Industry sign banking iowa claim fast
good afternoon everybody thanks for being here I'm Walt Rogers and the deputy director of TEF iowa tax education foundation of iowa we seek to provide policy solutions that benefit all Iowans this afternoon we are releasing the economic impact of Kovach 19 on the Iowa economy a first cut the first in a series of reports that examines the financial implications of the virus authored by dr. Ernie Goss and mr. Scott string the first report is based on a brief snapshot of the data currently available from the early days of the virus in Iowa the picture will become even more clear after April data is released later on this month we can already see that Kovach 19 is impacting our state's economy in an incredible way both in terms of wages and jobs lost to Iowans on future government budgets so it's important that we take a deep dive into the economic realities of the pandemic or instance this first cut will reveal projections of a total cost to the Iowa economy so far as well as projections about lost tax revenue TEF I was proud to have these two noted economist dr. Ernie Goss and mr. Scott Stream join us to discuss the findings of their first cut before I turn it over to the economist I want to let you know that if you have questions submit them in the Q&A section dr. Goss and mr. strain will give a summary of the report well they'll go through it and then we'll take questions at the end this whole briefing should last about 45 minutes so dr. Gosai turn it over to you Thank You Walt and thanks to two TEF Iowa you and John Hendrickson and Dan all your great people at tea if I would thank you for that thank you thank you for bringing us on first I'll just say that this is a first cut now why our first cut because we really we're really limited in data right now we're gonna do a second cut and a third cut when you get better and better data but we're living in a world which is we're talking about not not monthly we're talking about weekly and even daily impacts that are changing as we as I speak why I first cut well the BLS as I said BLS employment data for the month of April will not come out to maybe may the 22nd so we have to do something else to get better data and we use the weekly claims for unemployment insurance which will see shortly but the impacts are I would really didn't happen if we D if we can bring up the first time claims for unemployment insurance a slide it's showing those first time claims and you'll see you'll see that I mean what's those numbers we're seeing in Iowa the real impacts came in the 21st through the weekend and now that's the Thursday a week of the twenty first forty about 41,000 then it jumped up to 56,000 then up to sixty four thousand and then 44,000 up importantly and I can't see that last the 18th but nonetheless the first time claims have come down let me see if I move that aside so I kept and the last number is is the 28,000 and remember these are first-time claims what we really need to watch is the the continuing claims which now if we can bring up that slide showing continuing claims look at that I mean these are individuals that are continuing to draw unemployment insurance they are they have been laid off or otherwise disconnected to their companies that what they were there and you see that they began to rise again around you know we're talking about continuing claims on the 21st we only had twenty twenty two thousand in Iowa we're up to on the 28th we're up to fifty four thousand one hundred twenty seven thousand one hundred and fifty two thousand the latest number now that eighteenth is out we those aren't here available yet not final numbers those those are preliminary and the preliminary numbers would say a hundred and seventy thousand for the eighteenth 171,000 now here's an important point these are just those who are drawing unemployed insurance in Iowa about 40 to 50 percent of the unemployed workers draw unemployment insurance so you can almost double this so you're up to 300,000 there for the last number on the 11th and you look at the 18th you're probably up to three hundred forty thousand unemployed unemployed workers in Iowa and certainly this is an Alan Scott talk talking about more of the methodology but I think a lot of folks are saying is this going to be a v-shaped recovery that's what I initially when I was on radio interviews talking about a v-shaped recovery meaning sharp down sharp up then I moved to a u-shaped sharp down move along the bottom then sharp up well I've changed that to a Nike swoosh or check mark meaning sharp down and a gradual increase we're just not seeing the return even the states that we that have sort of opened back up Georgia for example you're not seeing that we're not seeing a sharp upturn we won't see that even the cares Act even with the trillions of dollars of the Fed the Federal Reserve is putting in the economy and the Fed US Treasury is putting into the cotton we're talking about a deficit this year that Lee may run between four and five trillion dollars now that's on the US economy that's 22 trillion so you get an idea about the about the devastation and we economic devastation I'd say but it is recoverable we will recover this we will get back to business it's just it's going to take a little longer than we initially thought and I initially thought and certainly it's it's troubling but this is a and I guess unfortunately or fortunately we're all in this together it's a global economic downturn but the debt negative side of that is you can't look to other nations to bring you out the exports we're we're we're in this for an a deep deep downturn price the largest I will say right now go