Report: Iowa is on the brink of recession
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A recent Moody's Analytics analysis lists Iowa and 21 other states as in a recession or on the precipice of one, and Iowa State economist Peter Orazem says our state's economy has been sluggish dating back to 2018.
Why it matters: Sluggish job creation and a shrinking labor force mean companies are more likely to expand in other states, leaving Iowa's economy spinning its wheels.
State of play: Mark Zandi, chief economist at Moody's Analytics, created an index looking at state-level jobs data and other factors including modeled industrial production, personal income and housing starts.
- While employment is the most important indicator, it is only one of many, Zandi tells Axios. His calculation considered where things stood in the economy at the end of August.
Zoom in: Like much of the Midwest, Iowa's agriculture and manufacturing industries have been impacted by tariffs.
- While a federal farm bailout is expected soon, its influence on our state's economy will be marginal, Orazem says, since the state's weaknesses go beyond the ag sector and the recent trade war.
Zoom out: Iowa's aging demographic, lack of workers and a decline in financial sector jobs are the longstanding contributors to our sluggish economy, Orazem says.
- Iowa has long had "brain drain" as young, college graduates leave the state, shrinking our skilled workforce.
- The state lost 4% of its finance jobs between July 2019 and 2025, while the U.S. has added 7%, per the U.S. Bureau of Labor Statistics. Major hits have included over 1,000 layoffs by Wells Fargo, particularly in the home mortgage sector. Insurance companies are also downsizing.
The intrigue: "We have an unusual situation where our economy is being held back by too few workers, but we also don't have a lot of new job openings," Orazem says.
The big picture: States in contraction based on Zandi's analysis are spread around the country — from Washington to Maine — and make up about a third of the country's overall GDP.
- Their problems are driven largely by a mix of more recent issues like slowing immigration, increasing tariffs and federal job cuts, Zandi argues.
What's next: Improving international trade relations and helping more immigrants live and work in Iowa could help, Orazem says.
- "We haven't exactly rolled out the red carpet," Orazem says.