Donnelle Eller

The Des Moines Register

In north central Iowa, competition for workers has grown so fierce that Forest City's Winnebago Industries is offering new employees a $1,000 hiring bonus if they work a full year at the RV manufacturer.

About 20 miles away in Garner, David Zrostlik, president of Stellar Industries, says that may be an option to fill open positions at his plant, whose 400 workers make field service trucks.

"For years, I sold our products to prospective customers. Now, I spend just as much time selling our company to prospective employees," said Zrostlik, whose hiring list includes engineers, painters, welders and assemblers.

Iowa's 3.1 percent unemployment rate is the lowest the state has seen in 16 years — so low that experts worry it could hinder the state's economic growth.

The impact may already be showing up in Iowa's budget problems, with retail and use sales and personal income tax receipts falling behind projections.

Officials have cut spending and are dipping into the state's cash reserves to close an estimated $300 million budget shortfall. Iowa ended its fiscal year Friday.

Iowa's economy has rebounded since the Great Recession, but recently it's showing signs of slowing.

Iowa added 110,200 jobs since 2010, with Des Moines alone gaining 47,700 positions.

Iowa workers have seen their real weekly wages climb 8.1 percent, outpacing the nation's 5.3 percent growth.

But last year, Iowa's economy inched up less than 1 percent, much lower than the gains of 2.2 percent in 2015 and 3.1 percent in 2014, according to Bureau of Economic Analysis data that was adjusted for inflation.

The same held true last year for average weekly wages, which rose a meager 0.8 percent after adjusting for inflation.

Zrostlik said difficulty finding workers has impacted growth.

"We've got a lot of orders in-house," he said. "We're getting behind on production."

Agriculture at fault?

Top political leaders have pointed the finger at Iowa's ag downturn, now in its fourth year, for a slowing economy and sandbagging the state's budget.

Iowa farmers reported $12.3 million in losses in the 2016 tax year, a massive change from 2012, when they reported $1.4 billion in earnings because of record-high corn and soybean prices the year after a drought.

Others, however, doubt that agriculture deserves all the blame for Iowa's budget woes.

"I don't think that farming can explain all of it, but it’s certainly a drag" on the budget, said Amy Rehder Harris, the Iowa Department of Revenue's chief economist.

Iowa and U.S. farmers have struggled with commodity prices that have fallen as much as 55 percent. At the same time, costs for seed, fertilizers and other inputs have been slow to decline.

Experts say the lingering ag downturn is something state leaders should have baked into their budget.

David Roederer, director of the Iowa Department of Management, said the state did.

"It was down more than we had estimated," he said.

Mike Lipsman, a partner at Strategic Economics Group in West Des Moines, sees bigger policy problems with the state's budget — an ever-eroding tax base that is squeezing revenue.

The problem was highlighted inMay, when a state fiscal analyst said new tax exemptions on goods that manufacturers use in production could cost close to $100 million — nearly four times more than originally estimated.

"We have factors that are causing the economy to slow down, but we’ve made it worse with policy changes," Lipsman said.

Tax receipts lagging

The state budget can provide some clues about the health of the economy, including what Iowans are earning and what they're buying.

Through May, the state says personal income tax receipts climbed 2.5 percent to $4.13 billion, trailing the state's 4.1 percent growth estimate.

Total state sales and use tax receipts on purchases such as clothes, TVs and trucks reached about $2.61 billion, only 0.4 percent higher than a year earlier, and behind the weak 1.5 percent projection.

The state is investigating the reasons behind its lackluster revenues, which can be complicated by growing consumer purchases online that escape taxes.

Lipsman likes to look at Iowans' spending on eating and drinking — the kind of fun expenditures consumers whack from their budgets when money gets tight.

Last year, taxable sales increased 3.3 percent to $4.3 billion, compared with a 5.6 percent spending climb in 2015.

Iowans cut $137 million in spending last year.

"That's a big drop," Lipsman said.

Wanted: More workers

There's another number that causes economists concern: Despite its low unemployment, Iowa had about 11,100 fewer workers in May than a year earlier.

"You can’t grow jobs if you don’t have someone" to fill them, said Ernie Goss, an economist at Creighton University in Omaha.

Amanda Formaro, a human resources director for Kemin Industries, said the Des Moines animal and human food supplement manufacturer wants to fill 29 positions ranging from accountants to scientists to tech and production workers.

The company offers its workers a $1,000 bonus for referring a new hire who stays with the company a year.

Those inside referral bonuses can climb to as much as $5,000 for good tech hires because of the "ferocious competition," said Joel Jackman, co-owner of Paragon IT, a Des Moines recruiter.

Big companies are investing in tech to push productivity — possibly reducing workforce needs. And state and local governments are encouraging tech startups.

"The demand has never been as high," particularly for college tech graduates needed to replace retiring Baby Boomers who are leaving the U.S. workforce at an estimated 10,000 a day, Jackman said.

With the tight labor market, many workers — from engineers and software developers to customer service reps — often are fielding two or three job offers, said David Leto, executive vice president at the Palmer Group, a West Des Moines recruiter.

Emilee Earlywine, a 22-year-old Iowa State University ag business graduate, was one of them. She's training now for a sales position with AgReliant Genetics, an Indiana seed company.

The company's recruiter called her the first day of her senior year.

"I had six interviews and three offers. I liked AgReliant's small-company feel," said Earlywine, who's put 3,000 miles on the company's truck learning about the company, its seeds and farming.

The wage conundrum

All that demand should mean employers are pushing up wages for workers, Goss said.

But that's not the case for many.

"That's the conundrum," he said. "Wages are getting bid up, but only for some workers."

Last year, Iowa's real weekly wages climbed less than $10 to $864. Nationally, wages were mostly flat at $1,031 in 2016.

Central Iowa workers have seen an average wage increase of about 3 percent annually in recent years, said Leto, the Palmer Group executive.

"Nobody has gone crazy and shot for the moon" on salary, said Leto, whose firm provides an annual salary guide.

He expects next year will see a larger increase.

David Swenson, an ISU economist, said workers will find their way to good jobs if the pay is right.

With its older workforce, Iowa likely will need to look to neighboring states for workers.

That means Des Moines employers will need to convince workers in Omaha, St. Louis, Kansas City, Chicago and elsewhere to make the move.

Des Moines and other cities already are pulling workers from smaller Iowa cities and rural areas.

Growth from immigrant labor also could be limited, given the Trump administration's efforts to restrict travel.

"Our labor force is naturally contracting, and that’s a problem," he said.

Zrostlik, president of Stellar Industries, hopes good pay, working conditions and benefits such as employee ownership bring more workers to Garner, a town of 3,000.

He's working with town leaders to increase housing options.

"It’s a whole big basket of stuff we have to do as an employer and small community to attract workers," he said.