Despite increased positive sentiment about the economic outlook for the next six months, attracting and developing a talented and diverse workforce continues to be a top concern among Iowa business leaders, and more focus is needed on federal immigration reform to help overcome shortages in the state’s workforce, according to the Iowa Business Council’s second-quarter Economic Outlook Survey released today.

The survey showed the overall economic outlook was 67.08, an increase from 60.42 in the first quarter and the highest the index has been since the second quarter of 2018 and the second-highest score ever.

The index ranking is based on an average of a formula the Business Council uses to measure performance in sales, capital spending and employment. A score over 50 indicates a positive outlook for the next six months. It was the fourth consecutive quarter the index rose into positive territory.

“I think it has a lot to do with getting back to a semblance of normal,” said Joe Murphy, executive director of the Iowa Business Council, a nonpartisan and nonprofit organization whose 22 members are the chief decision-makers of the state's largest employers.

“As vaccines have rolled out and people have become more comfortable being out in the community and in their personal lives, that just breeds an overall sense of consumer confidence we haven’t seen over the course of the  past 12 to 18 months,” Murphy said.  “As we’re rolling now halfway through summer, that confidence within the entire economy is proving out in our overall index scores and is a great sign for future growth of Iowa’s economy.”

The sales index rose 8.75 points in the second quarter to 71.25. The employment index increased to 68.75, and capital spending projections rose five points to 61.25, an indication that the majority of those responding expect to invest more in the coming months.

That is a change from the first quarter when the index remained unchanged, suggesting that business leaders were taking a wait-and-see approach to capital investments.

“You have to remember back in the first quarter, the vaccine was newly approved, it was the first wave of individuals who were qualified and able to get the vaccine, and as we’ve seen that vaccine rate increase, that bred a whole new sense of optimism,” Murphy said.

Despite the survey showing that companies planned to increase hiring in the coming months, 90% of those responding said attracting and developing a talented workforce was one of their top three challenges.

Murphy said that while the Legislature took steps this year to help expand and drive innovation by approving measures on workforce housing, child care and broadband, it’s now time to focus on immigration reform to help bring more people to the state.

“We need more people in the state and we need people back at work,” he said. “Iowa is coming back more strongly than many other states in the country. … But as Iowa companies are coming back at full force and with the demand at an exceptionally high rate right now for our members’ products, we need people in the workforce to match that demand. Iowa has had this issue for a long time, even before the pandemic, but it has never been more acutely experienced than it is right now.”

He said Iowa needs to become more creative, including the use of incentives, in recruiting people to the state, but also needs to look “at what we can do federally on immigration reform.”

“That’s really the bottom line from our perspective,” Murphy said.

Other areas of concern for business leaders include the cost of product and service inputs, with 65% of those responding saying that was a top challenge in the months to come. Another challenge listed in the report was post-pandemic supply chain issues.

"Receiving four consecutive quarters of positive index numbers is significant for the state’s economic outlook,” Tim Yaggi, Business Council chair, said in the report. “This survey illustrates that demand for Iowa goods and services has rebounded quickly. As businesses across the state return to pre-pandemic outputs, leaders are understandably concerned about talent pipeline and supply chain issues.”