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Iowa Report: Tech Giants Find Opportunity Amid Manufacturing Challenges

Feb/Mar 09
Iowa's economy is feeling the effects of the global recession across all sectors. Its index of leading economic indicators dropped 0.9 percent in November 2008, the eighth straight month of declines. Iowa manufacturing has taken some tough hits - over the past six months, for example, John Deere Dubuque Works has placed 188 employees on indefinite layoff. Iowa lost 4,400 factory jobs in November, with state unemployment claims for the month nearly double those a year ago. New orders for manufactured goods have also dropped significantly. However, new projects in the tech sector offer a bright spot.

Concerns
"Most of our manufacturing members are concerned, but not afraid," says Mike Ralston, president of the Iowa Association of Business and Industry. "Many are in good position to ride out the economy - they don't have a lot of debt and have access to credit. They just need sales. What they are worried most about is the consumer's ability to purchase."

The University of Iowa predicts fairly stagnant economic growth for the next two years. "The numbers won't be as good in 2009 as they were in 2008 or 2007, but it's not as bad as some are making it out to be," says John Geweke, director of the Institute for Economic Research at University of Iowa's Tippie College of Business. Geweke predicts that Iowans' personal income will grow about 1.9 percent in 2009 and 2.5 percent in 2010, with employment dropping by 0.1 percent in 2009 and increasing by 0.8 percent the following year.

Jump-Starting the Economy
To stimulate the economy and create new jobs, Governor Chet Culver recently announced a plan to create the "Rebuild Iowa Infrastructure Authority" that, if approved, will issue about $700 million in bonds over the next several years to cover major infrastructure improvements. "We're cutting back on the day-to-day expenditures of state government," said Culver in his Condition of the State speech in January. "At the same time, we will be investing in bricks and mortar to create jobs and keep our economy going."

Iowa's diverse and productive agricultural sector has helped minimize the overall effect of the economic downturn in the state. Using its Grow Iowa Values and Iowa Power Fund, Iowa continues to support emerging high-tech industries, especially renewable energy technologies such as biofuels, solar, and wind. Iowa leads the U.S. in ethanol and biodiesel fuel capacity, with 63 facilities capable of producing over 1.7 billion gallons of biofuel annually.

New Capital Projects
Despite the challenging economy, some companies are still expanding. Hormel Foods Corporation will build an $89 million production facility in Dubuque to produce microwave meals. The 327,000-square-foot facility will be operational by November 2009 and employ about 200 workers.

Large investments by Google and IBM in Iowa have brought considerable attention to the state as a location for information and communications technology. Google plans two data centers: The first, a $600 million investment, will be fully operational in this year and employ 200 workers; the second center is still being planned and will probably represent an investment of at least $300 million.

IBM's decision to build a $100 million information technology service center in Dubuque will result in 1,300 new jobs. One of the largest economic development deals in Dubuque history, with an annual payroll estimated at $58.5 million, the project is contingent on about $50 million in local and state incentives. Dubuque Mayor Roy Buol points out that, even with the IBM project, the city will still feel the effects of the recession, but says, "I think we'll have a lot more opportunities for people for jobs than they have in many places in the country."

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