New normal: IBC members optimistic despite ongoing economic uncertainty
Michael Crumb Apr 6, 2023 | 9:54 am
3 min read time637 wordsAll Latest News, Economic Development, Retail & Business
Iowa companies remain optimistic despite ongoing worries about hiring workers, according to the Iowa Business Council’s Economic Outlook survey for the first quarter.
The results of the survey, released this morning, showed that the overall outlook for the next six months scored 59.72. The survey was conducted during the first three weeks of March.
The survey of Iowa Business Council members gauges the economic outlook in sales, capital spending and employment. A score of 50 or higher indicates positive sentiment.
The first-quarter score was up 0.46 points from the fourth quarter of 2022, which Iowa Business Council President Joe Murphy said shows some consistency in expectations of the organization’s members, which include leaders from 21 of the state’s largest employers.
“It continues to show Iowa companies are continuing to assess what the economy will do in the next six months,” he said. “Everyone is thinking about next moves, how the economy will shake out, and I think that’s indicative of this relatively consistent report quarter over quarter.”
Two of the components measured in the survey increased. One decreased.
Capital spending increased 2.77 points and employment increased 1.38 points, with both having a score of 56.94 in the report.
Sales expectations declined 2.78 points, but continued to have the highest score in the report at 65.28.
Murphy said he believes that indicates that while demand for Iowa products remains strong, demand may be leveling off following the big surge that came as the state recovered from the pandemic.
“I think it’s that leveling out of our economy,” he said. “As companies think about what the next six months might entail, they’re not expecting anything dramatically different, good or bad, higher or lower with sales expectations.”
Despite the increased optimism in employment, 94% of the organization’s members said it’s still difficult to hire people.
“Our companies are figuring out different methods to accommodate that situation,” Murphy said. “We are coming back slowly but surely to our pre-pandemic levels. We’re almost back to where we were pre-pandemic, at more than 68% labor participation rate. Our peak labor force participation rate before the pandemic was 70%, so we’re right there. It’s just a matter of how companies are able to facilitate that change in the workforce, whether that be remote, in the office or in a hybrid model.”
The state’s labor participation rate dropped to about 65% in July 2020 but has risen steadily since then, data from the U.S. Bureau of Labor Statistics shows.
Murphy said the increase in the index score for capital spending is a key indicator for measuring companies’ expectations for the next six months.
“If there is one thing I would put great stock in is our capital expenditure expectation has increased by the largest amount, and that shows companies are still confident in the Iowa economy, they’re investing in their own companies and they expect to do so over the course of the next six months,” he said.
The increase was a reversal from recent reports, which Murphy said represents the resilience of Iowa companies in the face of continued uncertain economic times.
“To have that boomerang back, it really speaks to the confidence that our members have in our economic situation,” he said.
Murphy said that ongoing uncertainty is part of the “new normal” companies have learned to adapt to coming out of the pandemic.
“Not being able to project where we will be is part of that new normal but credit to business leaders in our state. They’ve adapted to that very well and are able to make strategic decisions without all the information coming to them as they would like,” Murphy said. “Then, when they’re presented with new information, they’re able to pivot and make adjustments and come up with new concepts or strategies based on new data.”
Michael Crumb is a senior staff writer at Business Record. He covers economic development, transportation, energy & environment, culture, sales & marketing.