As the Quad Cities and Wall Street await an anticipated Federal Reserve interest rate cut on Sept. 18, the Quad Cities Chamber 2024 Second Quarter Market summary says the potential is there for a soft landing if Fed rate cuts keep pace with inflation.
That is according to the economic analysis by Bill Polley, the director of business intelligence for the regional chamber of commerce. His analysis is contained in the recently released 2024 Q2 Market Report.
“Turning points like the present one have happened just a handful of times in the last generation,” Mr. Polley wrote. “So it is easy to see why so much attention has been given to this topic lately.”
He also said that as he was writing the current report the advance estimate of real gross domestic product (GDP) growth for the second quarter was 2.8%. “That was up from the final estimate of 1.4% for the first quarter. This was better than some expected,” he said. “As I noted in our last Quarterly Market Report (in late May), the Blue Chip consensus ranged from about 1 to 3%, so the actual number came in near the top end of the professional forecasters’ expectations.”
While those numbers wouldn’t normally be associated with the Fed cutting interest rates, he said “this is not an ordinary situation, and since May the labor market – which was in much better shape in the first quarter – has weakened enough that there are no more arguments remaining that would prevent a rate cut in September.”
Labor force declines
Mr. Polley’s Q2 report also notes that the regional labor market continues to cool. He cited a U.S. Bureau of Labor Statistics report that showed a decline in total nonfarm employment in the Quad Cities metro area totaling about 1,200 jobs from June 2023 to June 2024.
The second quarter also ended with about 183,300 nonfarm payroll jobs. Unemployment at the end of the quarter for the four-county Quad Cities metropolitan area was 5.0%, up from 4.6% in in March.
In the full six-county Quad Cities Chamber service area, the unemployment rate was 4.8%, up from 4.6% in March. In the area that includes Rock Island, Henry and Mercer counties in Illinois and Scott, Clinton and Muscatine counties in Iowa, unemployment rates ranged from 3.4% in Muscatine County to 6.1% in Rock Island County.
“The Quad Cities area experienced a normal amount of seasonal employment growth during the spring and summer months which helped bring the total number of jobs closer to the level of a year ago,” the report said. “However, a number of recent layoff announcements would not have been fully reflected in payroll and unemployment figures by June. Due to the already announced layoffs, third quarter jobs are expected to be further down from last year’s levels.”
But according to Mr. Polley “Now that interest rates are expected to decrease in September, there could be enough of a rebound in spending to provide support to prevent a recession-like decline in employment. However, there are factors beyond interest rates that are impacting employment locally (commodity prices, in particular). Because of this, it may take somewhat longer for the employment declines to reverse.”
QC local outlook mixed
According to the chamber report, the results of its most recent survey of local business leaders designed to gauge the state of the Quad Cities area’s business climate were mixed.
The chamber began surveying local leaders for their thoughts on the economy at the start of 2023. That process is similar to surveys conducted by groups around the country, the report said. It asks basic questions about each regional business respondent’s assessment of economic activity, wages, hiring, capital expenditures and a few other indicators. Options are “increasing,” “decreasing” or “no change.”
After crunching those numbers, the resulting “diffusion index” is computed to capture the degree to which respondents as a group feel that aspects of the business climate are changing in one direction or the other.
Respondents in the surveys are representative of the mix of companies in the region with 19% manufacturing, 28% retail, 39% service providers and 14% other.
According to those Q2 survey results, the chamber report said, more respondents felt that economic activity had decreased in the last quarter in both the U.S. and for their own businesses.
The survey also showed that the view of respondents “looking forward is very similar to the view looking back” except that more respondents expect their prices to increase while the cost of wages and benefits to go down. That, the survey said, is “not good news for inflation.”
QC development efforts
The report also highlighted chamber development efforts. That included its partnerships with the Small Business Development Centers (SBDC) at Western Illinois Univerity-QC (WIU-QC) and Eastern Iowa Community Colleges (EICC). It is designed to provide additional resources so each center could hire a minority business advisor to expand outreach and provide free counseling and advice to minority and underrepresented communities.
That new focused outreach “is having an impact and the SBDC business advisors have guided many minority entrepreneurs in launching successful businesses,” the chamber said.
The report also shared metrics that showcase the work of the Illinois SBDC over the past quarter. That full report can be found here.
The Quad Cities Q2 Market report also noted that there were a total of 20 projects in the fourth quarter of FY24 (April-June) compared to 23 for the same period last fiscal year.”
In the last quarter there also were 16 requests for information received, and seven were completed. There was one site visit during the quarter.
