Rebuilding for Resilience: How Will Iowa Thrive After the Pandemic?
DAVID OPPEDAHL: Welcome to a Project Hometown event from the Chicago Fed. My name is David Oppedahl. I'm a senior business economist in the economic research department at the Federal Reserve Bank of Chicago, and I am glad to have everyone joining us today for a panel, rebuilding for resilience-- how will Iowa thrive after the pandemic?
And it's a very timely discussion that's part of our Project Hometown series, which aims to foster discussion around the challenges and opportunities confronting hometowns in the Federal Reserve's 7th District, which includes the northern part of Illinois, Indiana, southern parts of Michigan and Wisconsin, and then all of the state of Iowa, which is our focus today. And it's certainly been a challenging time for Iowa, as it's been hit hard by COVID-19, as has the rest of the nation. The unemployment rate for Iowa jumped to 8% in June, more than doubling from last June.
The employment in Iowa was down 7.4% from a year ago in June after falling even further earlier in the pandemic. And as we've entered a new recession, those employment numbers are worse than under the great recession for Iowa. So it's a very challenging period, and certainly a pandemic is enough disaster for any state to endure. But now Iowa has also had a derecho event that occurred last week.
And so we can talk a little bit about that because it caused billions of dollars of damage in Iowa as well as creating havoc and power outages. And so it's been a tough period to add an additional disaster for many counties in addition to the pandemic. Now what does recovery from the COVID-19 pandemic look like for Iowa, and how can various sectors contribute to Iowa's recovery?
That's really what we want to answer today. It's a challenging question, but we have a panel that's up to the challenge. It's certainly a terrific panel to discuss this vital topic, and Iowa has a lot of angles in terms of the different sectors, the different peoples, and, of course, just a lot of good resources and a good base to start from in terms of the different educational levels as well as the people's hard work ethic. And so there's a lot going for Iowa, but at the same time, it's going to takes a lot of effort to get out of this period.
And I think we have an excellent opportunity to look at what's happening from a government, industrial, and nonprofit perspective today as well as thinking about the roles that those institutions can play in ensuring an inclusive recovery for Iowa's diverse population. So I think with that, I'll go ahead and introduce the panel. We have-- in order, we'll be covering the topics with Kanlaya Barr, who is a senior economist from John Deere leading off.
Then we'll have David Swenson, a research scientist from Iowa State University. He'll be followed by Quentin Hart, Mayor of Waterloo. And then we have Johnny Alcivar, our program director with Proteus Incorporated. So I'm looking forward to hearing your comments and to learn more about how Iowa can thrive after the pandemic. And why don't we start with Kanlaya?
KANLAYA BARR: Well, thank you very much, David, and I am excited to be on the panel today. So all of us has been living this strange life, and many of us, life would never be the same again. And so let you kind of start with, per David's comment, yes, Iowa economy is a diverse economy.
We have manufacturing accounted for about 18% of our GDP in the state of Iowa. We have finance, insurance, and real estate industry that accounted for a quarter of the economic activities in Iowa. We also have agriculture, retails, wholesales. Each of those sectors account between 5% to 6% of Iowa economy, so definitely a diverse group of talents, a diverse group of industry as well.
In addition to that, as an economist, I have to throw out some of the agriculture statistics in Iowa as well to remind us that in Iowa, we are the number one producing state in many agriculture [INAUDIBLE] as well. Looking at hogs, we are the number one producing state in the hog. We have about 28 million of hogs, more than the population in Iowa.
We are number one and number two producing state of corn and soybeans as well. So definitely a lot of good fundamentals of business in Iowa. Now for the next few minutes here, I want to give a quick comments about how does the COVID-19 affect our lives, what does the recovery path look like, and what are in store for aquaculture going forward as well.
So let's start with this. Before in 2020, when we started 2020, we thought that was going to be a pretty good year. The growth might not be as good as what we had in 2018, 2019, but still a pretty good year. We had a strong consumer sector.
In the US, consumer sector accounts for about 2/3 of the US economy. So having that sector being strong and solid with unemployment, good wage gain, having good home, good equity, those are pretty good tailwind for our economy. We also have the Chinese US-China trade one deal signed end of January as well.
