The Current Business Climate

Kay Henderson

From the economy to public policy and the workforce. How are Iowa businesses doing? We'll talk with the leaders of two of Iowa's biggest business groups on this edition of Iowa Press.

Announcer

Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation.

Banking in Iowa goes beyond transactions. Banks work to help people and small businesses succeed. And Iowa banks are committed to building confident banking relationships. Iowa banks, your partner through it all.

Announcer

For decades, Iowa Press has brought you political leaders and newsmakers from across Iowa and beyond. Celebrating more than 50 years on statewide Iowa PBS, this is the Friday, September 5th edition of Iowa Press. Here is Kay Henderson.

Kay Henderson

Today we're going to have a little update on Iowa's economy. Not from the insight of economists who are working at some of our state's institutions of higher learning, but two people who represent Iowa's business community. They are Joe Murphy. He is president of the Iowa Business Council, which represents 21 of the state's largest employers. Before this role, he worked in government relations and public policy for the Greater Des Moines Partnership. Welcome, Joe. And Nicole Crain is president of the Iowa Association of Business and Industry, which represents about 600 of the state's manufacturers. She previously worked in government affairs for the Associated Builders and Contractors of Iowa, and was president of the Iowa Taxpayers Association. Welcome to you as well. Thank you. Joining our conversation. Dave Price, Iowa political director for Gray Media, and Erin Murphy, the Des Moines bureau chief for the Gazette in Cedar Rapids.

Erin Murphy

So we wanted to start today and talk to you both about the new jobs report that came out this week, and hear how it's impacting your members. And, Joe Murphy, we'll start with you. And by the way, for the benefit of the viewers, no relation, but great to share the Iowa Press table with another Murphy.

Joe Murphy

Great to see you.

Erin Murphy

So 22,000 jobs added, which was far less than the 75,000 that was expected. That's the national picture. What are you hearing from your members? Is there a concern about out there about the current state of.

Joe Murphy

I think there's a lot of uncertainty still in Iowa's economy. You know, our members are really focused on the future, trying to create innovations, trying to create business models that will sustain through any sort of unpredictability that we'll see in the labor market, in Iowa's overall economic picture. But there's still certainly a great amount of concern with respect to the uncertainty that we're seeing, whether that's tariff related, workforce related issues. And we're seeing, you know, perhaps, maybe just a softening of the labor market. To your point on the national numbers, we'll see what the Iowa numbers say in the next few weeks or so. But definitely a concern that our members are seeing and something that they're trying to put into place to, to bolster their ability to move forward.

Erin Murphy

Yeah. Nicole, how about your members?

Nicole Crain

Yeah. So in Iowa, we're still at 3.7% unemployment. So if you're looking at that from what that means for Iowa manufacturers, Iowa businesses, that's essentially still full employment. We've been seeing a softening. The members have for several months now, actually, as we talk about HR1 at the federal level that passed, some of those provisions at the beginning of the year, our members had a lot of uncertainty. These tax provisions were expiring. That bill passed now in law. And so that has really helped provide some of that certainty back to those small and midsize manufacturers that maybe were holding off on capital expenditures, maybe holding off on some other investments, and now they feel a little bit better about that. They know what the tax, what the tax provisions are going to be. They know how to plan. There's still some uncertainty, still some softening. But I think that, you know, we're seeing stable employment numbers and looking forward to the fall.

Erin Murphy

Yeah Nicole touched on a little bit. Joe back to you that what impact that uncertainty that you're hearing about. What does that does that mean employers are holding off on hiring? Does it mean they're holding off on expanding? Nicole touched on it. Yeah.

Joe Murphy

Yeah. So our members are relatively optimistic about the future direction of the state. You know, our surveys are indicating, you know, still a very positive outlook on Iowa's economy for the next six months. We're going to determine whether that continues in our next survey here coming up. But with respect to hiring, you know, I think we're holding steady. We're seeing again, some softening. When you look at the percentages of people who talk about workforce retention and recruitment as their number one issue. That number has come down a little bit. For the first five years or so of my tenure at the Iowa Business Council, that number was about 95% of our members citing workforce as their top issue. Right now it's about 55%. And I think that indicates that there is some softening in that. You know, while some companies may be going through some layoffs, other companies are really just not hiring as quickly as they had previously. And maybe not, maybe not hiring as more robustly as they would like.

