At the Business Record’s 2025 Economic Forecast event, panelists shared their thoughts on how they believe Iowa’s economy will perform this year, weighing opportunities and challenges currently facing the local and national economies.

During the discussion Tuesday, the panel covered the potential effects of a flurry of executive orders introduced by President Donald Trump since his inauguration, the outlook on Iowa’s agriculture economy as the downturn continues as well as other national trends on interest rates and inflation and what they mean for Iowa.

Panelists included:
Jon Augustine – Chief investment officer, BTC Capital Management
Michael Cornett – Managing director, Washington National Tax Office, Forvis Mazars
Debi Durham – Executive director, Iowa Economic Development Authority and Iowa Finance Authority
Christopher Pudenz – Economics and research manager, Iowa Farm Bureau Federation
Deanna Strable – President and CEO, Principal Financial Group

Watch the event video
View photos from the event

Here is what our reporters took away from the conversation.

Outlook for Iowa’s economy in 2025

Panelists were asked to predict whether Iowa’s economy in 2025 would improve slightly or a lot, stay the same or regress slightly or a lot. Answers were varied. Augustine said he thought the economy would stay “about the same” but cautioned about weakness in agriculture. “I think we’ve all seen announcements from manufacturers of ag equipment that have announced layoffs, and obviously there is a ripple effect that goes through the economy in terms of how that impacts other businesses and suppliers within those communities,” he said. “I think there is a bit of angst there. But I do think there’s some positive aspects of the economy, too.”

Cornett said he thought the economy might improve slightly from 2024. “I’m optimistic that part of that is going to be that some tax reform will get done this year [by Congress and the president]. If they do some of the things they’re talking about, it will certainly have a positive impact [on the economy].”

Durham also thought the economy would improve slightly. “We’re starting to see labor participation recover. Population is growing in Iowa. … There’s an incredible amount of optimism about making tax cuts permanent and [about] regulatory reform. Forty-six percent of businesses surveyed plan to expand in the next few years. However, when you think about dismantling the federal bureaucracy, tariffs, mass deportations, these are all extremely disruptive factors in the economy, and though supportive of those, there’s going to be some pain in the short term.”

Pudenz said he thought the economy would regress slightly in 2025, mostly because of the agricultural economy. “There’s been a lot of bleeding in the ag economy in Iowa. I think it has slowed down but I don’t think it has stopped yet,” he said. “There’s a saying that when the American economy sneezes, the rest of the world catches a cold. In Iowa, I would adapt it and say that when agriculture sneezes, the rest of Iowa catches a cold. Agriculture is definitely sneezing quite a bit right now.”

Strable, who became president and CEO of Principal Financial Group in January, said she thought Iowa’s economy would improve slightly in 2025. “I think we have a resilient economy, and I think the underpinnings of both Iowa and the national economy are showing lines of positivity,” she said. “I think things like deregulation and tax policy could provide some positive stimulus as well.”

— Kathy A. Bolten

The optimism split

In the Business Record’s economic outlook survey, 41.8% of respondents predicted the economy would improve this year, and 41.8% of respondents predicted the economy would decline this year (16.4% said they thought it would stay about the same). Strable said Principal has found some interesting trends in economic confidence that relate to this optimism split: Employers and individuals have “confidence around the things that they can control, but less confidence as it gets further away from them.”

According to the Principal Financial Well-Being Index, “65% of business owners were positive. But when they were asked about local and U.S. economies, we saw a double-digit drop in confidence, even from November to January,” Strable said. “So local confidence went from 50% to 38% and U.S. confidence went from 40% to 26%.”

She attributed the uncertainty to volatility in the market due to federal policy changes and interest rates. 

— Emily Barske Wood 

Immigration policy a wild card

It’s hard to know the exact number of undocumented immigrants working in the U.S., or specifically in Iowa, but Pew Research estimated about 8.3 million U.S. workers were undocumented in 2022. About 105,000 undocumented immigrants live in Iowa, according to the Migration Policy Institute. Panelists were asked how it would affect Iowa’s economy and workforce if the mass deportations proposed by President Donald Trump’s administration came to fruition.

