The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy.
By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.
The new numbers present some reason for hope for job-seekers — but also show Iowa jobs are falling short of demand. An extension of unemployment benefits in this climate would be important, to help struggling families and the economy.
Iowa nonfarm jobs grew in January, but revised December numbers are far below previous estimates. Nonfarm, or payroll, jobs rose by 4,600 in January to 1,463,400. Though a clear gain, it shows the number of jobs for December was vastly overstated. The January number is 5,400 jobs below the level that had been previously estimated for December.
The unemployment rate showed a slight increase following annual government revisions of employment data, to 6.6 percent from 6.5 percent in December. That December number had previously been reported at 6.6 percent.
The new numbers are the best numbers available, and they do present some reason for hope in what has been a very difficult period for job-seekers.
Over the year, from January to January, we see pretty similar trends to what we’d seen earlier. Iowa lost nearly 40,000 jobs in one year (38,200), and over 40 percent of the loss (16,600) came in manufacturing. These are jobs that traditionally pay better than most and offer health benefits.
It’s always best not to get too swept up in the monthly numbers because they are subject to revision. It’s better to take a step back and view them over time.
What the numbers do illustrate, however, is that Iowa jobs are falling short of demand for work. This yet again emphasizes the need for an extension of unemployment insurance benefits by Congress — both to help families make ends meet when jobs aren’t available and to bolster the economy. Unemployment benefits are spent in local economies, and that helps to create jobs.
About 1 in 5 Iowans would be eligible for direct consumer relief on energy costs in the House climate bill.
Climate change affects everyone, everywhere.
Everyone will have to make changes, but for some it will be more difficult than others. Public policy must recognize this disparity.
Recent negotiations in Copenhagen dealt with climate-change policy ideas that hit poor countries differently from rich.
Unless rich countries provide funds to help implement new energy-efficiency and renewable-energy technology, developing countries will not be able to afford a transition to smarter, cleaner, but initially more expensive methods of producing energy.
Within the United States, we’re going to see higher energy prices by making coal and other fossil fuels account for their environmental and health effects, at least initially. It is not avoidable, and without careful design these policies will affect people differently at different income levels.
While a climate-change bill has not passed the full Congress yet, President Obama last year signed economic recovery legislation that takes some steps, helping low-income people who find it difficult to insulate their homes and upgrade furnaces and other appliances to use less energy.
In that so-called “stimulus” package, the American Recovery and Reinvestment Act (ARRA), Community Action Agencies in Iowa and around the nation received a large boost in funds to ensure that homes of the poorest families use much less energy.
Before, that program spent about $15 million per year on weatherization in Iowa. ARRA added $80 million over three years. The work is currently under way, helping people to weatherize their homes and helping the Iowa economy at the same time.
Climate legislation in Congress can and should do more.
The climate-change legislation passed last June by the U.S. House recognized the difference. Where, higher-income Americans can offset the higher costs of a gallon of gas or kilowatt hour of electricity by installing insulation or combining car trips, such efficiency moves are out of the reach of many Americans at low incomes.
About 1 in 5 Iowans — approximately 579,000 at low incomes — would be eligible for direct consumer relief in the House bill. These payments would compensate for higher expenses for energy and energy-intensive goods and services for those households.
A Senate version of the bill does less directly for low-income citizens, but that bill, passed out of the Environment and Public Works Committee, also makes improvements. It’s something that needs further consideration.
At home and abroad, climate-change policy must recognize the disparity in economic ability to make the necessary changes to save our environment, our resources and our planet.
As these funds cycle through the economy, thousands of jobs are produced or saved, and economic activity benefits Iowans.
American Recovery and Reinvestment Act (ARRA) put millions of dollars into the hands of Iowans who needed money most —Iowa’s recently unemployed. It encouraged states to update their unemployment insurance eligibility (of which Iowa was the first), enabling part-time and low-wage workers to qualify for unemployment insurance (UI).
Unemployed Iowans benefited from ARRA in two key ways: they received an additional $25 per week and they had their eligibility for receiving UI extended significantly. Rather than having just 26 weeks of UI, ARRA extended workers’ eligibility for UI by 47 weeks, to 73 weeks total.
As a result of these two measures, the Iowa economy will have an additional $314.8 million ($82.6 million for the additional $25 in weekly payments and $232.2 million for the extension of benefits) injected into its economy in 2009 and 2010.
