Iowa businesses show ‘robust’ increase in optimism about economy for 2023

Iowa businesses have an optimistic outlook due to a 2022 tax-cut package, diverse industries, and other factors, according to an Iowa business organization’s quarterly survey. 

The Iowa Business Council’s (IBC) quarter two economic outlook survey indicates “strong confidence” in Iowa’s economy, with the index rising since quarter one.  The survey, taken quarterly by 21 chief executives from some of the largest businesses in Iowa, showed an increase in optimism for the upcoming six months. 

The index is a weighted average calculated through a formula based on employers’ responses to survey questions about spending, sales and employment. It showed a robust increase across all three metrics, according to Joe Murphy, president of the IBC. 

“This is the first report that we’ve seen in the past three that all our metrics have been above the 60-point threshold. While anything above 50 represents positive economic growth, the fact that we had tailed off pretty good since the third or fourth quarter of 2021 was beginning to raise some concerns for us at the IBC,” Murphy said. “We had some marginal upticks over the last two quarters, but to see a robust increase in our levels of optimism is really a good sign for Iowa as we close our fiscal year and head into the second half of this calendar year.” 

Tax legislation

The optimism can partially be attributed to tax changes passed by the Iowa Legislature in 2022 and enacted in January, according to Murphy. 

“I would say the last few years in particular have been really positive for business,” Murphy said. “We’ve put in a lot of key policies with respect to workforce development, realigning our workforce development initiatives here at the state level. Most importantly, I think, you’d have to look at the tax reform packages that were passed in 2022, so that gives us a great sense of optimism not just in the short term, but the long term.”

The state is only six months into the five-year rollout of tax changes, and the IBC expects growth beyond the next six months measured by the survey. 

The recent tax changes affect individual income tax rates as well as corporate tax rates. 

“I would expect, all things equal, continued optimism, continued business expansion and as a result, continued increases in Iowa’s ability to expand,” Murphy said. 

Employment

Optimism regarding employment rose the most among the three metrics. Most of the surveyed employers still consider it their greatest struggle, however. 

The survey shows 80% of respondents reported it is “somewhat to very difficult” to hire employees, down 14% from the previous quarter. Ninety percent of surveyed executives did report workforce attraction and retention as their number one concern. 

“We are still in the midst of a workforce situation where we need to attract and retain a quality workforce in our state,” Murphy said. 

Murphy said due to low unemployment rates, the biggest challenge for Iowa businesses will be finding people to fill the open jobs. 

In May, Iowa reported a 2.7% unemployment rate, a full percentage point below the national average. 

The IBC works with K-12 schools to make students aware of jobs available through the Business Education Alliance. The IBC also markets outside of Iowa to attract employees to the state to retain and expand the Iowa workforce.

A diverse economy

Murphy believes a diverse array of industries helps Iowa buck trends other states experience. 

“We are really blessed with a diverse economy, manufacturing is our number one industry in our state but we’re very well represented in financial services, biotechnology, agricultural, we don’t have just one item in our economy that keeps us going,” Murphy said. “It’s sort of a lot of factors. When one area maybe isn’t doing as good, others areas are able to pick up the slack.”

Diverse industries keep Iowa competitive at a national level, according to Murphy, despite national concerns of a looming economic downturn. 

“That [a diverse economy] is what has traditionally really helped Iowa beat expectations when you look at the previous recessions, particularly 2008-2009. Iowa has always weathered some of these difficult times better than any other state in the country and this time is no different. While other states are experiencing more prolonged downturns, Iowa really hasn’t seen a downturn at all.”

Phil Jasper, president of mission systems for Collins Aerospace and chair of the Iowa Business Council, also expressed his confidence in Iowa businesses to beat national projections.

“IBC members remain confident in Iowa’s economic position,” Jasper said in a news release. “Despite a narrative of an impending downturn in the national economy, Iowa business leaders are optimistic about the future here in Iowa.”