Data snapshot: Iowa’s economy is losing ground

Unemployment edges up as labor force participation edges down

Iowa’s economic recovery following the COVID-19 pandemic has ground to a halt. The state’s May report on jobs and unemployment from Iowa Workforce Development shows Iowa heading the wrong direction and losing ground faster than the rest of the nation.

Three important metrics demonstrate the potential risks ahead:

1. Iowa is losing jobs — especially in manufacturing

Iowa Workforce Development reported that in May 2025 Iowa had 8,200 fewer total jobs compared to one year prior, a drop of a half a percent. But over that year, Iowa lost 8,400 manufacturing jobs — a decline of 3.7%, the biggest drop among the 11 major industry sectors over the year. Manufacturing also is the only sector of Iowa’s top four to be currently below pre-2020 recession levels. This decline reflects Iowa’s lack of competitiveness in the manufacturing development space, driven by our public leaders’ failure to take advantage of significant manufacturing investment incentives created by the Inflation Reduction Act, Bipartisan Infrastructure Law and the CHIPS and Science Act. Nationally, private investment in manufacturing construction rocketed skyward as tax credits became available starting in 2022; however, it already shows signs of flattening out in the wake of the administration change.

Source: Federal Reserve Economic Data (FRED), St. Louis Fed

2. Unemployment is on the rise, despite reforms

We are now experiencing our highest level of unemployment since COVID. The state’s unemployment rate has steadily climbed (it is now 3.6%), and Iowa has around 10,000 fewer job openings than unemployed individuals (62,400 unemployed vs about 50,000 job openings). The state unemployment rate was 2.7% in June 2022, when Governor Reynolds signed HF 2355, slashing unemployment insurance benefits for workers who lose their jobs through no fault of their own. Even as Iowa Republicans touted the law’s ostensible success over the past three years, the unemployment has never again fallen below 2.7%.

3. Labor force participation is stagnant

In the June press release, Iowa Workforce Development Director Beth Townsend tried to put a positive spin on the latest job and labor market numbers by highlighting the addition of 3,900 workers to the state labor force since April. But job market numbers usually are best understood over longer periods than one-month bites. One way to consider them is in terms of the labor force participation rate — the proportion of working-age adults who are either employed or seeking employment. On this measure, too, Iowa has failed to gain ground since Reynolds’ unemployment benefit restrictions. From a rate of 67.8% when she signed the law cutting unemployment benefits, the labor force participation rate has slipped to 67.3%. The job market, in other words, still is meeting the demand of just two-thirds of the working-age population in Iowa. The Governor and Legislature have rejected other measures that might produce greater interest in Iowa jobs, such as increasing the minimum wage.