As we head into the new year, Iowa’s economy appears more solid than it has been for some time, according to the Iowa Department of Revenue’s Iowa Leading Economic Index. 

The index, despite its name, is not a predictor of the future as much as it is a measure of where we have been. And what it tells us is that the past two years were good for Iowa. 

In fact, if you figure that the worst of the pandemic occurred during the first half of 2020 when many things were shut down, the Iowa index shows we are about 6 points better off today than we were during those early dark months of COVID. 

That’s 6 points on an arbitrary scale of 100, which is the value state officials assigned to the overall Iowa economy in 2000 when they created the index.

During the two decades since then, Iowa’s economic index did not climb higher than 108 until August of 2021, when it hit 109. 

The index hovered around 106 when the pandemic began, and it fell to 103 during the spring of 2020 before it started climbing about a year later. It peaked at 110 in February 2022 and stayed there through June before slipping back to 109, where it is now.

The index lumps together eight different economic measures to come up with its single number as a monthly gauge of how Iowa is doing. 

Those inputs include four agricultural profit measures for corn, soybeans, cattle and pork, which are lumped into a single farm profits number; two employment measures; a calculation of new orders received by purchasing agents; monthly tallies of residential building permits; diesel fuel sales; a stock market index for publicly traded Iowa companies; and a financial proxy for the difference between long- and short-term bond yields. 

All those measurements have undergone significant change since the onset of the pandemic.

The biggest swing was for unemployment claims. Initial claims exploded from about 2,900 a month before COVID to nearly 12,000 in February 2021 before beginning a decline to fewer than 1,900 at the end of 2022.

Shares of publicly traded Iowa companies also took a big hit initially. 

The biggest companies, Principal Financial Group, Casey’s General Stores and Ames-based Workiva, a provider of software for large publicly held businesses, lost a third to half of their value initially. But all have since recovered and reached new highs. 

Other companies with notable Iowa operations, including recreational vehicle maker Winnebago Industries and office furniture supplier HNI Corp. in Muscatine, struggled to return to pre-pandemic levels.

The Iowa stock index of 28 companies lost 40% of its value during the early months of the pandemic, compared with a loss of 32% for the S&P 500. Nor has the comeback for the Iowa index been as strong. Late last year the S&P 500 was 20% above its pre-pandemic level, while the Iowa index was up only 11%. 

Agriculture was not significantly affected by the pandemic, but it did receive a big positive boost when Russia invaded Ukraine a year ago and shut down the Ukrainians’ ability to compete with Iowa producers in world grain markets. 

During the past year, corn and soybean prices climbed to record levels that produced profits two to five times higher than they had been in recent years. Cattle profits were also up as much as 50%, while hog profits were largely unchanged, according to formulas used by the Iowa Leading Indicators Index. 

Lest you think Iowans accomplished all this on their own, recognize that during the past two years federal pandemic spending directed at Iowa totaled about $18 billion. That’s about $1 billion more than all of state government spending during the same two-year period.  

If you look at what has happened in other states, you will see there is nothing unusual or special about Iowa’s rebound.  

Nonetheless, Iowa’s strong farm economy does have the state well positioned to continue moving forward once the federal government’s money spigot runs dry.