on record is this is the largest downturn in GDP when it's all at the end of the in this period of time if you annualize it it's the largest downturn that the US economy is experienced since we began recording GDP in 1929 and as all the viewers know 1929 was the beginning of the u.s. Great Depression so if we can bring up the next slide and we'll talk about some of the other the insured and the unemployment the insured unemployment rate again we're up to the 18th brings it up to ten and a half now I wouldn't argue for doubling that to get the real unemployment rate but it certainly we're in the neighborhood we don't we we provide a measure that in our study but in Iowa were probably 15 to 16 percent it could be even higher again we won't know the number until May the 22nd for April and if we're probably again 15 is 16% and I think I may be on the low end there Scott can chime in on that but we're talking about the highest rates of unemployment that we've experienced in many many many decades and if we can bring up the next slide there please and there you see where the rankings of the insured unemployment rates and you see right I was in almost in the middle of the fact with Michigan at the highest insured unemployment rate and a lot of that has to do with in Michigan you're talking about durable goods manufacturing automobiles and parts manufacturing workers that are have been laid off by either Ford GM or others and they are drawing unemployment insurance and I'm sure we'll talk about the Fed some of the programs that the federal government and the Federal Reserve and implemented if we can bring up that next slide and if you want to jump in here and talk about the methodology that we used and and and measuring that and you see the well I'll let you know what better than a Scott thanks Ernie we looked at the continuing claims the net incremental increase in claims from for the period March 21st April 1st and used that as the foundation to make our estimate of the what the downturn means to the state of Iowa we found that during the last reset recession the recipiency rate in the state of Iowa was about forty to forty one percent these are the people that are unemployed part of the state program relative to the total number of unemployed reported by the Bureau of Labor Statistics using that as the bridge we were able to move from continuing claims to a rough estimate of the total number of unemployed in the state and then we took those that information distributed across industries based on available information at the national level as well as available information at regional and state levels and took those figures put them into a software program called implant which is one of the most widely used input excuse me regional input-output models available and from that we were able to come up with an estimate of about two hundred forty three thousand jobs lost in the state of Iowa for the March 21st April eleventh period about half a billion dollars in wages this is salary wages and salaries for employees lost and that self-employment income took about a seventy four million dollar hit the total impact to the state of Iowa comes in at about one point six billion dollars for this time period and that is a figure that tracks sales at each level of production so in one point six million once one point six billion represents the impact to the output of the state of Iowa in Scott you know I don't mean to interrupt but you came in with a GDP estimate if this continues on that's that's correct if we if we analyze this impact if this impact were to continue for a 12-month period you're looking at about nine to ten percent of the gross domestic product for the state of Iowa lost lost yes go ahead and go to the next slide thank you we took a look at what what's the fiscal impact and you can see that sales tax receipts during this period likely took about a thirty seven thirty eight million dollar hit what we anticipate is when it comes time for individual income taxes to be paid you're probably looking at about twenty six twenty seven million dollars and then in total the fiscal it down draft or the downdraft hit Iowa to the tune of about a hundred and twelve million dollars to state and local tax coffers and I reiterate something here because as a former state representative looking at a hundred twelve you know that's not that much of a dent it's only a three week period correct correct so you look at it like that the impacts are growing and I want to explain you're someone might ask about the property taxes how could it be hit on property taxes well that's an opportunity cost another exists is property that would have been built and taxed that the tax is on that but also the assumption the assumption that you'll get the assessments will come down now that's a pretty big assumption there the problem is if you don't get those assessments coming down you're going to put a big big time hit on some of the businesses and farm farmers out there of course by the way picture there is of Iowa there's a picture of a farm near Glenwood Iowa a friend of mine has a farm and his son took the picture and I loved it so I'm using it I did pay for that I didn't pay for a rock only Nike swoosh though so that was I don't know don't turn me into forgotten his name now a nike fame with anyway he'll he would send me a bill for using that swoosh now that you say that I had a reporter from up here in Northeast Iowa wanted to get on our press briefing but he couldn't and he said that you were on his show Oh a month or so ago and had a pretty you know pretty good outlook at that time and I think that's when you were talking about the V that's right and