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Three Reports on Economy See Positives for Iowa

Three reports on economy see positives for Iowa but global uncertainties make it hard to expect dramatic growth, the Iowa Business Council says.

Leaders of Iowa’s largest businesses say in a new quarterly survey that they're optimistic about the economy over the next six months, but they cautioned against expecting it to be the beginning of a sustained economic recovery.

Uncertainties, including U.S. and European debt, cloud Iowa’s economic outlook, even with a strong farm performance, say economists and business leaders.

“In spite of lingering government debt issues both in the U.S. and overseas, Iowa’s business leaders have regained a cautious optimism for economic growth during the first half of the coming year,” said Tom Aller, chairman of the Iowa Business Council.

But “to suggest that a sustained economic recovery is occurring might be premature,” said Aller, president of Interstate Power & Light, an Alliant Energy company.

Two other economic reports released Thursday echoed the Iowa Business Council’s fourth-quarter outlook, which bested the third quarter but trailed results from a year ago.

Iowa’s Leading Indicators Index bumped higher in October after two months of decline, and a report from Creighton University looking at the Midwest economy showed continued improvement for Iowa.

Economists say Iowa is performing relatively better than the rest of the nation—its jobless rate was seventh lowest nationally in October, for example— but the state’s economy needs national and world markets to improve to escape the sluggish recovery.

“We can’t produce stuff here without a strong customer base” nationally and globally, said Peter Orazem, an Iowa State University economist. “Things might be OK here, but you look over the fence and don’t know what the heck is going on.

“We haven’t been down this route before, so we don’t know what all the implications are,” he said.

Ernie Goss, a Creighton economist, called European debt negotiations a “real risk factor” for Iowa’s economy.

“Any calamity there would boost the value of the dollar and put downward pressure on farm commodity prices and reduce the competitiveness of Iowa companies doing business abroad,” said Goss.

The uncertainty affects businesses, consumers, and investors. “That’s one of the problems we’re dealing with,” said Goss.

Charles Whiteman, a University of Iowa economist, said the state has seen strong growth in personal income, a 7 percent climb over the first six months compared with a year earlier. “That’s pretty doggone good,” said Whiteman, who added that farm profits, fueled by record high commodity prices, helped drive the increase.

“It’s an important contributor but not the only contributor,” said Whiteman.

Increased productivity continues to temper Iowa businesses’ call for new employees, though, he said.

“Income is growing faster than employment,” said Whiteman.

Goss said Iowa is down about 41,000 jobs since the start of the recession, depite adding about 21,000 positions. “That’s a pretty big hill to climb,” he said, adding that it will take into 2013 to recover those jobs.

Manufacturing will most likely help, especially production related to farming, he said.

Pioneer’s Jeff Austin, vice president of strategic planning, said the Johnston-based seed company would add 500 jobs in Iowa by 2013. Pioneer Hi-Bred is investing $85 million in new laboratories and offices, a total of 450,000 square feet.

Austin said the growth is driven by increasing population and incomes worldwide, demand from farmers to be more productive, and development of alternative energy sources such as cellulosic ethanol.

The global financial upheaval has failed to stymie the company’s growth, said Austin, adding that the company has added 3,900 employees worldwide from 2006 to 2011. “Agriculture is somewhat insulated, given a very strong core demand for food” and increased seed technology, he said.

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