A monthly index of leading indicators tracked by the Iowa Department of Revenue strongly suggests that the Iowa economy will continue to show weakness for the end of the fourth quarter of fiscal 2020 and into the first quarter of fiscal 2021. The report also suggests that employment growth will weaken over the three to six months. 

For the sixth month in a row, the Iowa Leading Indicators Index decreased in May, moving down 0.5% to a reading of 100.8. The six-month annualized change in the index fell to -11.7% in May from -10.6% in April — the 19th consecutive month of negative value and the third month below a -2.0% change. The six-month diffusion index remained unchanged at 37.5 in May from April. 

The decrease in May’s index is considerably less than the past two months after dropping 3% in March and 1.7% in April — the two largest drops in the 20-year history of the index — as Iowa businesses began reopening to the public in May. 

The Iowa Leading Indicators Index was constructed to signal economic turning points with two key metrics that when seen together are considered a signal of a coming contraction: a six-month annualized change in the index below -2.0 percent and a six-month diffusion index below 50.0. 

Three of the eight component indicators (diesel fuel consumption, national yield spread and residential building permits) experienced an increase of greater than 0.05% over the last six months.

Unemployment claims, one of the eight indicator components, are beginning to taper down. The 11,507 average weekly unemployment claims for the month of May were nearly 72% lower than April’s 40,835 average weekly unemployment claims. Iowa’s unemployment rate decreased to 10% in May from 11% in April. 

“Given Iowa did not begin to reopen until May, it is not surprising that the unemployment rate remains at 10%,” Iowa Workforce Development Director Beth Townsend said in a press release. “There are signs, however, that more people are returning to work as we see the total number of claims decline each week.”