that must be that must be Jeff Stein yeah I've actually been in his Studios always love talking to Jeff he has wonderful questions and that's who that's a great one right there it was I thought it was a v-shaped recovery I I I did not know that we we would have this shelter in place across from here I didn't expect it to be shelter in place I didn't expect it to last this long I saw the stimulus we knew what cares was it was a two to three trillion dollar federal support then you had the Federal Reserve buying up bonds to bring down long-term interest rates you had the Federal Reserve stimulating the economy through other means so it was clear we had never we've never seen a downturn like this but we've never seen a reaction this quick and this big it was that big unfortunately the shelter in place is remaining now I I can't comment on the medical part I see the deaths rising but what about then I don't know this but many medical folks talk about the deaths that are because of shelter in place the deaths that are coming about because of individuals not going to their local physician to their local hospital to do colonoscopies to do what it's called elective surgery some of us not that elective and some of the some of those so we're not seeing that recovery and the shelter-in-place is is really hitting some states more than others I would argue that Iowa is taking anymore in my judgment more sensible approach to opening up and we've got if we don't get back the openness economy I heard there was one the car bird study came out said we'll need to shelter in place until 2022 there will be nothing to come back to that is a nutty nutty proposal I don't I don't know that a comments that did it but they they need we need to have their license taken and we don't even have license for economists so but if we did we need to eat and take it back that's a crazy idea I think we've moved into some of the question and answer period one that's the top of my list here is how how quickly do you actually expect unemployment to to rebound you mean turn down I mean they're down Scott do you wanna jump in on that why I think it's gonna you're gonna have to have supply chains three couple you'll need to have retail open have rebound in the energy because the energy sectors were we had most significant capital investments I can see that taking 12 months 18 months and I think another thing if I may the federal government is no the cares Act is not that supportive of bringing back workers in other words there's four months of if you you can get six hundred dollars plus your normal unemployment insurance and therefore senators that voted against that the sugar and more senators that voted against that that portion of the bill and that is very hurtful so my belief is my expectation I should probably say is after four months we may see some declines but it's not going to be what we need to see after that period of time when individuals get they they lose the 600 bucks and say well I'd be back better back off at work so we'll see a return there and the real problem with the care is that act and summer Brigade the Federal Reserve's actions is is more thing they're more too much politics in there not enough economics so but I would expect the rate to turned out to come down a bit in four months then in a second the third and fourth quarter come down a bit more but if this as Scott said it's going to be a longer recovery than the president's indicating I think it's going to take some time particularly in the energy sector has Scott said that would be more in North Dakota that's the survey state of cratons that I do surveys on and of course Iowa's energy what about ethanol ethanol is I was the number-one ethanol producer in America it's being hit hard all right now but not necessarily just by covert 19 but also by the nonsense of Russia what Russia and Saudi Arabia that battle they got into what a battle yeah this question is you know speculative but you guys would be the best ones that soothsayer you know what do you expect legislators to do in these next year as far as budgets when they see these revenues decline what do you expect them to do of thinking about both Nebraska and Iowa well unfortunately there's going to be a temptation and a push to raise taxes I I would like to see more and more I would support more fees fees instead of taxes fees normally don't discourage economic activity like taxes dude we're seeing the Iowa casinos now have been closed down and who knows when they'll be opening back up they of course in August approved sports betting in Iowa casinos that there was lots of there's lots of revenue there that goes to the local ends up at the local area and the state area we need to see the casinos open back up in terms of raising taxes but there's going to be pressure to raise income taxes and not should be I think in those cases when you can issue debt when you can't issue debt no