Dave Price

There were a couple of numbers I wanted to hit you with that. We had heard this week that stood out to me. So nationally, we have about 7.24 million, 7.24 million unemployed folks, 7.18 million job openings. And we have talked for quite a while in our state, sorted the other way around. Right. We had more openings than we had folks looking for jobs. Now, we've had kind of this long series of layoffs with John Deere over the last year and a half, two years, Kinze, a bunch of others. Can you maybe look ahead to fourth quarter, maybe start with you, Nicole. Where do your Joe has used the word softening quite a bit since we just started this show…What can the workers expect from your members in this fourth quarter about the employment picture?

Nicole Crain

Yeah, I appreciate that question. And we talk about some of those employment numbers. What you're seeing and the word softening. And when we send our third quarter survey out what members could expect in the third quarter, the softening word was used as well. The uncertainty members thought about 60% felt uncertain where we're at. The next biggest issue for our members was still workforce. And that was in our CEO survey. Of all industries as workers and employees, I think what our members have been doing, they do very well, is they're managing the business cycle. So this, you know, the softening that maybe people are talking more about. I've been on the road for the last nine months, talking to lots of different industries. And when we get out and talk to our members, they said, yeah, this is the business cycle. We expect this. We're managing. We're leading. You know, our members, a lot of them, are in these small or midsize communities. And they're not only business leaders, they're community leaders. And what they want to make sure is that they're providing opportunities for their communities to thrive and their workers to thrive. So I think that you will continue to see that stable employment number, but I think, you know, in some industries like health care, you'll see more hiring. We've seen, again, since the tax law has passed, a couple of our members have lifted hiring freezes and they are hiring. But I think you'll just see stable employment numbers as we enter into the fourth quarter.

Dave Price

So are offers, Joe, would you expect fourth quarter if somebody is hiring… I remember talking to you sort of our post-COVID recovery and employers had to expect to up pay, pay more to keep people there. Do you expect does it go the opposite fourth quarter where we shouldn't expect that?

Joe Murphy

I think it's I think it's too early to tell what we're going to see. Let's get through, let's get through the third quarter first and see where we're going to head. But look, I think, you know, when you look at the economy overall, yes, there is some concern, particularly in the ag economy, the main concern that we have or maybe the main indicator that we're looking at is whether or not that spills into other sectors of Iowa's economy, whether that's manufacturing, as Nicole has mentioned, whether it's biosciences, whether it's financial services and insurance. That's really sort of a concern that we have moving forward. Or maybe not a concern is the right word, a thing that we're looking at. You know, how deep does this go from an ag perspective? Does it spill into other economic sectors, and what can we do about it to make sure that it doesn't negatively impact Iowans to a great deal?

Kay Henderson

Our viewers aren't going to get a quiz after this is over, but does softening mean downturn, Joe?

Joe Murphy

So what we would characterize softening as maybe not hiring as much. And so what I mean by that is if someone's retiring, if someone's moving on to another job, at another company, they might, some companies might not be hiring to replace those people more quickly or as quickly as they had previously. When you look at our economic outlook survey that we do every single quarter, the vast majority of our members are projecting no change in their hiring, their current hiring thresholds. They're not expecting to lower the hiring, but they're not expected to greatly increase it at all. So holding steady, and I think that's maybe a theme that we're seeing, you know, at a macro level as well. We're trying to just see where things are going to go. A lot of uncertainty out there. Let's just kind of hold steady. Let's take all the information in. Let's have a cautious approach on future investment and we'll get through this all right.

Kay Henderson

Well let's talk about a law that took effect this summer. The state's unemployment tax to businesses has been reduced. It's money that's paid into the state's unemployment trust fund that actually pays jobless benefits. Nicole, your organization, when this was first proposed in 2024, raised some concerns that taxes might go up on businesses if there is a downturn and more people are unemployed and need benefits. But you were in favor of it this time around. What changed?

Nicole Crain

Yeah. You know, I think as we look at that bill, specifically as we're talking about unemployment, I think one thing to make clear to the viewers as well, is that the Unemployment Insurance Trust Fund is funded by employers. It's not funded by employees. It's there for those individuals who may lose their job through no fault of their own. And so as we look at that, we wanted to make sure that the trust fund was sustainable. Governor Reynolds has been a huge advocate through COVID and everything, when to make sure that there was plenty of resources in that fund and to help Iowa employers come back quicker. So as we looked at the proposal, what we saw is one, this didn't affect anything for those individuals. It didn't affect benefits. It didn't reduce benefits for those individuals who may lose their job through no fault of their own. And it also really ensured that the trust fund would remain sustainable. And so when we looked at that, you know, our employer members and those individuals that pay into the trust fund will see a reduction in those taxes and but in those insurance premiums, but workers won't see any change in their benefits.