As the only source of income for many unemployed workers, UI benefits are spent quickly and locally. Apart from helping the unemployed meet basic needs, UI benefits also help the local economy, maintaining or even increasing the demand for goods and services. Providers of these goods and services end up using these funds to pay their workers’ wages, who in turn, spend their wages on their basic needs. The multiplier effect of the increase and extension of UI benefits, as well as other workforce- related provisions of ARRA produced almost $501.7 million in direct and indirect effects in 2009, and will produce over $314.6 million this year.
As this money cycles through the economy, we estimate over 3,700 Iowa jobs were produced or saved last year, and over 2,200 this year, solely as a result of the UI measures of ARRA.
Clearly, UI benefits are no match for a steady job with a decent wage and benefits. But for the thousands of Iowans who have found themselves without such a job, ARRA has been a lifeline. Moreover, it has helped keep many other Iowans who, but for the stimulus, might have found themselves unemployed, too.
Like Oregon voters, Iowa voters favor a balanced approach to budget challenges.
Iowa could learn something from Oregon voters about taking a balanced approach to budget challenges.
In a victory for fiscal prudence, Oregon voters recently passed two initiatives — Measures 66 and 67 — that upheld their legislature’s decision to use a balanced approach to their budget shortfall.
In Oregon’s case, lawmakers last session made cuts to the budget and raised income tax for the top 3 percent of filers. They also raised the corporate minimum tax from $10 and increased the corporate income tax rate for businesses netting over $10 million a year, and temporarily for most other businesses. As the Legislature already voted last session to use a balanced approach that included trimming the budget and raising revenue, this vote saves Oregonians from further cuts in important services. This is notable for two reasons:
■ Oregon is known for its opposition to raising taxes, having last voted to raise taxes about 80 years ago when it added a state income tax.
• It is one of five states that does not have a state sales tax.*
• It also has a statewide cap on property tax.
• It has a “kicker” law that automatically sends money back to residents when revenues exceed forecasts. Oregon has no rainy day fund.
■ Given the opportunity for a direct vote, Oregon voters chose to retain a balanced approach and raise taxes on themselves rather than make additional cuts that would decrease funding for education, health care and other essential services.
Oregon’s voters truly understand the importance of a balance during difficult economic times.
So, what does this mean for Iowa? For one, the Oregon vote remarkably reflects the results of a survey of Iowa voters last fall.
■ Six in 10 favor some increase in taxes and fees rather than making cuts alone.
■ By the same ratio, Iowa voters believe the wealthiest Iowans — those earning over $250,000 per year — and big corporations pay less than they should in taxes.
The situation is complicated, and Iowa voters recognize that using budget cuts or tax increases alone will not solve our balance problem.
Oregon’s unemployment rate is 11 percent, compared to Iowa’s 6.6 percent. Oregonians understand that a budget has two sides, and a balanced approach to spending and revenue assures a responsible way to protect critical services in difficult economic times.
We need all the numbers to best view Iowa’s job picture.
Iowa’s latest jobs picture is a bit mixed up. Iowa’s unemployment rate was at 6.6 percent in December, remaining relatively stable through the second half of 2009. But the job numbers themselves dropped dramatically, shedding 13,200 in December alone for the largest one-month drop in more than a decade.
Though this month’s job losses were staggering in their rate of change, the whole year gives a better picture.
Iowa began 2009 with a seasonally adjusted unemployment rate of 4.4 percent, and jumped quickly – to 4.8 percent in the first month, and to 6.2 percent by June and 6.5 percent in July. The rate has stayed at or above that level ever since.
It’s important to understand that the unemployment rate alone doesn’t tell the whole story of those without work.
The unemployment rate:
does not include those who are working less than full time but would prefer full-time employment.
does not include those workers who have given up and dropped out of the job search; and
does not necessarily reflect job trends. In other words, the unemployment rate can go up at the same time we’re adding jobs — or vice-versa.
So what gives? First it helps to know the monthly numbers reflect two surveys that measure different things.
A U.S. Census survey of households determines the unemployment rate. When a person is unemployed he or she must be 1) jobless, 2) looking for a job, and 3) available for work. In other words, not every person without a job is considered unemployed.
People meeting that definition as “unemployed,” along with those who are employed, constitute the labor force. The unemployment rate is the percentage of the labor force that is unemployed.
