New analysis measures economic impact of Iowa industries

AMES, Iowa – Agriculture and manufacturing are at the heart of Iowa’s economy, accounting for 38% of the state’s gross domestic product, according to a new economic analysis from Iowa State University.

The report goes beyond traditional jobs and income data reported by the U.S. Bureau of Economic Analysis and measures all labor and supplies required to provide a commodity or service for export. Dave Swenson, associate scientist of economics, says the model provides a more complete picture of an industry’s economic impact.

“It allows important sectors like agriculture and manufacturing to declare the fraction of the total economy that they support,” Swenson said. “Another advantage is that it helps sort out industries that primarily produce items sold to out-of-state buyers and sectors that primarily support other in-state industries or households.”

For example, much of Iowa’s corn is exported, which stimulates jobs in manufacturing, transportation and various business services along agriculture’s supply chain. However, a substantial portion of the state’s corn is also converted into feed grains, high fructose corn sweeteners and ethanol by Iowa manufacturers. The value of that corn production becomes a component of the manufacturing output in those sectors.

The analysis, using 2018 data, focuses on sectors that generate substantial export sales. According to the findings, manufacturing accounted for $62.48 billion in gross domestic product and 586,582 jobs. That’s compared to $33.52 billion in value and 230,980 jobs using direct, traditionally-reported data. Agriculture, food and ag-related manufacturing generated $37.81 billion in GDP and 391,939 jobs, compared to $19.69 billion in value and 183,659 direct jobs. After eliminating the overlap between the two sectors, Iowa manufacturing and Iowa agriculture combined linked to $72.9 billion in GDP and 698,112 jobs.

Swenson says the findings illustrate how growth or decline in a specific sector impacts the state’s economy. For example, if a manufacturer cuts 10% of its workforce, the ripple effect is felt throughout the supply chain. While the analysis does not examine the current economic decline, the closure of meat processing plants and the associated stress it puts on hog production, it illustrates the value of these critical linkages and the potential consequences of disruption.

“This analysis tells us how important these industries are to Iowa and the magnitude of economic fallout to expect if there is reduced production in either set of industries,” Swenson said. “The current economic slowdown is significantly affecting both agriculture and manufacturing, and by extension, all of their respective in-state suppliers.”

Government, household measures

The report also looks at other industries and institutions that stand out with this method of analysis. Governments – local, state and federal – and households are listed among the report’s major categories. Swenson says governments generate a significant amount of economic activity when they provide public services. And households receive income from external sources, such as investments and social assistance, which in turn drive economic activity in the state.

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