Kay Henderson

So, Joe, is it sustainable because the duration of benefits change dramatically?

Joe Murphy

I think it's sustainable because we have a huge amount of funds currently in that that trust fund currently. And I think when you look at the projections over the course of the next several years, even with this reduction in that, in that overall tax structure, we'll still be at about $2 billion moving forward five years out. That will be more than sustainable given our current volume flow. And even the projections that we've seen from the Department of Management and other areas with respect to potential downturns in the economy, that that might occur, that we just don't see right now.

Erin Murphy

Before we drill down really quick on tariffs, I want to ask you about the impact of those. It occurs to me that maybe for the benefit of our viewers, have you each describe…We keep asking you about and you guys talk about your members. Who are your members from very top line view, because we got a lot to get to. Joe, tell us about the members of the Iowa Business Council.

Joe Murphy

The Iowa Business Council represents 21 of some of the largest companies in the state of Iowa. What's unique about our board is that the CEO or the president, the top executive of that company, serves on our board of directors, and we're a wide ranging business association from health care to retail to financial services to agriculture to manufacturing. And again, you know, our mission is to enhance Iowa's economic vitality for every company, for every Iowan, not just Iowa's largest companies. How can we come together and lift up Iowans and create jobs and opportunities for Iowans into the future?

Erin Murphy

Okay, and Nicole?

Nicole Crain

Yeah, the Iowa Association of Business and Industry, we are a general business and trade association. Our members are in all 99 counties. We have large members. We have small company members as well. Our sweet spot member is really a mid-sized manufacturing member in a mid-sized town. A lot of our members are in rural Iowa. Like Joe, we want to make sure that there's economic opportunities for all Iowans. And we start as a manufacturers association. So when I talk about manufacturers, the core of our membership is still in manufacturing. And in addition to our advocacy work that we do, we also have a foundation that really leans into some of these workforce needs. And also the issues awareness. As we're moving to, you know, 20 years from now, what are those big issues that are facing our state? And so that's really, we've been around since 1903. We've made it through two pandemics and hope we don't see another one.

Erin Murphy

Well, and that's perfect to get back into tariffs then, which we've touched on a little bit already. But with all the manufacturing companies that your organization represents, and I've heard you both say use the word uncertainty a lot. Let's look forward now like we know what's been happening. Is there anything on the horizon? Is there optimism? Is this thing leveling out, or is there concern that there's still going to be a lot of unknowns in the weeks and months ahead?

Nicole Crain

Yeah, I'm glad that we're talking about this topic. It is something that's front of mind. It's something that we continue to hear from members of all sizes. We are a net exporting state, and our manufacturers, we produce a lot in this state. And so as we look at what's ahead and specifically tariffs, we understand what the administration is doing. We completely support again, we have a ton of manufacturers that are members. So we support wanting to have more products made in America, made in Iowa. Many of our members, 40%, have they've experienced unfair trade practices. But at the same time. And so they understand needing to get that fair balance. But we need to we need to get these deals done. And so I know that the administration is working on that. We're working with working with our partners in DC on how we can help tell that story of what that means to Iowa manufacturers and small businesses in our communities. But I think that we need to be prepared. And I think Iowa manufacturers are well positioned to ride this out. They've been riding it out. But the sooner we can get these deals done, the better.

Erin Murphy

And to that, is there like a breaking point at some point? Is there a timeline that's like, you know, we can we can ride this out for now. But at x months of this, we're going to be in trouble.

Nicole Crain

You know, as we look at our key trading partners in Iowa, it is Canada and Mexico. And so as we look at those deals, those are by far 2 to 1, you know, and in Iowa, our next largest trading partner is Japan. So in some of those will be those ag markets too. So from the manufacturing standpoint, it's really you know, when I talk to our members around the state, especially some of our larger manufacturers, a lot of their suppliers, most of their suppliers are American suppliers. They're already getting that product from people who are local. It's just really that secondary suppliers, where those smaller components are coming from. And so, you know, it depends on the industry, I think is my long answer to your question. But, you know, we're getting to the point where we need to we need to see some movement on these deals.

Erin Murphy

Joe, how is this impacting your groups?

