Iowa’s rural economy has been boosted by increased hiring, but confidence is falling on ongoing recession fears

Iowa’s rural economy grew slightly behind the rise in jobs in November, but remained below neutral growth as rural bank executives forecast a continued economic slowdown in economic activity in the coming months.

According to Creighton University Rural Mainstreet Indexreleased Thursday, Iowa’s index score rose to 47 from 45.6 in October.

The index is a snapshot of the economy in 10 rural, agricultural and energy dependent countries, concentrated in approximately 200 communities with an average population of 1,300. It ranges from zero to 100, with a value of 50 representing neutral growth.

Iowa’s performance was similar to that of 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 decline in economic activity. Last month nearly one in four bankers, or 23.1%, reported the economy was already in recession,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University, in the report.

In Iowa, the higher score was helped by an improved performance in the farmland price index, which rose to 70.2 from 60.4 in October, and a one-tenth increase in the state’s new hires index, which edged up to 51.9 in November up a point from the previous month.

Thursday’s report cites data from the Bureau of Labor Statistics that showed Iowa’s rural economy saw nonfarm employment rise 3.4%, while the state’s urban areas saw a 1.9% increase.

For the region, the Bank Lending Index fell 11 points but remained at a strong 65.8.

“Higher farm input costs, larger farm equipment sales and drought conditions in parts of the region supported strong farmer borrowing,” Goss said.

Bankers also recommended that the Federal Reserve either halt interest rate hikes or approve a lower rate to give earlier rate hikes time to settle and take effect. About three in four bankers said they believe a recession would start in 2023, with one in four saying the economy is already in recession.

The index for new hires in the region 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 higher mortgage rates.

“This is the sixth straight month that the Home Sales Index has fallen below neutral growth,” he said. “A doubling in 30-year mortgage rates over the past year has slowed home sales in the region during this time.”

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

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

The report also pointed out that rural banker confidence continued to fall as the economy slowed due to high energy prices, higher borrowing costs and increased farm input costs.

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