All looked good. All of those are good and ready to go for this year. But then we have this pandemic hit, and the economy has terribly disrupted with the social distancing, as all of us has been experience over these past few months.
My kids are now entering the second summer of their school year now. So life has really changed. There are a lot of disruptions that happen in our life.
Let me give you some example here. Some industry like the airline industry or restaurants, hospitalities, and hotels got hit pretty hard. We saw virtually almost no flying over the past-- at the beginning of the COVID-19. But also, the driving pattern has changed as well.
All of us are working from home now. So what does that mean? Well, in April, at peak of the shutdown, we saw about 50% less driving in the US compared to the previous April. When you drive less, you consume less gasoline. You also consume less ethanol as well. So therefore, we have seen between 25% to 40% shut down or reduced production of ethanol plants throughout the entire United States.
We also see a lot of news that talked about producers. You know, ranchers have to cull their animals because as the COVID-19 spread into the meat packing plant, these plants have to shut down or slow their production. We have lost probably between 30% to 40% of the animal slaughter capacity during the peak of the COVID-19 in April or early in May as well.
We have seen producers and ranchers have to dump their milk. It is not easy for the supply chain to switch from wholesale outlet into resale outlet. So as schools and restaurants are shutting down, those milk and producers that used to go into those channels now have to be diverted into the retail sales.
So all of those are not an easy task. We have gone through that. And as we stand right now, we actually see the worst likely to be behind us. We are on the path of recovery right now.
I want to talk a little more on even though you think that the effect of these COVID-19 have been significant in some sectors, but there are some other sectors in the economy that actually see some benefits or come out of this actually in the better side. Let me give you an example. If you ever make a trip to Home Depot or Menards in the past few months, you'll notice that the do it yourself projects, home improvement projects, or the landscape sector, those are the sectors actually thriving in these past few months as people staying at home, and they don't spend money anywhere else because they can't.
find other avenues to spend their money. So those are actually beneficial for those sectors. We've see outdoor recreation has actually been beneficial from this COVID-19 as well.
And also, with the record low interest rate, I think a couple of weeks ago, the 30 year mortgage rate actually fell below 3% for the first time. So with that record low interest rate, we actually see the mortgage activities both pretty well. Home inventory remains like record low. So all of those are-- some sectors actually see some bright spot amid all of these COVID-19 pandemic.
Now let me talk a little bit more on things that are actually-- consumers and all of the workers, in my opinions, are actually better than expected, recovery better than what I expected. And I think all of those have to do with the government's actually injected about $4 trillion in the relief fund to help filling the gap of the economy shrinking, the demand shrinking. That really helps.
And the Fed itself actually increased the balance sheet by about $3 trillion. So that's also helping in injecting liquidity as well. They want to get ahead of what they saw in the crisis in '09.
Market forbearance from the CARES Act also helped stabilize some home value for some of the vulnerable homeowners as well. And all of us, workers that we're working from home, to now that we are more productive working from home and finding ways to make work productive for us. So I think that's encouraging to see this recovery. We would continue to see this recovery throughout the rest of the year, and we'll continue to see that recovery path going until next year as well. It's probably going to take us about another year and a half for us to get back to the pre-COVID activity level according to the IHS market forecast.
Now that doesn't happen without no risk because as you all know, everything's going to have some risk here. There are still uncertainties out there. I geopolitical uncertainties. But as it relates to the COVID-19, I think the key risk as we look into the recovery path is whether the resurgence is going to be-- how severe is that going to be?
I would tend to think that what we saw in April would be the worst of what it is, what had happened. But if we have the resurgence of the COVID, it has to have some more shut down for now. Perhaps we have some more social distancing.
But we have really learn and our supply chain has really learned to adapt. So I think that recovery phase would likely be much better than what we saw in April. But definitely, it will take us with the rest of this year and next year to recover into the pre-COVID level that we saw.
Now as an economist, I want to make a last comment here about epiculture because despite all of the COVID-19 that happened, every countries are experiencing the recession, not just the US. In the US, we're probably going to see about 5% recession this year, double the depth we saw back in the great financial crisis in '09. But other countries like Europe seeing the similar kind of contraction.