Joe Murphy

I would I would wholeheartedly agree that we just got to get these deals done. Even our member companies who are maybe indirectly affected by tariffs, whether it's through strategic relationship that they have with another company, they're beginning to feel the effects of that. And so this is industry wide, you know, through all different sectors of our economy. And that's concerning because it just adds to that level of uncertainty. I keep coming back to that word, but it's true. You know, it's cloudy. It's uncertain. We know that we're working on these deals, but we just have to get them done so we can get over this hump and move forward with sort of a regulated economy with respect to trade policy, it's really hard to make deals when you don't know what the rules are.

Dave Price

Earlier this week, I went to the Tri-State governors conference in Dakota Dunes, South Dakota. So you feature the governors of Iowa and Nebraska and South Dakota. They have this every other year. They bring in local folks and ask a bunch of questions in the governor's respond, if they're if they're sitting there. Nicole, if we can start with you, the one thing that they brought up was energy production outside of the major metro areas. And whether it's RECs, however they do energy production, how are they going to meet the needs of some of these manufacturing centers or anything else? We are seeing early stories about how energy bills have been going up across the country, and I'm curious what the energy impact has been on your members. And is there concern that there is not enough available power for them now?

Nicole Crain

Energy policy is one of the policies that are we have five public policy committees that set our policies for the next legislative session. So we are just concluding that process. The energy policy falls under our Economic Growth Committee. So as you look at that, it's very critical to economic growth. Iowa has always been a great state that's had a competitive climate. I think that's why we see lots of people wanting to come here, expand here. We do have available energy. Our position is that we support as we look at, we support baseload expansion and we support an all above approach. You know, I think energy, whether it be at the state level or our partners in other states, it's going to continue to be a conversation and something that we want to make sure in Iowa that those, whether they are in the REC, whether they're in whatever, whether it's Alliant Energy, Mid-American, whatever territory they may be in, that they have reliable, affordable access to energy. And we have not seen that as a challenge to our manufacturers in Iowa. They're able to produce what they need to produce. They're able to when they need to produce more, get that access to energy. But it's something we want to make sure that we continue to see.

Dave Price

Joe, for your members, maybe if we can talk specifically about wind. The president is not a fan of wind. He's made all kinds of allegations. He has killed some wind deals. I don't think that's affected us here in any way. But they have wound down some of these tax credits. You have a couple of your members in particular, Nicole just mentioned Alliant and MidAmerican. How is the future of wind energy, which is a big deal in our state…how is that affected by these federal changes?

Joe Murphy

We'll have to see how some of these changes will kind of come into play in whether the regulations around the laws will, will impact some of these projects. There's a lot of projects in the ground right now that are already underway. The question I think that we would have right now is how do the new laws impact currently existing projects that are maybe halfway through the process? But look, Iowa's one of Iowa's competitive advantages is its energy production. This all of the above approach that makes us competitive to recruit new businesses into the state, that makes us competitive to retain businesses in this state. And that's a good thing for the state. And so we'll have to wait and see on how some of these things play out. But some of the rhetoric that we're hearing around this, obviously concerning, but we want to reserve judgment and see where some of these things go.

Kay Henderson

People have begun raising concerns about artificial intelligence. Nicole, JBS is going to open a new plant in Perry, where a Tyson plant closed. They're building a completely new facility. Are your members - who you mentioned are sort of mid-sized manufacturers - are they going to be able to invest and spend the money to keep competing with bigger businesses that are converting, using A.I.?

Nicole Crain

I think one thing that Iowa manufacturers and all Iowa businesses have done very well is to compete. You know, I think that when I look at some of our members, I think always to the community of Fairfield. And I look at the innovation that they have there and what a couple of members there have really just invested in automation, robotics early on. They were early adopters. And so I think as far as competing, that's something that our members are leaning into AI. Many, if they haven't already, completely started using A.I. and automation, I know those are separate in their facilities. 20 some percent are looking into it. They've dabbled into it a little bit. And so I think also the state has some great policies. The manufacturing 4.0 grant that has helped small and midsize companies, 125 employees, manufacturers invest in automation, invest in technology and software improvements. And so we need to continue to do those things as a state. We want to continue to encourage the state to do that. So those small and midsize folks can compete, because as we're looking at the rural economy, whether it be Perry or whether it be Fairfield or Garner, in order to keep those individuals in rural Iowa and to keep those jobs in rural Iowa, those manufacturers have to invest. They want to invest, but we have to support that at the state level as well.

Erin Murphy

One topic I know when you talk about workforce is keeping young people in the state. And that's not an issue that's unique to Iowa, but the so-called brain drain of college graduates who then leave the state and find work elsewhere. Joe will start with you. How much of an issue is tha,t and what are there solutions that you've maybe seen in other places, or that you're hearing about here that could help keep young Iowans here and working here?

