(The Center Square) – Iowa is showing “concerning economic trends,” signaling a possible recession on the horizon, according to a report released by Common Sense Institute Iowa.
The average household in Iowa is spending approximately $1,088 more per month compared to 2020 to maintain its standard of living, the report said. The typical Iowan household has shelled out an additional $28,980 over the last four years to maintain its standard of living – with housing, services, fuel and utilities driving excess costs.
Between rising inflation in Iowa, a decreased labor force participation rate, and 1,500 jobs lost in July alone, all signs are pointing to a weakening labor market and economic slowdown, according to the report.
While Iowa’s unemployment rate is the 7th lowest in the nation at 2.8%, its labor force participation is falling at a “troubling rate” not seen at the national level, the report said. A steady decline in the labor force participation rate coupled with dropping employment signals Iowans are losing jobs and leaving the workforce.
Iowa’s labor force dropped by more than 2,500 people while employment fell by over 3,500, revealing potentially “deeper structural challenges” in the state’s labor market, the report said. Meanwhile, the Midwest is experiencing rising inflation even though the national inflation rate is falling.
Consumer prices are 22.2% higher in the Midwest now than they were in March 2020, leading to Iowans spending more and more of their paychecks on necessities to keep up with their everyday expenses, according to the report.
Inflation in the U.S. fell from 3% to 2.9% last month, while inflation in Iowa rose from 2.5% to 2.7%, the report said.
It comes as the U.S. unemployment rate rose to 4.3% and triggered a leading economic indicator of recession called the Sahm Rule.
“Historically, Iowa has trailed the United States in entering recessions; the national economy usually slows before Iowa’s economy does,” wrote the report’s authors, Andrzej Wieciorkowski and Ben Murrey. “The U.S. unemployment rate has risen sharply either shortly before or right at the start of each recession going back to 1980. Iowa’s unemployment rate has typically remained lower than the national rate but has generally followed the same trend.”
Nationally, over 8.4 million people were working multiple jobs in July. The U.S. reached a peak of people working more than one job in December, with over 8.5 million people.
“Recent spikes in multiple jobholders can be attributed to rising costs, which force many families to sacrifice their time for extra income,” the report said.
The authors concluded a “soft landing” is not looking likely based on recent data, warning Iowans to brace for an economic slowdown.