South America even deeper contraction-- it's going to take them even longer to come out of this to be on the recovery path. But given all of that global recession, the grain, [INAUDIBLE] seeds demand for agriculture commodities continue its 25th consecutive year of growth. So what that is telling us is the tailwind for the agriculture economy continued to be there as there are more people in the world, two more billion people coming in, expected to increase by 2050. There will be people more living in an urban setting, and they're going to need to produce 50% more of food.
So what that means is we know that demand is going to be there. We know that we're going to recover, and we know that by using technology, by using data, our producer is going to build to come out of this, able to do more with less, able to produce efficiently, and finally be able to do it sustainably. And I think there's a lot of bright spot ahead of us as we're coming out of these recovery. And I'll stop my comment there, David.
DAVID OPPEDAHL: Thank you, Kanlaya to kick off. It's nice to have positive notes there as well. So let's turn it over to Dave Swenson now.
DAVID SWENSON: Yes, good morning. Well, I'm going to talk a little bit more about the Iowa economy as we went into the pandemic and then as we're moving through the pandemic. Iowa's economy, when we came into the pandemic, wasn't running on all cylinders.
It had sort of flattened out. It wasn't growing. Over the course of the last decade, Iowa's economy grew more slowly than all of its neighbors, and it grew more slowly than all of the plains states.
So it hasn't been a fast growing economy. It's lagged the nation. It's lagged the region. It's lagged the neighbors.
Part of the reason Iowa's economy isn't growing as rapidly as the nation is because it's dominated significantly by two sectors that actually over time basically have been shedding labor, which is manufacturing and agriculture. So our industrial mix is loaded up with very productive sectors. Yet over time, they're wanting fewer and fewer workers.
So for measuring our economy in terms of jobs created, we're a little bit flat. We had, as David talked about, though, very, very low unemployment. We are now, as we've moved into the pandemic, we had fully realized a lot of the damage from the trade wars. But there had been federal offsetting payments in the form of-- from the federal government, and there had been expectations perhaps of some easing of tensions that would result in an increase both in agriculture and manufacturing exports.
And so there was a brighter outlook compared to last year or the year before despite the fact that we have relatively slow growth and a relatively poor year. As a matter of fact, the growth in agricultural income that occurred last year in Iowa was nearly all due to federal payments. Our global goods manufacturing sector also is one that, again, it wasn't growing. As a matter of fact, it was contracting some.
And again, our economy is a function of how well the rest of the United States and the rest of the world is doing. We sell to them. And so how well they're doing is how well we can do.
So we had some issues coming into this recession. We also had some sectors that had particular weaknesses, like the ethanol industry. We just heard about ethanol demand going down because of a decline in consumption associated with the pandemic.
But overall, you and I are driving less and consuming-- not necessarily driving less, but consuming less motor fuel over time. And the ethanol amount that's being blended into the United States fuel supply is basically flatlined. Yet they're producing more ethanol than the nation can consume. So they have a supply problem, and the industry is having a profitability problem.
So that's a lot of what's going on. And then we have another thing in Iowa that's important. And I always want to take time to talk about it.
We have two major economy dynamics we have a metropolitan economy in Iowa that is robust, [AUDIO OUT] growing well. Three of those economies are really growing rapidly-- Des Moines, Iowa City, and the Ames metro.
The other ones aren't growing as rapidly, but they have more diversity, and they seem to have more stability. And then we have Iowa's rural economy. It's not a metropolitan economy.
That non-metropolitan economy never recovered from the great recession, and in just the last 12 months or so, employment has started to go down. And within that non-metropolitan economy, we have mid-sized cities, micropolitan cities. And all of them in the aggregate are performing worse than the remainder of the rural areas in the state of Iowa in terms of retaining the population and in job growth.
So we've got some rural issues to deal with in Iowa that aren't being addressed as effectively, I think. Now with regard to the pandemic, yes, our unemployment rate shot up. David summarized that. It's now around 8%.
The unemployment rate is highest or higher in a lot of these non-metropolitan counties that were manufacturing-dependent. There's a lot of volatility in manufacturing. I'm going to get to that in just a second.
The counties that seem to have very low unemployment rates-- and we have to be careful with monthly unemployment rates because they're not seasonally adjusted. But they tend to be ag-dependent counties, counties that are primarily dependent on agriculture. And those are also going to be counties where the workers oftentimes commute out for jobs. So that's what's going on there.