Joe Murphy

It's a huge concern. You know, we're exporting a tremendous amount of talent outside of our borders in the form of highly educated young people. We need to do everything we can to retain those individuals in in the state of Iowa. We partner a lot with an organization called the Common Sense Institute. And they put out a recent report that talked about the brain drain of highly educated or college educated young people in Iowa is leading to, you know, billions of dollars in lost potential, earning impact or earning income for those individuals over the course of their lifetime, as well as tens of billions of dollars in economic loss for the state. And so it's a big it's a big concern for us. We need to do everything we can to retain them. I think from a from a strategic standpoint, one of the things that we can do in the business community is to better partner with our institutions of higher education through high quality internship programs or job exploration programs, to ensure that young people, as they graduate either community college or a four year institution, that they know that they have options to have a career in the state of Iowa. You know, Iowa is the place that you can live the life you've always dreamed of living. And I think that that's really important to communicate. You know, you might get a higher paying job in New York City or Boston, but the cost of living is many more multiples than it is here in the state of Iowa. And so we need to communicate better, I think, on that. And you'll see the Iowa Business Council in the coming months really focus in on college internships, work based learning at the K through 12 level as well.

Erin Murphy

Nicole, maybe just to piggyback on that, how much of that solution is on the businesses themselves and the recruiting aspect and how much can local and state policy help here?

Nicole Crain

I think it's a partnership. And so, you know, I mentioned our foundation and some of the programs we have. So the ABI Foundation, we have programs for high school students, a week long summer camp. And it's all about opportunities in Iowa, but also how to start your own business. And they get to connect with executives in the community around the state that volunteer their time. We have a program for college interns where we bring college students to Des Moines for a week, but they tour manufacturing facilities. They sit down at lunch again with executives. They network. They learn how to be job ready, and they also learn about all the opportunities that there are for them in Iowa. But that's only, you know, kind of scratching the surface. As we talk, as Joe mentioned, work based learning. It's got to start sooner. You know, we have it's got to start at the elementary, middle school. And I think the state is really leaning into that with the career and technical education, with the work based learning requirements. And so I think as businesses also need to know the playbook. How do we, you know, they're not education experts, but how can we get into the schools. And so I think that like Joe and the Business Council, that's something that our members are leaning into, that we as an organization are leaning into. But it's got to be just like a lot, so much of what we do, it's a public private partnership.

Dave Price

We're down within two minutes here. I'm going to reference back that Tri-State conference I went to. Joe, start with you. In light of our budget, state budget, where we're seeing less money coming in. Do your members expect a scenario like the Nebraska's governor talked about? He's like, look, you want all this stuff, declining budgets, we want to cut property taxes. Businesses may have to be more willing to absorb some of the costs, whether you need a better sewage system, water access, power, whatever it is. Have we come to that?

Joe Murphy

I don't think we're quite there yet. I mean, you know, we'll have to see what the different proposals might be, particularly with property tax. I know that that will be a main focus of attention here, this, this coming time. But look, it's a partnership working with our policymakers to make the state of Iowa as competitive as possible. We want to be, we want to work with our policymakers no matter what side of the aisle they're on, to make Iowa's competitive as possible and to create a workforce environment where people want to be here, want to live here, and start their career here.

Dave Price

Nicole, we have like half a minute, but will this affect your wish list before the legislature about declining revenues?

Nicole Crain

No, I think we are already on the…on the property tax side, we already do the partnerships, businesses partner with their local governments and counties very well. That's how we grow the state. And you know, we're looking forward to the 2026 legislative session.

Kay Henderson

You mentioned the institute that issued a report, Joe. How do you, are you going to have a proposal for legislators to address the issue of young men not being in the labor force?

Joe Murphy

Well, I think with respect to young men in the labor force, we need to do everything we can to figure out what's driving that. I think we need some more data on that to figure out what's going on, and maybe offer some solutions down the road.

Kay Henderson

Well, I have a solution right now. We are out of time. Thanks to both of you for being on this edition of Iowa Press.

Joe Murphy

Thank you.

Nicole Crain

Thank you.

Kay Henderson

You may watch every issue of Iowa Press at iowapbs.org. For everyone here at Iowa PBS, thanks for watching today.

Announcer

Funding for Iowa Press was provided by Friends, the Iowa PBS Foundation.

Banking in Iowa goes beyond transactions. Banks work to help people and small businesses succeed. And Iowa banks are committed to building confident banking relationships. Iowa banks, your partner through it all.