Balancing Iowa’s worker losses will be difficult, state economist says

JOHNSTON — Iowa’s economy is in a recession and losses in the workforce will be exceptionally difficult to recoup because older Iowans who are retiring are not being replaced by younger or new residents, a state economist said Tuesday.

Peter Orazem, a professor of labor economics at Iowa State University, discussed the state’s economic and human resources issues Tuesday while taping this weekend’s episode of “Iowa Press” on Iowa PBS.

Iowa’s unemployment rate is 2.9%, according to state data, which is the 13th lowest in the US. However, Iowa’s workforce remains below pre-pandemic levels, according to state labor force data.

While Iowa’s workforce has steadily increased throughout 2022, the most recent Iowa workforce — 1,584,600 in October — is still behind October 2019 and the pre-pandemic February 2020 level of 1,590,500 .

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“We’re lagging behind the rest of the US in terms of employment recovery, and that’s holding back the economy in Iowa,” Orazem said.

Complicating matters further, Orazem says, a majority of the workforce Iowa lost was older workers. Those older workers don’t appear to have plans to return to the workforce, Orazem said, and Iowa has historically struggled to attract new residents.

Orazem said that the participation rate among Iowans under the age of 45 has actually increased. But unemployment rates among Iowans over 45 were falling, he said.

“Iowans who stayed in Iowa and weren’t retired worked atypically. And so, untypically compared to the rest of the US, they have dropped out of the labor market. As a consequence, we don’t think they will come back,” Orazem said. “That will hold back Iowa’s economy in terms of its ability to make up for lost workers.”

Iowa has the ninth-highest percentage of residents who were born in the state, Orazem said, meaning Iowa draws a relatively small portion of its population from other states or countries.

“If you look at sources for Iowa’s replacement labor force, it’s really hard to find any other than immigration, which has been the buffer for Iowa’s labor force for many years,” Orazem said.

State and federal data show that Iowa has had three consecutive quarters of negative growth compared to the year-ago quarter.

“We’ve had negative gross government product for three consecutive quarters, which, as you know, would fit the classic definition of a recession,” Orazem said.

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