is a wonderful time to issue municipal debt to issue state debt now Iowa state debt is good there's some states when do you want to buy an Illinois bond probably not not and I hear you're talking about two states but right there together they're not the same fiscally they're not the same and I was a better bet they're going forward so issuing debt instruments would be a good thing on the regulatory environment we do need to see more movement toward reducing some of the onerous regulations out there and there are many in Iowa and other states that could be cut Scott you probably have some better suggestions and meet them well no I was thinking of the regulatory environment the other thing there might be a push to raise taxes there might also be a call for cutting spending austerity this is a random perturbation and it's going to be temporary even though it might take us some time to work out of it I don't think the legislators across the nation need to take draconian measures I think once the economy starts moving again and you start refilling the coffers we're not we won't make up all that was lost but we'll make up a fair portion of it and one thing if there you know the positives to come out of this is we're doing this online I'm teaching my classes online we have universities doing classes on my mind included a state look at K to 12 delivering classes online we need to see more of that in a hybrid I'm not talking about continuing to deliver all the classes online I come out of hybrid solutions that's going to be wonderful in other words we in education we're the last to innovate I'm sorry to say we need to see more innovation there so that state local taxes in terms of support for the K to 12 can be less onerous going forward by providing some of the care some of the learning through through technology now I'm not again I'm not arguing for staying home I'm arguing for a hybrid approach we're gonna see that and that's a great thing to come out of this tragic situation we had the same question it was a great one we had in the press briefing is what are some of the critical macroeconomic measures to keep an eye on one of the anecdotal evidence that you are paying attention attention to okay I'll begin there by saying keep an eye on our two surveys are regional not necessarily the us but our Creighton surveys comes out first business day of manufacturing almost a record low on the manufacturing manufacturing in this case is a lagging indicator believe it or not on the bank we do a survey of bank CEOs comes out the third Thursday of every month that one measures impact of agriculture and energy record low levels watch those two surveys keep an eye on the 10-year US Treasury bond that yield measures risk when everybody's scared they're moving in and buying the bonds pushing the price up to yield out yields at the record has been at record low levels six tenths of one percent to seven tenths of one percent you take out inflation you've got nothing there you got a negative return that's how scared we are go the son degree but it's less of a good measure than the other one and I Scott you and the stock market I'm saying I think it's still overpriced there's certainly there there are some stocks in there that are overpriced are I wouldn't use the equity markets to see what's going on so I don't I would I pay attention to high frequency data the unemployment claims financial market information I would also pay attention to spreads between some of the corporate issues and Treasuries and then some of the commercial paper issues I'd also look at some of the real estate backed bonds that are out there especially related to the retail space those are all going to give us indications of increased risk as well as improvements in the economy and when we say spreads that's the gap between it's a high-yield corporate bond or triple a corporate bond and they say you'd like revolt Treasury so what happens is when risks go up to individuals investors flee the Trevi unning the the corporate bonds and go into the government bonds bringing down those yields and raising the corporate bond yields so that's the spread you were talking about very good a good question here what form of additional federal stimulus would likely have the greatest now make impact examples are dollars for state and local revenue shortfalls infrastructure projects additional loans and grants Scotty thank you if the federal government needs to do something probably payroll tax eliminates a roll tax from period of time the problem that I have with infrastructure spending is by the time any decisions made the crisis is going to be over if you recall the last recession we had all this money that was put out there almost a trillion dollars with the idea that we'd have all this infrastructure spending for shovel-ready jobs and we had politicians some period later laughing haha well I guess it was shell where any jobs really weren't ready well some politicians you mean the President President Obama laughter but there we have we have some video on that he laughed about shell already they were not shelled already so I think we're I think the federal government my judgment is really they've really I'm not arguing against it they needed to do what they've done but maybe as Scott said we could have an unemployed hey they cut our elimination of the payroll tax for a period of time but my concern is we go back to the recession the last recession 2008-2009 why did it not do anything well individuals and businesses held on their their their confidence was not to the level where they would invest more buy more spend more so what the federal government can do and I think is is encourage in Senate are I should say bring back confidence now that's that's not going to be easy and it looked to these other indicators and but I again some of the infrastructure I would argue as you're right Scott takes too long to do it but in terms of broadband access and telephone accent us we need to see some of that for rural areas and I have a home in rural Iowa and I have pretty good coverage for rural areas but there are lots of Thor parts of Iowa that are cut off right now and feel cut off and cannot engage and come on they don't have the bandwidth to to watch some of these videos and do take advantage right could you go a little deeper into how covin 19 low affect the manufacturing and the agricultural sectors yeah the manufacturing has been a