonmetros were affected slightly less than the metros
• IA’s labor force contraction is stark and will inhibit recovery
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Iowa’s Labor Situation
• As of last release, compared to February 2020– We have 73,800 fewer labor force members
– We have 92,300 fewer employed Iowans
– We have 16,500 more unemployed Iowans
– And 68,200 fewer nonfarm payroll jobs
• Concerning: Half of the improvement in Iowa’s unemployment rate since April of 2020, has been due to labor force exits
• Understanding who exited and why is important to anticipating Iowa’s potential for recovery
Who’s left the labor force?
• We can suppose they were
– Parents (likely a woman) saddled with child care or remote education responsibilities
– People who had difficulty obtaining unemployment assistance
– Those for whom COVID posed a high risk
– Those whose jobs were in sectors with high transmissibility
– Those close to retirement decided instead to retire
– Those who died or were otherwise affected by the disease
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Outlook
• Iowa’s job economy was slow‐to‐no growing before the pandemic, and has grown <0.01% since October 2020 – U.S. growth of ~ 1.4%
• Durable goods manufacturing has lagged. It will depend in large part on overall U.S. recovery. Nondurables are capitalizing on pandemic‐related shifts in demand
• IA’s ag economy is in good shape, having benefitted from strong subsidies over the past 3 years coupled with robust prices
• Much of the higher‐end non‐ag economy has recovered substantially, but business and professional services are lagging
Outlook continued
• The health care economy was damaged significantly, and it has a ways to go before it is operating at pre‐pandemic levels
• Twin looming crises: landlords and renters in arears. There will be a wave of evictions
• Repairing Iowa’s labor force will require mostly market improvements. There is very little that state policy initiatives can do in the medium term to facilitate the re‐staffing of businesses
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Finally
The nation’s and Iowa’s economies have been significantly damaged.
– Full lost job recovery is still a long ways off
– There are sectors that will not likely recover to their previous levels of output and employment
– There will be new or revamped sectors
– There already is, and there likely will continue to be, a shift in occupational preferences
– And emerging policy priorities – infrastructure, clean energy, social services expansions – will emphasize much broader dimensions of economic and community welfare than has been the case conventionally
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