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The Iowa Leading Indicators Index November 2020 Report and Memo are indicative of economic activity experienced in November of 2020. The Iowa Leading Indicators Index (ILII) increased to 103.8 in November 2020 (100=1999) from 103.5 in October. November is the fourth month that the index has increased since the COVID Crisis in Iowa began. With five of the eight components contributing positively, the monthly diffusion index increased to 62.5 in November from 50.0 in October. This marks the fourth month in a row the monthly diffusion index has registered at or above 50.0.
The ILII was constructed to signal economic turning points with two key metrics that when seen together are considered a signal of a coming contraction: a six-month annualized change in the index below -2.0 percent and a six-month diffusion index below 50.0. November marks the second month since February 2020 that the ILII has not shown recessionary signals. With the positive improvements in contractionary signals, this report suggests that employment growth will improve over the next 3 to 6 months. The six-month diffusion index improving in November to 62.5, the annualized six-month ILII change value of 0.9 percent are good indications of a positive economic turnaround despite the decline in the Iowa non-farm employment coincident index. Five of the eight component indicators (diesel fuel consumption, the Iowa Stock Market Index, the national yield spread, the new orders index, and residential building permits) experienced an increase of greater than 0.05 percent over the last half-year. Residential building permits rejoined the positive contributors to the six-month diffusion index.
The Iowa non-farm employment coincident index1 recorded a 0.45 percent decline in November, the twelfth month in a row of decline and the seventh largest one month decline in the 20-year history behind only the months of April 2020 through September 2020.
Five of the eight components added to the ILII’s monthly increase in November: the new orders index, residential building permits, diesel fuel consumption, the national yield spread, and the Iowa Stock Market Index. The November 2020 monthly value of the new orders index decreased to 77.8 from 82.1 in October, yet was substantially higher than the November 2019 value of 46.8. With the year-over-year increase, the 12-month moving average of the new orders index increased to 57.9 from 55.3.
November 2020 residential building permits were 58.0 percent above November 2019 (1,065 vs 674), and 10.3 percent above the historical average for November (1998-2019). The 12-month moving average of residential building permits increased to 996 in November from 963 in October. Increases in permits were concentrated in single family homes and permits for five or more units, up from 595 in November 2019 to 803 and up from 70 in November 2019 to 212 in November 2020 (35.0% and 202.9% respectively).
Taxable diesel gallons were 75.54 million gallons in November 2020, 4.8 percent higher than the 72.04 million gallons recorded for November 2019. The 12-month moving average of diesel fuel consumption increased to 63.57 million gallons in November from 63.28 million in October. Diesel fuel consumption, a measure of semi-truck traffic within and across Iowa, was a positive contributor for the sixteenth time in the last two years indicating that there is growing demand for the transport of manufacturing inputs and final products and agricultural commodities.
During November, the yield spread expanded to 0.78 percent from 0. 69 percent in October. The long-term rate increased eight basis points while the short-term rate decreased one basis point. November is the eighth expansion of the yield spread in the last twelve months representing potentially increasing confidence in financial markets for long-term economic growth. In November 2020, 21 of the 31 companies in the Iowa Stock Market Index gained value, including 9 of the 11 financial-sector companies. With nearly two-thirds of the stocks experiencing gains, the index increased to 82.46 in November from 80.80 in October. Gains experienced by Wells Fargo Financial, John Deere and Company, Corteva, Tyson Foods, ConAgra, and Principal Financial Group contributed to the growth in the index.
Average manufacturing hours, average weekly unemployment claims (inverted), and the agricultural futures profits index dragged down the index. The 12-month moving average of manufacturing hours decreased to 40.1 in November from 40.17 in October. November 2020 average hours were 39.9, below the 40.7 hours in November 2019, and nearly two hours below the historical monthly average (1996-2019). This was the fifteenth month in a row that the 12-month moving average of manufacturing hours has decreased.
The agricultural futures profits index showed a decrease despite both grain commodities expecting to have profit gains, while expected profit for cattle commodities increased and hog commodities decreased. Compared to last year, new crop corn prices were 11.3 percent higher while soybean prices were 16.1 percent higher. The November crush margin for hogs decreased 7.5 percent from October while the crush margin for cattle increased 3.4 percent.
The 12-month moving average of weekly unemployment insurance claims increased to 10,357 in November from 10,144 in October. Average monthly claims were up 63.2 percent from last November, and 78.2 percent above the monthly historical average (1988-2019). While still elevated, jobless claims have improved sharply from their unprecedented highs of March and April. The 7,122 average weekly unemployment claims for the month of November was 82.6 percent lower than that of March’s 40,835 average weekly unemployment claims. The Bureau of Labor Statistics reported that the Iowa unemployment rate (a coincident indicator) decreased to 3.6 percent in November from a revised 3.7 percent in October. The state’s jobless rate was only 2.8 percent one year ago. The U.S. unemployment rate decreased to 6.7 percent in November from 6.9 percent in October. “November’s rate remained steady as Iowa’s workforce adjusts to the seasonal shifts we typically see this time of year,” said Director Beth Townsend, Iowa Workforce Development.
The monthly Iowa Leading Indicators Index report is available on the Department's website.
1 The Iowa non-farm employment coincident index is the measure of the number of workers in Iowa excluding farm workers and workers in a handful of other job classifications. This is measured by the Bureau of Labor Statistics (BLS), which surveys private and government entities throughout the U.S. about their payrolls. The BLS reports the nonfarm payroll numbers to the public on a monthly basis and the index then creates a 12-month moving average.
The mission of the Iowa Department of Revenue is to serve Iowans and support state government by collecting all taxes required by law, but no more.
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