Orazem: Economic signs are troubling

August 26, 2019

Dr. Peter OrazemPeter Orazem, university professor, was quoted in an August 23 Des Moines Register story, "Survey predicts shrinking manufacturing sector as demand falters" which reported that Iowa's unemployment rate rose from 2.4% to 2.5%, the first uptick in more than a year. Iowa still has the third lowest rate of any state in the country, compared with the national average of 3.7%. 

But Iowa State economist Peter Orazem warned that some signs are troubling, beginning with the manufacturing sector. He believes tit-for-tat tariffs between the United States and China are hurting factories in a number of ways.

First, he said, Iowa's manufacturers who are tied to agriculture (John Deere, for example) are indirectly hurt by the tariffs because their farming clients have less money to spend on equipment. At the same time, steel tariffs have increased costs.

"Cost is going up," Orazem said. "Demand is going down. That's never a good business situation. ... As these things drag on, their impact becomes more and more apparent."

Liesl EathingtonCommenting on the IHS Markit Flash U.S. Manufacturing Purchasing Managers' Index registering a 49.9 in August, down from 50.4 in July, IHS Markit Economics Associate Director Tim Moore said,  "Growth has continued to soften in the third quarter."

"Iowa State economist Liesl Eathington and Drake University economist Sean Severe both said they can't draw a conclusion from one month. Compared to a year ago, there are still 3,000 more jobs in the sector." 

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