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Release: March 23, 2000

UI report says tight labor markets will dampen income growth in Iowa

IOWA CITY, Iowa -- Tight labor markets will dampen Iowa's income growth this year, according to the Iowa Economic Forecast issued by the University of Iowa Institute for Economic Research.

The Forecast was released today (Thursday, March 23) at the Iowa Economic Forecasting Council meeting in Des Moines.

"With employment growth expected to be near zero, the leading indicator in the forecast shows that income growth will be below average this year, " said Institute director Beth Ingram, UI associate professor of economics. "The probability that the Iowa economy will experience growth rates similar to those enjoyed over the past four years is near zero."

Newly released Bureau of Economic Analysis data indicate a much slower pace in Iowa's employment growth in 1999 than was reported in the last forecast. In November 1999, the expectation was that employment would grow by 2.4 percent in 1999; actual employment growth was 1.4 percent. The current forecast is for non-farm employment to rise by 0.5 percent in 2000 (down from 1.2 percent in November). Employment is now expected to drop by 0.2 percent in 2001.

The Institute sets real personal income growth at 3.65 percent in 2000, down slightly from the November forecast of 3.73 percent. The decline in the forecasted growth rate was also attributed to weaker-than-expected economic performance in the state during the final two quarters of 1999, according to the UI report. The November forecast set growth of 3.2 percent and 3.4 percent in the final quarters of 1999, but actual growth, based on currently available data, was 2.7 percent in the third quarter.

Employment fell in the wholesale trade sector in 1999 and is expected to decline over the next three years, falling by 0.7 percent in 2000 and 0.8 percent in 2001. In other sectors non-durable goods manufacturing rose by 0.6 percent in 1999, but employment in this sector is expected to decline by 1.9 percent in 2000. Employment growth in services is forecast to be up by 2.7 percent in 2000, with retail trade employment growth up by 0.8 percent in 2000, and durable goods manufacturing employment up by 1.3 percent in 2000. The Institute looks to an increase in employment in the service and durable goods sectors and declines in employment in all other sectors in 2001.

However, the forecast for farm income looks brighter, boosted by federal payments to farmers in 1999, when there was 14 percent rise in real farm income. The Institute forecasts another increase of 21 percent in 2000 and a slight decline of 3.2 percent in 2001.

For more information, contact Ingram at (319) 335-0897. Ingram can also be reached Thursday morning and Friday morning at 330-5170 (cell phone).