lagger here and that's a good thing meaning it came from the consumption side that would be in travel and tourism ripeness spilled over into manufacturing our number for March and the manufacturing sector for I was not that bad it wasn't good wasn't that bad now it's getting bad it's lagging but in terms of overall outlook you're talking about manufacturing that is some of them we were talking about the most productive manufacturing manufacturers on the face of the earth we should not read or even shy away from competition we will out-compete everybody all other nations so we need trade barriers to come down and the two senators from Iowa have been out front on that very important in getting us MCA signed and getting the phase one with China now some would say that's not a big good deal but I would argue it is and that was in January we were all very confident about 2020 for agriculture agricultural obviously we need higher commodity prices it's in C and we need of course a rebound and ethanol with oil prices moving up and I think we will see that as the economy improves oil prices move ethanol prospects improve and that'd be very good for Iowa agriculture in terms of grain that would be of course corn and soybean in terms of the replacements their livestock we need again exports exports exports exports and and we're talking about a chief dollar that's going to be supportive as well so I'm very positive long-term impact nebraska's Nebraska and Nebraska and I was two sectors of agriculture and manufacturing we they can out-compete us we will compete as well Scott you want to add anything there well I think I was encouraged this morning I believe I saw that the Tyson plant there you know I was going to be reopening I think on a limited basis to begin with but I found that encouraging also or even discouraging you don't have can you imagine the crisis in food if the supply chains were hurt there and the the packing plants there has to be a solution there and I think there may be have to be some intervention now the federal government through the through the the requirement that they remain in business well what about the workers I mean there has to be some support for being able to keep distances between and among workers and that and of course Tyson and other food production producers will find the answer but it might be a costly answer and there might should be some federal support in that area and I would hire to argue for support in terms of exports I would argue in terms of potentially direct support and I'll leave that to the politicians a figure I'll do that one my son owns a first started in a small business where it grows microgreens here locally and microgreens are the little sprouts but you clip them at 12 days and you're selling as salad or whatever and but he's in a place where he doesn't know what's happening you know and there's you know the next question I've got is about small businesses and have you seen anything that talks about how small businesses are gonna get through this no I mean it's it's obviously you know you don't need an economist to tell you that it's your son knows his market is dried up well my restaurants those that type of farming you be more profitable if you're close to a metropolitan or urban area where you can sell directly to the restaurants and that's very important I mean that's that's an important and growing growing industry for Nebraska for Iowa for other states I keep using these same states but we have this all in common Kansas North Dakota and South Dakota and yeah the small businesses restaurants all of a sudden you're allowed to open in some cases which you've got you can only have so many tables tables well that may be an unprofitable level of operation for it for the for the restaurant what about the bars we've got to look at that and you'll have to get somebody who's more has more expertise in restaurants than I whether you talk about hotels there we're talking about business conferencing we surveyed our manufacturers they're not doing business conferencing who is I normally do probably 50 presentations a year to business groups agricultural groups banking groups I'm now doing I'm down to zero I've done I haven't done a presentation in in two or three months and maybe that's maybe that's a good thing for those who can they don't have to listen to my voice but it's it's it's a hit on my income by the way and by the way my income I mean and I think that's an important point my income may be down but it's not there's there some of these restaurant tours and hotel hotel owners are down to zero or close to zero so those of us who are online right now we're still making money these individuals are not making money and that's not only that their costs gone and replacing it with government money it's just it just it's not the solution we have to move to more other solutions other than the government it's like the father giving his daughters a bailout money and then taxing her and she gives it back to him and he gives her another it doesn't work does not work we've got to be able to get the broader economy going and like your son he needs the restaurants opened the private the private sector is gonna lead us out of this the private sector will be the solution that's where the innovations come from the Xoom folks that are they came up with the technology we're using right now think of the cost savings from the private sector innovation the cost savings available to state local governments for reduced travel costs think of the conference savings I mean those that's what that's where that's going yeah right I had a basic economics class in college I remember the teacher gave