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CONTACT: GEORGE MCCRORY
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Iowa City IA 52242
(319) 384-0012; fax (319) 384-0024
e-mail: george-mccrory@uiowa.edu

Release: Sept. 24, 1999

UI economic forecast predicts employment, income growth for Iowa in 1999

IOWA CITY, Iowa — In its September Iowa Economic Forecast, the University of Iowa Institute for Economic Research predicts continued income and employment growth for the state in 1999.

Citing continued employment growth in retail and service sectors, the Institute increased its projections for employment growth to 2.5 percent in 1999, up from its 1.8 percent estimate in June. For the first two quarters of 1999, non-farm employment grew by 3 percent.

The forecast, released Sept. 24 at the Iowa Economic Forecasting Council meeting in Des Moines, sets personal income growth at 3.8 percent, down from 4.7 percent in the June forecast, but still higher than the 2.8 percent level in the March forecast. The expectation for 2000 is a 3.4 percent increase, up from 2.9 percent in the June forecast, according to Institute director Beth Ingram, UI associate professor of economics.

"Income growth for 1998 was a little more robust than we thought, so growth in 1999 looks a little lower," Ingram explained. "The outlook for the Iowa economy in 1999 and 2000 is similar to that of the national economy. However, in contrast to our June forecast, we now expect real income in Iowa to grow the same rate as national real income and we expect a continuing decline in farm income."

Initial estimates of income growth for the fourth quarter of 1998 were set at 5.25 percent, but the actual rate was revised upward to 6.11 percent. This new data coupled with lower levels of income growth reported in the first quarter of 1999 led to the downward revision for 1999.

The forecast incorporates a 28 percent decline in farm income in 1998. Farm income is expected to drop in 1999, decreasing another 11 percent. By 2000, farm income could rise 5 percent, according to the forecast. However, Ingram cautioned that these predictions about farm income are subject to much uncertainty.

Iowa's service sector and retail firms will continue to experience employment growth, according to the forecast. Service sector employment is expected to grow by 3.6 percent in 1999 and by 3.5 percent in 2000. Retail trade employment is expected to grow by 2.7 percent in 1999 and by 1.7 percent in 2000.

Growth in wholesale trade employment will grow 2 percent in 1999 before falling to 1 percent in 2000. Growth in durable goods manufacturing employment is expected to grow 1.6 percent in 1999 and 0.8 percent in 2000, while non-durable goods manufacturing employment is expected to be strong in 1999, up 1.8 percent before declining by 0.6 percent in 2000.

The Institute also issued a positive long-term employment forecast for Iowa, raising its growth projections to 1.2 percent in 2000, up from 0.8 percent in the June report, and .9 percent in 2001, up from 0.7 percent in June.

For more information, contact Ingram at (319) 335-0897, or Charles H. Whiteman, chair of the UI department of economics and former director of the Institute, at (319) 335-0831.