Oil. China. Ag prices dropping. Interest rates rising. Yes, the beginning of 2016 is off to a bit of a rocky start, as U.S. markets led off the year with their worst initial week of a new year in market history. So what does the future hold here in the United States, in Iowa and for your business? In advance of our Jan. 28 Economic Forecast Luncheon, we wanted to get our panelists’ thoughts on the economy in 2016. I’m excited to moderate this year’s event, and look forward to seeing you all there.
 
Chris Conetzkey, editor of the Business Record

What is the most important thing businesses should know about the economy in 2016?

I remain optimistic about Iowa’s economy for 2016, but I would caution that we’ll not see as much activity as we’ve seen over the past few years. There is no doubt that the growth trajectory that we have been on is slowing. We have seen signs of that both objectively and anecdotally. The strong dollar is dampening our exports and the softening ag industry is affecting manufacturers around our state. Despite that, Iowa has opportunities to lead in areas of growth. That’s why it is so important in 2016 that we work with the Iowa Legislature to pass the Renewable Chemicals Production Tax Credit. Iowa is already known as a leader in the biofuels industry. We have a unique opportunity to take that leadership to the next level by encouraging the use of biomass for the production of building block chemicals. By placing focused attention on creating this new industry in Iowa, we can propel our state’s economy.

Statewide, Iowa’s economy looks sound. Jobs and population are growing, and there is much new investment. But state averages mask detail. The net of Iowa’s growth since the onset of the Great Recession has occurred in Iowa’s metropolitan regions while three fourths of its micropolitan trade centers, like Fort Dodge, Mason City, Clinton, and Ottumwa, and the vast majority of its smaller counties have not recovered pre-recession employment levels. In analyzing job shifts by major industry comparing 2008 with 2014, I found that Iowa realized very strong gains in health care, finance and insurance, management of companies, educational services, and professional and scientific services. Iowa had strong shifts away from manufacturing, information, trade, and tourism. Iowa’s economy is telling us which sectors are strong and which are not. In short, our economy is expanding, shifting, and diversifying, but the gains are uneven across the state. Expect more of the same in 2016.

Dave Swenson
Associate scientist of economics, Iowa State University

What’s in store for 2016 in the overall economy?

While overall economic growth this year will likely remain subpar by historic standards, our guess is the global economy will enjoy its first “synchronized” bounce in real economic activity of the recovery. This probably will be led by a recovery in the materials, energy, and manufacturing sectors due to a lagged response from powerful economic stimulus introduced about the globe during the last year. While better economic growth should be supportive for most stock markets, it may prove conflicting for the U.S stock market. After a widespread obsession about the potential for a global deflationary abyss, most inflationary indicators may lift in 2016. The first synchronized global economic bounce since the U.S. has returned to full employment, a surprisingly weak U.S. dollar, a revival in commodity prices, and worsening wage pressures may combine to accelerate the Fed’s exit strategy and pressure fixed-income markets around the globe.”

Jim Paulsen, the chief investment strategist at Wells Capital Management, recently provided his indepth look at what he expects the economy to be like in 2016 for AdvisorAnalyst.com. Below is his broad overview. You can find his full report in which he breaks down his reasoning here: bit.ly/1P0v8da. 

(Columnist Dave Elbert provides an extended summary of Paulsen’s 2016 outlook in his weekly column)