Now we have some interesting statistics that have been going on in Iowa. Now we're looking at two numbers. We get weekly numbers that tell us the number of people who are applying for unemployment insurance, the initial claims numbers.
And then we get the monthly numbers, which are lagged quite a bit, tell us what the unemployment rate is. Well, if we look at the weekly unemployment claims, the first time unemployment claims in Iowa, considering the industry that the workers were working in going all the way back to the middle of March, manufacturing-- the manufacturing sector accounts for 26% of those claims. And for the last 15 weeks or so or 16 weeks, it has led the list of the kinds of industries where the workers were filing claims.
So these claims being filed in manufacturing sectors suggests a lot of volatility. The next one in the initial claims was accommodations in food services, and health care and social services were down the list, and then, of course, retail. Now if we look at actual unemployment as recorded in the last week of-- in June, the June statistics, we find that even though manufacturing claims are 26% of the total, durable manufacturing explains only 4.8% of the total, and non-durable manufacturing, despite the disruptions in the food processing industry, despite the ethanol industry, since February, those numbers are essentially flat.
So we have stability on non-durable goods. We have some instability in durable goods. What leads in terms of explaining the number of out of work people-- 33% are in leisure and hospitality.
Local government is about 19%. They have to be careful with that number. That's mostly local schools, and we're not quite sure how that's going to shake out.
We still have about 12% of the unemployed or the difference between those two time periods is education and health services. A lot of health services have been limited. So that's where the majority of that-- and then retail only explains about 3.3%.
So that's the big picture with regard to Iowa. With regard to the-- and I'm going to go through what I think are some quick strengths and weaknesses for it. First of all, we're not a travel, recreation, and tourism state. So the hit that hits the leisure industry isn't quite as bad in Iowa.
We have foundations in manufacturing. Even though those numbers are a little volatile, they're going to still produce. Finance is relatively strong, concentrated in the metropolitan areas.
Again, that industry hasn't seen very much of a decline. Ag is going to continue to produce agricultural products despite the supply chain problems that led to some disruptions earlier on. And so those areas are going to do OK.
We have multiple and dispersed metropolitan areas. That means our economic resiliency is spread out around the state. It's not concentrated in just one or two mega areas.
We have this spatial distribution of employment opportunity as well as resilience. I worry that we have a lot of small businesses in Iowa, very small businesses that just simply cannot survive this pandemic. They're one or two person shops.
They're in small towns. They're on the main streets. They're providing a set of basic services. I think many of them aren't going to survive.
And we have a lot of stability, although I suspect we're going to grow very slowly. We haven't been hit as hard as the national experience, but our recovery, like it was before, is probably going to be a tad slower over time than the national recovery. Thank you.
DAVID OPPEDAHL: Well, thank you much, Dave. We really appreciate your perspective, and I think you set it up very well for Mayor Hart to discuss what's happening in his city as well as his views on what's happening around the state. Go ahead, Mayor.
QUENTIN M. HART: All right, thank you so much, David, for the invite to be on here today. I think this is one of the most critical conversations that we've probably had in our state history and around this country in a long time. Now to all the other fellow panel members, I just want to say ditto. So I'm not going to deviate too much because I'm in complete agreement with a lot of the thoughts and a lot of things that were shared.
But from a city's perspective, first, I want to say that in addition to COVID, in addition to civil unrest in our communities, now you add derecho to what many of the citizens in our state that have been greatly impacted. But first and foremost within our city, one of the largest challenges in Iowa, just one, is the overall health of people.
As we know, COVID has a-- there's a tremendous amount of deaths here, and our hearts and our minds go out to all of them. But when we take a look at the disproportionate impact in a community like Waterloo and very similar to other metropolitan areas, we see minorities, African-Americans and Latinos, disproportionately impacted, Asians, disproportionately impacted from those numbers and overall health within our communities. When we take a look at some of the smaller businesses-- as was mentioned, this is an incredible impact over, you know, one person employers and just overall with our small businesses. But I want to add another layer to that conversation going back to African-American minority small businesses within our community and some of the underlying issues because it's harder to run and scale.
