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Where’s the economy headed?

By Staff | Nov 20, 2009

Consumers fuel the American economy, so it’s no wonder that the economy is struggling as a result of the highest U.S. unemployment levels since 1982 and reduced spending. In Iowa, the recession appears to be driving changes in the economy that may have an impact Iowans for years to come.

“This isn’t just a blip in the road,” said John Lawrence, an Iowa State University (ISU) Extension economist, who noted that consumer spending comprises 70 percent of the gross domestic product. “There is something different with this recession.”

With all the stimulus money that has been pumped into the economy, inflation will be a likely result in upcoming years, said Chad Hart, an ISU assistant professor and grain markets specialist. “What’s the cure for inflation? You raise interest rates. If you have variable interest rates on your line of credit, now’s the time to lock in lower rates on a long-term note.”

How does Iowa tend to fare in difficult economic times? “Sometimes we lead, sometimes we lag, and sometimes we track together with the national economy,” said Lawrence. “There’s no one thing we can bet on.”

However, it’s clear that Iowa has become more dependent on service industry jobs in recent years. Unfortunately, these jobs are fairly easy to move outside of the state or overseas. Hart noted that a well-known tax preparation company is training tax accountants in India, for example, to reap the benefits of low-cost labor.

“Having more service industry jobs in Iowa does make us more vulnerable in a downturn,” he added.

The economic downturn and budget cuts in Iowa are also driving a trend towards higher fees for services provided, the economists agreed. These can take the form of higher college tuition fees, or additional costs passed along to the end user for a variety of services. Although these changes are hitting home in Iowa, other states are facing even tougher decisions.

“While Iowa’s 10 percent budget cut made headlines, the governor of Michigan threatened to cut all funding to ag Extension and the agricultural experiment station, and the governor of Missouri proposed 50 percent cuts to Extension funding,” Hart said.

Contact Darcy Dougherty Maulsby by e-mail at yettergirl@yahoo.com.

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