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Release: Immediate

UI report predicts continued economic growth

IOWA CITY, Iowa -- Despite recent volatility in the U.S. stock market, Iowa's economy should remain strong for the rest of 1998. This growth is expected to continue into 1999, according to the Iowa Economic Forecast released today (Sept. 15) by the University of Iowa Institute for Economic Research.

The report, prepared by Beth Ingram, UI associate professor of economics and director of the Institute, forecasts a 3.3 percent increase in real personal income for 1998. This represents an increase in the purchasing power of Iowans' income.

"We are not forecasting a slowdown. Early predictions for 1999 indicate that real income growth will remain robust. Employment growth is slowing down, but the labor market is also tight," Ingram said.

The report was prepared for today's meeting of the Iowa Economic Forecasting Council in Des Moines. According to the report:

* The non-farm employment growth forecast for 1998 is now at 2.5 percent, up from 2 percent in June and 1.4 percent in March. Most of this gain is concentrated in services, with growth in this area projected at 3.9 percent in 1998. Service sector employment now accounts for approximately 25 percent of all non-farm employment in the state.

* An expected employment growth slowdown has been pushed into 1999, falling to 0.8 percent in 1999.

* Real personal income, or the purchasing power of Iowans' incomes when inflation is taken into account, is expected to grow about 3.3 percent in 1998 and also 3.3 percent in 1999, up from the June forecast of 2.3 percent growth for 1999.

* The forecast for Iowa's overall real personal income incorporated a 40 percent drop in farm income, a projection that hasn't changed significantly since the June forecast. By 1999, a 6 percent increase in farm income is expected.

* In 1998, employment in durable goods manufacturing is expected to increase 2.2 percent, followed by 1.7 percent in non-durable goods, 1.5 percent in retail trade, and 1.3 percent in wholesale trade. However, the institute predicts declines in employment for 1999 in both durable and non-durable goods.

* The Institute's model also predicts that fiscal year 1999 growth in state tax revenue is likely to be around 2.2 percent, while early forecasts of revenue growth for 2000 indicate a growth rate of about 6.9 percent. The figures represent the effects of both state and federal tax cuts enacted during 1997 and 1998.

For more information, contact Ingram at (319) 335-0897, or Charles H. Whiteman, chair of the UI department of economics and former director of the Institute, at (319) 335-0831.