“Certainly with some of the population growth that we have had, some of that is migration, immigration — but that’s legal immigration that we’re capturing in those numbers,” Durham said, and added that it’s anyone’s guess what the impact of deportations could be on Iowa’s workforce. 

Pudenz predicted that deportations would have a more significant impact on the agriculture workforce along the coasts than it would in Iowa. 

Iowa communities with high immigrant populations have been the target of Immigration and Customs Enforcement raids in the past. Among them, ICE arrested 90 people at Swift & Co. pork processing facility in Marshalltown in 2006, and two years later, ICE held one of its largest immigration raids at the time in Postville, where agents arrested nearly 390 workers at a meatpacking plant. 

After the Marshalltown raid, “there was a sense of fear among the Latino population that constrained families from engaging in grocery shopping, dining out, or even visiting the downtown, which, at least temporarily, reduced the demand for goods and services in the city,” according to a report from the Immigration Policy Center. Swift & Co. faced several steep fines after the raid and raised its starting wage due to a worker shortage, which in part led to JBS purchasing the company in 2007. The report found that the “ICE raid contributed to a localized economic recession for perhaps six months to a year after the raid.”

— Emily Barske Wood

Regulatory relief

Durham said officials in Iowa’s state government are looking forward to some relief from federal regulations, particularly in the area of housing. “Affordable housing is really not affordable at all” because of regulations, she said. Iowa works with the Department of Housing and Urban Development and other federal agencies that each require separate environmental reviews for housing projects requesting grants. “Think of the cost of a project that’s got to do multiple environmental reviews. The time that that adds also costs money. So for us, looking at that regulatory side is the part that has us the most encouraged.”

— Kathy A. Bolten

Iowa’s struggling farm economy

The Iowa Farm Bureau Federation, which provides financial and educational benefits to the state’s agriculture industry, reported in November that Iowa’s economy suffered a reduction of $1.5 billion in value-added economic activity because of the downturn in the ag sector in 2024. In addition, farm equipment manufacturers, food processors and other ag-related companies slashed 11,400 jobs, resulting in lost income of $828.3 million, according to the report. One in five jobs in Iowa is in agriculture or an ag-related industry, according to the Coalition to Support Iowa’s Farmers. “Agriculture is a really, really important part of this economy,” Pudenz said. “But so is the whole ecosystem of businesses which support agriculture — Kinze, Vermeer and others. They are all located in the state of Iowa because agriculture is here. And those businesses all have their own network of businesses supporting them and buying their products. … So when farm incomes are depressed due to lower commodity prices … it has ripple effects throughout the economy.”

Since January 2024, there have been 7,000 permanent job layoffs in Iowa, 5,000 in manufacturing and related to the agriculture sector, Durham said. “The good news, though, is that we’re seeing some strengths: improvement in nondurable goods of manufacturing and you’re seeing some major capital investments in manufacturing. So, there’s still some bright spots out there. But until the ag sector calms down or levels out, we’re going to probably continue to see [layoff] notices.”

— Kathy A. Bolten

Interest rates: Fed ‘won’t be cutting just for the sake of cutting’

Augustine correctly predicted that the Federal Reserve would not cut interest rates when its Federal Open Market Committee met on Jan. 29. The Fed paused its rate-cutting program and held the benchmark rate at 4.25% to 4.5% after cutting rates twice at the end of 2024. As for the remainder of 2025, Augustine said financial markets are looking at potentially two interest rate cuts this year — one in May and the other in September. According to Augustine, the Fed always uses “data dependency” to make decisions on rate cuts, but will be looking even deeper at market trends this year. “They’ll be watching things very closely in terms of, “We won’t be cutting [rates] just for the sake of cutting in any way, shape or form. There will be a definite rationale behind it,” he said. Augustine said markets are anticipating interest rates to stay higher for longer.

Principal representatives are also watching moves by the Feds, and Strable said she thinks there could be three rate cuts in 2025 but not until later in the year. “And I do think tariffs, if any of those come to fruition, could have a much more dampening [on] those cuts,” she said.

