Central Iowa’s economic picture seems to be brightening – but it’s still showing on a smaller screen than we would like.

Statistics and predictions gathered by the State Revenue Department, combined with input from private-sector experts, suggest that key economic factors such as personal income, employment rates and retail activity should continue to climb through the rest of 2005 in the state as a whole. Compare our prospects with the national forecast, however, and it looks as if Iowa will continue to underperform in some areas, as it has in recent years.

And with every passing year, it becomes clearer that the Central Iowa economy has separated itself from most of the rest of the state.

“Central Iowa is disproportionately accumulating people,” said David Swenson, a scientist in economics at Iowa State University. “Whether the state is posting many new jobs monthly or not, we still have a shifting of jobs into the metro, mostly in the finance area.

“But other good-paying jobs don’t look so hot, especially in manufacturing.”

The Revenue Department reported in December that since the national economy began to recover in August 2003, “Iowa has underperformed relative to the nation as a whole in every sector except financial services, education and health care . . . in wholesale trade, transportation and utilities, information services and government, Iowa continues to experience significant job losses.”

Given that recent history, the state report said, “expectations are that Iowa’s employment growth will continue to lag behind the nation as a whole.” Non-farm employment is projected to increase by 9,780 jobs in the second quarter of 2005 when compared with year-ago figures. That’s a mere 0.67 percent increase, compared with a projected 1.71 percent rise for the entire United States.

Economists also use the yield curve – the difference between long-term and short-term interest rates – to predict future economic activity, and that method produces a lukewarm 2005 outlook, possibly followed by bad news sometime in 2006. “If the pattern set during the 1990s holds,” said the report, “it appears the yield curve reached a new cyclical peak during May 2004, and consequently non-farm employment growth may be expected to peak between January and March 2005 . . . prior to the last recession, the nationa did not start losing jobs until 16 months after the rate of job growth peaked.”

“One problem persists” in Iowa’s employment picture, according to Ann Wagner, research analyst for Iowa Workforce Development. “Hiring at this point is still not broadbased. Three sectors are still pretty weak: manufacturing, trade and transportation, and information.” Wagner said the state lost more than 30,000 manufacturing jobs in the recession, but that the tide has turned.

“Our strengths have been construction and finance – especially finance, because of the low interest rates,” Wagner said.

The December report raised a warning flag about the state’s construction sector, based on real estate transfer tax figures. A transfer tax is paid on each real estate transaction, and the report said, “during each of the past six quarters, real estate transfer tax collections have increased by more than 10 percent relative to the same quarter the prior year. . . . This indicator merits close attention over the next few months, because after growing every month from November 2001 through July 2004, it decreased during August and showed no gain during October. This could mark the beginning of a downturn in construction activity in the state.”

A couple of local construction and real estate experts hold a more optimistic view.

“The last word I heard from a lumber dealer was that things are still pretty good in Central Iowa, considering we’re in the winter months,” said Glen DeStigter, CEO of The Weitz Co. However, he noted that the current situation is somewhat distorted.

“In Central Iowa, .a huge volume of the nonresidential work is tied up in really big jobs” such as the downtown library, the new science center and two Wells Fargo projects, DeStigter said. The Wells Fargo project near Jordan Creek Town Center will be done in about a year, and the company’s downtown building will be finished in about 16 months. “It will take a lot of $2 million strip malls to make up for those projects when they’re complete,” DeStigter said.

Rick Tollakson, president and CEO of Hubbell Realty Co., said, “I think this year will be similar to last year,” when the company had strong results in brokerage activity and residential sales, but commercial sales and leasing continued to mark time.

Single-family home building permits jumped by 11.5 percent in 2004 in the metro area, Tollakson said. In the brokerage area, “a lot of people are interested in real estate as an investment, and a lot of money is going into 1031 exchanges,” referring to a provision in the Internal Revenue Service’s code that allows sellers of real estate to delay capital gains taxes by investing the proceeds into “like kind” property.

The American consumer was credited with keeping the U.S. economy on its feet during the recession, and the retail sector seems to be booming in Central Iowa. Jordan Creek Town Center remains the top retail factor on everyone’s mind, but some observers are starting to wonder whether it will live up to expectations.

“Des Moines already was an incredibly powerful retail draw” for much of Iowa, said ISU’s Swenson. “It remains to be seen whether Jordan Creek changed that at all. My first inclination is to think there has been a very small amount of net new sales because of Jordan Creek. An extremely small amount.”

In Swenson’s view, Merle Hay Mall in Des Moines and Valley West Mall in West Des Moines are “threatened tremendously” in the current shopping environment. In addition to Jordan Creek, he emphasized the retail growth in Ankeny along Interstate 35. Swenson, who lives in Ames, said, “Ankeny is in position to capture that really rich flow of traffic down I-35 every day. It has already eliminated 95 out of 100 reasons I might go on into Des Moines.”