And those businesses are also in areas and industries that are most impacted, like service industries, like food and personal and retail industries and those industries that are within close proximity but also with some of our manufacturing areas. And what we've seen in some of our packing plants, which I'll talk a little bit later, have had an incredible double impact on minority businesses. So we know also could be some of the worst prepared because of underlying structural changes or economic gaps that already have existed from showing signs of limited financial help to credit score challenges to profitability.
All of these are even before we talk about the impacts of COVID. I think I read a story, an article, that said that 56% of minority small businesses from the survey respondents indicated that they are very optimistic about the road to recovery. But when you take a look at those that are most vulnerable, those that may not be open after we come through COVID, are those minority businesses as well, so very interesting dynamic. But also with regards to our city, let's take a look at overall lost revenues for cities.
You're talking about road use tax. You're talking about hotel motel taxes. You're talking about local option sales tax. And just revenue generating programs are being impacted, and we are still trying to do our best to make sure that the burden of those impacts do not directly raise our overall tax rates for citizens within our local community, which, once again, has a double impact based upon some of the challenges that we're having in our local economies.
And then if you add that into the fact that now we're moving into where our schools, I believe, are mandated, that 50% have to be some type of in-person, we are really in a very interesting time like we've never been in before with so many factors and challenges. So that is just a small snapshot of what I've been seeing around the state and also what I've been seeing within our local communities already. But when we take a look at the actual road to recovery, we must understand that although there are a lot of similarities. We cannot take a one size fits all, cookie cutter approach in some instances because what is needed in Waterloo may be different in Guttenberg or Elma or Atlantic, Iowa, or Cherokee, Iowa, or Fort Dodge.
So we have to make sure that we retrofit some of our programs and our opportunities to change our communities in a way that best serves those communities. So the first-- I have three R's. So the first R is relief for our road to recovery.
And that's when relief money does come to try and make sure that there is a mechanism that it could reach cities more quickly because if it gets held up at the federal level, if it gets held up at the state level, it will deepen and prolong our recovery efforts. Let's take some of our minority businesses, for example, when we get ready to have more support for them but support in the ways of immediate relief in the forms of grants and loans, legal advice, credit negotiation, or some types of public-private community relief funds. We take a look at cities making sure that our state legislatures are informed by listening to how cities-- how we are dealing with the pandemic and asking what we need going forward and then being prepared to support and aid cities of all sizes.
When we talk about the conversation of moving to rebuilding, we talk about how do we start spending again, how we should utilize local and targeted hiring and focusing our recovery dollars on communities that are most impacted by COVID. When you take a look at a city like Waterloo or a county like Columbus junction and how the packing plants within those areas have made the impacts of COVID that triple and quadruple more severe than it's been in other communities, it would be great if our federal and state governments can look at those communities and figure out ways to be able to help.
You know, just from my local community, when you're talking about at one point 1,500 cases or so of COVID at a local business, you're also talking about the fact that those that have to self-quarantine-- so the grab and go's in our businesses, the overall retail areas that are able to do curbside-- are even greater impact because of the amount of cases that we've had gone through our communities. And then also, with rebuild, take a look. There was one conversation on the federal level that we all can agree with that was necessary and needed, and that was with regards to infrastructure.
And when we talk about the local option sales tax, the road use tax, and those myriad of things that I mentioned, and then you take a look at something that everyone was agreement on, it's infrastructure and some type of infrastructure bill. That would actually help be a stop gap for us to be able to take care of some of those needs with regards to our losses. And then last but not least, reimagining how we are shaping and realigning our communities-- you know this is one area that I am hoping that I will be able to address as president, coming in as president of the Iowa League of Cities and giving small businesses and other opportunities the tools that they need to adapt, to move to online and new delivery methods for goods and services that are there.
But this is an incredible time in our history as cities and as a state to take a look at delivery methods and rethinking how we do things to be able to better prepare ourselves for the future in this new normal. So I look forward to some of the other comments that I have coming up later, but thank you. Thank you, David.
DAVID OPPEDAHL: And thank you, Mayor. We really appreciate your comments as you give a great perspective from a city that is dealing with a lot right now. So we thank you for your time. Last but not least, I'd like to have Johnny Alcivar talk about his perspectives on what's happening in Iowa as well.