an analogy of economics kind of like a huge freight train when it's rolling down the track it's just cruising but the amount of energy it takes to get to that train to move in the you know 60 miles an hour is a lot of energy but once it's there you know it's just a cruising machine what's it gonna take I mean number one is that a correct analogy and number two you know what what what's the extra amount of energy is it gonna take for our economy to give back to a cruising machine like that well like Scot said we've got to move to open the economy back up I'm sorry I unfortunately there will be deaths with identified connected to kovat 19 however their deaths right now connected to unelected surgery that's not being taken place checkup so they're not going on we we're killing perhaps I don't know whatever we're killing potentially as many people as we're saving by being sheltered in place we've got to move to open the economy up and I think those of us who may be in a high-risk group there may be we may have to be somehow quarantine or sheltered or whatever but we've got to move and I realize I may be banned from whatever forever but that's the way I see it it's just we cannot kill as I put in one of my presentations I think killing the goose to save the egg right we just stopped that free train yeah yeah so I should have continued with your analogy that's a good analogy but we did stop it is in the you know wall and the listeners and certainly Scot knows this system that maybe all of you do as well we haven't had a calamity like this that affects the economy in our history people said what about 9/11 I'm like are you kidding me not even it's a pimple on this one we're talking about not not the we've been keeping GDP numbers got the numbers back to 1929 we saw 13 percent decline from 31 to 32 this is gonna it may swamp that one so are we getting more weakness for the Great Depression no we just have to get back we can't do what those two a Harvard economist said wait till 2022 well maybe we economist can wait to 2022 maybe we educators in wait to 22 to 22 people in the nuts and bolts the economy can't wait well as we wrap up let's wrap up with some some hope and positivity and I could get the end of the press briefing both you give us kind of a you know an idea what you think is hopeful coming around then I know President Trump has talked about he's kind of changed his view of things and he keeps saying you know now it's after the fourth quarter he thinks the fourth quarter would be real good and next year obviously great he's gonna say that but you anticipate something like that or what do you think is gonna be hopeful for us well oh I'll say the hopeful part the hopeful part is that this is introducing us to rely more heavily on being more innovative like with technology in education we're finally you word is dragging those of us who are in higher ed or even in K through 12 those solutions that are very dynamic so it's gonna in that regard we're not going back we're going far which is through us the second thing is again we in America and particularly in Iowa and in this part of the country no one can out-compete our manufacturers no one cannot compete our agriculture open it up we need to the idea that somehow China or Brazil for example Brazil is going to eat no Brazil is not going to eat our lunch well they they may well eat our lunch because we're gonna be shipping food with them but will out-compete them all so we need some movement toward opening the economy free and free earth free earth and fair trade and we will do quite well again I don't expect it to be a rebound will it be a V W or I think it's going to be more of a check mark or a Nike swoosh well you know what I what I'm thinking about and this goes back to Walt's analogy it's gonna take us a while to get the boy boiler heat it up get the steam going and get the locomotive going again and again I think that's going to take at least two three four quarters but the thing you remember is we didn't suddenly become less productive we didn't have the type of overhangs or imbalances that we typically have you have to work through
in a recession this is a voluntary closure of our economy right this is a completely different set of circumstances and I'm I don't think we become less productive we didn't suddenly lose all the human capital all the skills that we've accumulated for years still have a productive labor force and just let him get back to work that's the way I see is a like Ernie was saying it's this country has the element of freedom and freedom is the engine that's that Spurs all these ideas and all these innovation and all this growth and that's the steam in the engine that's starting to go quicker and faster and finally get to a place where it's just cruising down the track again so hopefully we'll get there rather than later well I just want to thank both of you dr. Goss mr. Stane for being here Spain and hey this is this has been a really good discussion we we thank you and appreciate you for being here and once again this this normally on TEF Iowa or to EFI organ will be coming back within the next months and weeks and months with cut two and cut three and looking at the data and see and what's really happy and maybe it'll be a V and maybe they'll be to smouch we don't know but we know that Americans are gonna fight hard to get back to where we were right and thank thanks for all thanks to your organization and by the way I should have said this is a beginning I go by Ernie only my wife and kids call me doctor gallstone all righty Thank You Wallace thank you everybody take care thanks so much thanks well thanks to TIA thank you we'll talk soon