— Mike Mendenhall

Cost of services driving inflation 

Market watchers are starting to see some good news on rent prices, which Augustine said had been a main driver in the consumer price index showing high inflation levels in the U.S. The  U.S. inflation rate has shown a “significant” drop, Augustine said, in the last few years. It reached a 20-year peak of 9.1% in June 2022 and hit 2.4% in September. But he said inflation has begun to level off around 3% and is still above the Federal Reserve’s 2% target rate. “We think getting down to that level will take a lot of effort,” Augustine said.

Cost of services like insurance premiums and medical needs will continue to be an inflationary factor, as well as the ripple effect of government spending in the last few years.

“Seeing some incremental improvement in a component like rent is going to be significant to help push that incremental progress forward, but we continue to see that it probably won’t get down to that 2% level this year. We might see once again some movement toward that,” Augustine said. 

— Mike Mendenhall 

IEDA launches new talent attraction initiatives

With Iowa’s labor participation still down from 70.3% pre-pandemic, Durham said IEDA is still working to get back populations that left the workforce during the pandemic, including those who retired, women and men ages 24 to 35. The state agency launched the program in June targeting people between 20 and 40 years old. She said the program has “exceeded all of our expectations” garnering about 6,000 leads, and around 1,000 are active leads, meaning they are in contact with those people or gathering data from them. Durham highlighted a few other talent initiatives as well. “We’re also going to start a project with the Technology Association of Iowa,” she said. “They used to have this project called the Iowan Project, which is kind of like our ambassadors abroad. We’re going to reunite that with them and then we’re going to start doing some hostings out in some marketplaces where we know where they’re moving from … California is the No. 1, we’ve received more people from California in the last two years and we know exactly the counties in California where they’re coming [from], so we’re doing that wraparound service.”

— Sarah Diehn

Panelists weigh in on AI

China-based DeepSeek’s recent announcement of its free artificial intelligence assistant the week of Jan. 27 sparked fears in the stock market about future investments in AI and saw chip giant Nvidia fall 17% on Jan. 27 and lose $593 billion of its market value, a record one-day loss for any company. The concern stems from DeepSeek’s model matching the performance of U.S. AI models while being built at a lower cost using chips that require less computing power, despite U.S. regulations meant to restrict the amount of high-power chips sent to China. Augustine said that the swings raise questions about tech companies’ valuations, but he doesn’t think it will affect the integration of AI into businesses.

“I think in terms of what we saw [Jan. 27] in terms of the reaction from the largest tech companies, particularly Nvidia, is the realization [that] to some degree these companies have, from their stock price perspective, been priced for perfection … when you see something like the announcement in regards to an alternative that is potentially cheaper that creates questions in investors’ minds of ‘OK, we put extremely positive valuations on these companies, do we need to go in and revalue them?’” Augustine said. “I think it’s very early in that process. I think one of the things that comes out of this is it doesn’t slow the integration and utilization of these types of products and services. It may mean that their sourcing may be differentiated, the costs associated with it may be differentiated, but it won’t slow the integration of these into our business practices and manufacturing processes going forward.”

Durham said like other states across the country, a top concern around AI for Iowa is the demand for stronger utility infrastructure to power data centers. This requires a stronger base load, she said, which is the minimum level of demand on an electrical grid over a span of time. She noted what she picked up on from Trump’s comments about power for data centers during his remarks at the recent 2025 World Economic Forum held Jan. 20-24. 

“He’s very provocative when he speaks but he’s like we’re going to do it by just letting them generate their own power behind all of these data centers and AI centers,” she said. “Well, in a regulated state like Iowa that’s not really an option, so yeah, there are definitely some concerns about that.”

Strable said she is thinking about AI in terms of how it affects Principal’s company priorities and how it can make the business more productive. As a real estate investor, Principal has also benefited from the data center boom, she said. She said she expects AI to drive some volatility, “but you have to invest. You have to be focused on it. We have a huge push to make sure we’re scaling our use cases and getting impact in both growth and efficiency because our competitors are doing it. We have to do it as well.”

— Sarah Diehn