It’s not perfect: Someone who has lost his/her job and has quit trying to find a job at a given point in time is no longer counted as unemployed, and therefore is not reflected in the unemployment rate. And someone who lost a job with health-care and retirement benefits may now be working independently — at lower pay and without benefits — but is counted as employed. That person is employed, but is really underemployed.
So the unemployment rate does not necessarily measure job quality or the ability of the economy to meet the demand for jobs.
The monthly nonfarm job numbers, on the other hand, come from a payroll survey of employers. It does not count workers; rather, it counts jobs, which is a more transparent way to know what jobs employers are making available.
The nonfarm job number, too, is not perfect. In fact, one person with two jobs is counted twice. And it doesn’t tell whether the jobs are full- or part-time jobs. But it’s a pretty good measure, because it shows changes in the number of jobs the economy is supporting, month to month and year to year.
Rather than focusing too heavily on one-month changes, we can see that during all of 2009, nonfarm payrolls fell by 40,100 jobs, or an average of 3,300 per month. In 2001, the year of the last recession before the 2009 recession, the average job loss was 2,100 a month.
A few key points from the nonfarm jobs numbers, which show changes by sector for the year:
Nearly half of the net nonfarm job losses for the year were in manufacturing — 19,900.
We had losses of 7,900 jobs in trade, transportation and utilities; 7,700 in construction; and 4,500 in leisure and hospitality.
Only three sectors showed a net gain: education and health services, 2,600; professional and business services, 1,200; and financial activities, 900.
The economy leaves Iowa with a lot of room for improvement. Employment is often one of the last areas to show signs of recovery, so it is going to take some time to see big positive changes. It is also a reminder that we need all the numbers to best view the state’s employment picture.
Think opening the books on public business doesn’t bother corporations? Think again.
While transparency is good, and will result from a new law passed last year, lawmakers made a mistake in not having the new legislation take effect immediately.
Lawmakers ordered annual public disclosure of recipients of the Research Activities Credit with claims exceeding $500,000.
Instead of an immediate effective date, the law carried a July 1 effective date. That gave companies two months to get their claims filed before the information gathering would begin — a temporary window to avoid disclosure. Some jumped through that loophole, to the tune of an estimated $25 million.
The Iowa Department of Revenue reported on this in its December Contingent Liabilities report for the Revenue Estimating Conference. After estimating RAC claims for FY2009 at $45.5 million and $46.1 million in August and October reports, that number spiked to $70.8 million in the December report.
The DOR report itself attributed the spike in the estimate to the new transparency law:
There was also a dramatic increase in the amount of Research Activities Tax Credit claims in FY 2009. The majority of the increase in FY 2009 claims is a result of corporations filing claims early, before the July 1, 2010, effective date for a new disclosure requirement for Research Activities Tax Credit claims exceeding $500,000. As a result the estimate for FY 2010 was lowered to account for those claims moving forward a fiscal year. (emphasis added)
The graph above shows where the steady upward trend in RAC claims broke sharply with passage of the disclosure law, claims spiking just ahead of the law taking effect, and the projected one-year reduction before the trend returns.
Think opening the books on public business doesn’t bother corporations? Think again. When public business is tied too closely to private business, as we see with the RAC, taxpayer accountability suffers.
Companies receive secret checks. That’s business as usual in Iowa, where corporate giveaways are out of control.
When you put your money in, do you see where it goes?
It’s an important question for taxpayers, and it’s one the Iowa General Assembly may address further this spring.
The so-called “Research Activities Credit,” or RAC, has become an annual drain on the state Treasury of $30-40 million and is projected to reach past $60 million in a few years. But the biggest cost is not simply tax revenues lost to a credit against taxes owed. The biggest cost of the RAC is in its poorly named “refund” program. If a company can claim a credit larger than its taxes owed, it gets what’s called a “refund” — for taxes it never had to pay.
These “refunds” averaged about 92 percent of claims from 2000-05, and in 2005 averaged $3 million per recipient. That is money that never has to go through the regular budget process, scrutinized by legislative committees and weighed against the state’s priorities. If it were a grant, or a regular budget item, you would see where that money goes. But since it’s rewarded through the tax system, you don’t. The companies receive secret checks.
That’s business as usual in Iowa, where corporate giveaways are literally out of control.
Maybe this will start to change. A new law passed last year could be a critical first step toward transparency of subsidies to private corporations. Recipients of RAC claims above $500,000 will be named, with amounts received, in an upcoming report from the Department of Revenue.
You’ll be able to see where at least some of the money is going, and count your quarters — a half-million dollars at a time!