Iowa’s rural economy boosted by increased hiring, but confidence plummets amid lingering recession fears

Iowa’s rural economy grew slightly in November, trailing employment increases, but remained below neutral growth, with rural bank managers forecasting a continued slowdown in economic activity in the coming months. come.

According to Creighton University Index of rural main streetsreleased on Thursday, Iowa’s index score rose to 47 from 45.6 in October.

The index is a snapshot of the economy in 10 agriculture- and energy-dependent rural states, focusing on about 200 communities with an average population of 1,300. It ranges from zero to 100, with a score of 50 representing neutral growth.

Iowa’s performance was similar to the region as a whole, with the overall index score rising to 45.7 from 44.2 in October. It was the sixth consecutive month that the region’s index remained below neutral growth.

“The rural main street economy is currently experiencing a downturn in economic activity. Last month, nearly one in four bankers, or 23.1%, said the economy was already in a recession,” said Ernie Goss, Jack A. MacAllister Professor of Regional Economics at the University. Creighton, in the report.

In Iowa, the score increase was supported by improved performance of the farmland price index, which rose to 70.2 from 60.4 in October, and increases in l the state’s New Hires Index, which rose slightly in November to 51.9, up one-tenth. one point from the previous month.

Thursday’s report cites data from the Bureau of Labor Statistics, which shows that Iowa’s rural economy saw a 3.4% increase in non-farm employment, while urban areas of the state grew. recorded an increase of 1.9%.

For the region, the bank lending volume index fell 11 points, but remained at a high level of 65.8.

“Rising farm input costs, increased farm equipment sales and drought conditions in parts of the region have encouraged strong borrowing from farmers,” Goss said.

Bankers also recommended that the Federal Reserve stop raising interest rates or approve a lower rate to give previous rate hikes time to settle in and have an effect. About three in four bankers said they thought a recession would start in 2023, and one in four said the economy was already in recession.

The region’s new hires index fell slightly to 49.1 in November. The home sales index also fell, falling to 34.8 from 36 in October, which Goss said was the result of rising mortgage rates.

“This is the sixth month in a row that the home sales index has fallen below neutral growth,” he said. “A doubling of the 30-year mortgage rate over the past year has slowed home sales in the area over this period.”

Thursday’s report also painted a less than happy picture of the upcoming holiday shopping season, as the retail sales index weakened to 45.5 from 50 in October.

“Bankers were pessimistic about the economic outlook for the Christmas and holiday shopping season, as they expect growth of less than 1%, or 0.8%, from the 2021 season,” Goss said. .

The report also said rural bankers’ confidence continued to plummet as the economy slowed due to high energy prices, higher borrowing costs and rising farm input costs.

The confidence index fell to 27.3, from 30.8 in October, for what Goss said was “the lowest confidence index reading since May 2020”.

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