Washington area balances economic concern, signs of stability

In the last fiscal year, a handful of facts have become painfully clear to every economist, businessperson, government and holder of a wallet in Southeast Iowa and — to some degree — the world.

Help is harder to hire. Child care is harder to find. Housing is expensive and scarce. The price of everything is up. The supply of everything is down.

While economic issues linger on a broad level, adaptation has become the name of the game.

“Businesses are doing really well,” Main Street Washington Executive Director Sarah Grunewaldt said. “Yes, inflation is a thing, cost of materials is a thing, employee shortages is a thing, but they’re adapting really well and a lot of them are having really good years, which is wonderful.”

That’s not to say there aren’t problems, or that those problems don’t have solutions. The story of Washington’s economy is complex at the moment, with several major factors taking most of the spotlight.

State sees jump in new businesses, while Washington sees old ones grow

Statewide, filings for new businesses are up according to the Iowa Secretary of State’s Office. breaking records for the second year in a row.

“Despite rising inflation and supply chain disruptions, this data shows Iowa entrepreneurs are investing in businesses in our state,” Secretary of stat Paul Pate said in a news release. “I’m very proud of the work we’ve done to make it faster and easier than ever to launch a new business in Iowa.”

The state saw 33,331 new businesses file last fiscal year, just above the previous record of 33,260 set last fiscal year. The news release credited recently launched “Fast Track Filing“ options for new businesses, as well as reduced filing fees, for the growth.

At the local level, however, the Washington community is seeing a different trend. Washington Chamber of Commerce Executive Director Michelle Redlinger said more people are looking to expand current operations, not start new ones.

“Things are growing and expanding more than I’ve ever seen,” she said. “I’ve been contacted by a large number of businesses that are looking for growth opportunities. Larger businesses, more space … our list of people looking for that next step is larger than it has been.”

Redlinger said those plans to expand may not necessarily be new. They may instead be just now reaching the Chamber’s ears after two years of conversations and relationship-building driven by the pandemic have created some rapport.

“I think one thing it shows is that businesses are continuing to invest locally … they’re not looking to leave the community for lack of support,” she said. “These conversations could have been happening all along, but more internally, and not with the economic development partners in the community.”

Iowa Economic Development Authority Executive Director Debi Durham said decisions to expand rather than start new projects could be a result of economic uncertainty.

“They’re saying, ‘No, let’s just expand where we are and do some remodeling, versus doing something brand-new,’” she said. “Businesses that could switch to an online presence and … pivot did really, really well. So more of them are now looking at how they can expand that online presence.”

Inflation hits hard, but impacts may be short-lived

It goes almost without saying that broad economic issues can be felt in Washington. “From a pound of hamburger to gasoline, everything’s going up,” said Washington City Council Member Steve Gault in January, one of many people voicing concerns about the rate of inflation.

Washington Chamber of Commerce Executive Director Michelle Redlinger said the trend could cause economic stagnation.

“I’m hearing a lot of shock value and commentary about, ‘I got a quote on this, and a year ago it would have been 20%, 30% less expensive,’” she said. “I think people are paying attention, they’re working on that, and if they have a project that can be put off, I think we’re going to start seeing that a lot more.”

Still, most of the outlook has not yet turned to doom and gloom.

“I hope that by the time our businesses are able to catch up, inflation won’t be as high of a concern,” Redlinger said. “But that definitely is a concern, that that could happen.”

Iowa Economic Development Authority Executive Director Debi Durham said she agreed, especially in the context of construction costs.

“There may be some projects that will be delayed, so they’re going to wait until building costs come down,” she said. “We had a project that we awarded incentives, and they still put it on hold because their (prices) come in way too high.

“It’s not going away, they still need to have the capacity, so it will still happen, it may just take a year or a while. So you’re going to see some delays for things, but I think these projects are still going to come forth.”

For now, experts say the impacts of climbing material costs are limited.

“It’s … not as much as it could be,” Main Street Washington Executive Director Sarah Grunewaldt said. “What we’re starting to see is people working remotely, or in areas where they don’t have to commute so they don’t have to pay for gas. The walkability of a community is more important than it has been … all of that plays into what Main Street has been doing for years, but we’re just seeing it become more of a spotlighted issue at a larger scale.”

Washington Economic Development Group Director Mary Audia said slowdowns induced by rising costs and interest rates could even be a good thing.

“We needed to slow the economy down,” she said. “We’re fiscally conservative in our community, so I don’t think people went too crazy when prices were a lot lower, I just think it was time to put on the brakes, because I think spending was getting out of control.”

Housing, child care solutions are coming, but not soon enough for some

A string of housing developments started in the last year. HACAP and ECICOG projects, two newly approved subdivisions in Washington, and Southtown developments in Kalona represent just a few of the community’s efforts to address a longtime housing shortage.

Mary Audia said the in-progress projects would have a tremendous impact, but they need to finish construction first.

“As soon as these things get off the ground, it will make a huge difference,” she said. “Some of the big companies, Bazooka Farmstar, Eichelberger, have said now that they are able to secure housing for new people coming in.”

Iowa Economic Development Authority Executive Director Debi Durham said it was a familiar story throughout the state.

“We have a population problem,” she said. “We have to grow population … we estimate, based on our population needs, that we’re going to need 61,000 new housing units by the year 2030.”

Durham said a commitment to solving that shortage would be key, however long that may take.

“We have a ways to go, but we’re hyper-focused on it, and we’re making a difference,” she said. “So we’re really looking at it in a very intentional, comprehensive way … in order to grow the population, that’s certainly critical, but we’re working on parallel paths.”

A child care shortage in Southeast Iowa presents a similar situation. WEDG managed to complete a child care study this year, with results establishing a data set for the area that revealed a shortage of 844 child care slots in the community.

Audia said that study had already reaped some benefits, but would see more use as grant opportunities present themselves.

“Little Ducklings Daycare in Ainsworth got a grant for $26,000, and we helped them get that grant,” she said. “Part of this study is, we have to show proof that it’s needed for … grants that are coming up.”

Labor shortage remains top-of mind

There are of course, other problems for which no solution is in the works, or even necessarily possible at this point. Workforce is a prime example.

“It’s top of mind, it’s a great concern, but there is no magic solution to workforce,” Washington Chamber Director Michelle Redlinger said. “It’s been a topic at all of the conferences I have gone to … labor shortages are high priority. Nobody had a perfect solution. They were talking about ways to attract people from neighboring states, which in my opinion, is not a long-term solution, it is basically a game of tug-of-war.”

Solutions to these kinds of issues will take collaborative, communitywide efforts according to Redlinger. Approaches might include anything from cash incentives to discounted housing to gym memberships.

“We’ve got to start getting our businesses to understand how we’ve got to be creative and competitive,” she said. “Even in a situation where they might be employed by a remote company … if we can bring them here and make them enjoy the community, at some point they might be looking for another opportunity in our workforce, or they’re still shopping here and buying gas here and contributing to our economy.”

Washington Economic Development Group Executive Director Mary Audia said participation in the workforce was growing, with the Washington Area’s unemployment rate far lower than most of the state. The trend that may ease some of that pressure.

“It’s not nearly what it was last year,” she said. “We’re at 1.9%, as of May 2022. Last year, it was 3.9% … most of the industry leaders I’ve talked to say it’s improved quite a bit from last year.”

Many businesses may be adapting to the problem, rather than waiting it out. Redlinger said she was hearing fewer complaints about it.

“I don’t know if that means they’ve been able to find people to fill those positions, or whether they’re getting more used to a limited workforce,” she said. “I have heard concerns about hiring and how to be competitive when it’s an employee’s market.”

Hazy future leaves some uncertain, others hope for insulation from impacts

An approaching economic downturn is on everyone’s mind. The million dollar question, then, is how big of a downturn that will be.

“We’re going to have a recession, that’s inevitable,” Iowa Economic Development Authority Executive Director Debi Durham said. “The question is, how long and how deep. I would say, even today, there are some signs of recessionary pressures. So I would say it’s going to happen, you can’t have inflation where it is without calming it down.”

However, Durham said Iowa wouldn’t feel the full force of the anticipated economic disruption.

“We’re still going to be in a better position than a lot of states,” she said. “I lot of the projects I’m seeing are somewhat recessionary-proof because they have to do it. They have to shore up their supply chains, they have to digitalize their workforce and become more automated, those investments have to be made.”

Main Street Washington Director Sarah Grunewaldt said many businesses came back from the pandemic stronger than before.

“I think our businesses are better able to predict and absorb trends,” she said. “I really believe our businesses are better-equipped to handle what’s going to happen in the next year or two. I think they are much more of a team than they have been in a long time … things that happened during 2020 taught us a lot, it’s changed how we’ve done our business.”

The period also changed the way consumers view markets in small communities like Washington County. Grunewaldt said people doubled down on efforts to support businesses in town.

“The one good thing that came out of 2020 for people to remember is the priority of shopping locally first,” she said. “We have seen an increase in that priority for shopping local and that desire to try and find it in town first.”

Many of the businesses on Main Street cover nonessential sectors: jewelry, boutiques, coffee shops. Those industries may have more to worry about amid prospects of refocused family budgets under inflation and potential economic woes.

“It is one thing that people don’t need, they don’t need to do a DIY class, it’s something that they want to do,” said Leslie Allender, owner of RePurpose It, which recently added a new space for craft workshops. “As we keep tightening our pocket book, people are doing less things that they spend money on.”

Still, Grunewaldt said she wasn’t worried, after the pandemic showed a willingness to support local shops that she said would endure future financial troubles.

“The concerted effort people made to continue to spend money with those businesses was remarkable,” she said. “That kind of thought process has continued, and yeah, it’s not considered essential services, but people were still ordering flowers … people put money where they value things, and they value these businesses because, remember, these are their friends and neighbors.”

Comments: Kalen.McCain@southeastiowaunion.com