JOHNNY ALCIVAR: Thank you, David, and I want to basically allude to some of the comments that have been mentioned already as far as taking a closer look at the impact on the workforce itself. The pandemic what has done, it's essentially exacerbated some of the disproportionate impact that-- the disproportionate economic differences between some of the populations and the workforce. As we know, what we have deemed as essential workforce are those that are the most impacted by COVID-19.
As Mayor Hart mentioned, we have cases of that here in Iowa with the meatpacking plants. And we have also seen that in the fields with farm workers that arrive to the state in early July and across that season for the agricultural season. We essentially, with produce, partner up with the state of Iowa to do some rapid testing of every crew that arrived at the state. Almost every crew had at least one positive case.
So finding a way to provide the safety environment for these people to isolate, for them to quarantine, it has been a challenge. But again, I want to go and emphasize the fact that it's just highlighting the discrepancies that exist within the system as far as the different economic classes, for lack of a better term. But at the same time, I want to emphasize that the CARES Act did not cover everyone with the stimulus package.
So we did have a large segment of the population that was not benefiting from those stimulus funds. And largely, that was undocumented folks. And as you all may be aware, that's a big part of the workforce in every single state of the country. So how do we contribute to that population, and how do we help them when the impact is a lot deeper than for everyone else that qualifies for some of that governmental help?
And that's what we have seen in central Iowa and across Iowa as we partner with some other organizations to provide some assistance to that population. We have seen that the need is out there. We have received an overwhelming amount of requests for assistance. Our funding has come in the door and gone out the door the very next day.
It's been a very, very sad-- and at the same time, it encourages us to look out for more funding and ways to help out this population. Again, the large part of what's needed is its for basic needs, things that were essentially what the stimulus money was there for-- housing, utilities, transportation, all of these basic needs. And we haven't been able to fulfill the demand for this, but we have been able to help.
So I think as we continue to think about how do we come out of this and what if there is a second wave, if the first one is even done, how do we help this population that is not part of the conversation? And it's typically an afterthought. So that's some of the things that we have seen at the workforce level here in Iowa.
So I would be interested in hearing how some of the other communities in the state have dealt with some of these workforce-related issues. As I mentioned, the name tag essential, sometimes we forget that it does not mean disposable. So we still need to consider this a big part of our workforce that's keeping economy running and keeping the things that we consider our basic needs such as groceries and all these things in our stores, keeping us fed, and all of these things that contribute to a lot of us being able to work from home. Again, I'm very grateful to be part of this panel. I'm looking forward to some of those comments as we continue to figure out ways to come out of this pandemic together and stronger.
DAVID OPPEDAHL: Thank you, John. That was very helpful to bring in a perspective that's one we need to really understand better as we move ahead to help all the people of Iowa thrive. And certainly, one of the things we want to do is bring in some of the questions that have been brought to the panel from the audience, that they were submitted during registration.
So we have a few of those. And first I'd like to ask about, compared to other states, how is Iowa's response to COVID-19 working? What's been the impact on Iowa's economy? And Mayor Hart, would you be able to start us off with that?
QUENTIN M. HART: Yes, thank you. Well, so much for beginning on a good note. But I would probably say overall, when you're talking about just from personal experience as being Mayor, for those that didn't know, one of our outbreaks in one of our local cracking plants made Waterloo, Iowa and Blackhawk county a hotspot not just for the state but the entire country.
And so the slow response to that coupled with what I consider a lack of response from the state and a federal response releasing packing plants and other businesses from any accountability, even when CDC best practices are not being followed, caused our challenges to skyrocket. And one thing that I've always continued to say throughout this process and especially being in Iowa is that to have it to be pro-business and pro-ag economy, we must be pro-workforce. And if we are pro-workforce, then we have to be proactive about public health. And that's been a challenge.
And there's been attempts, you know, as mayors in this state by telling us that what we can't do to be proactive in protecting our cities has really, really been a challenge with regards to home rule. And now we just saw yesterday there was a glitch in the reporting system that may be putting our children and educators at risk because they use these matrices to be able to figure out if we're in person school, if we're not, and to make data-driven decisions over moving forward. And one area, last but not least, is on the federal level with regards to asking for help and support and then receiving information back from senators that I've trusted throughout my tenure as being an elected official not having confidence in cities within our state to be able to manage those things.
So you know, I honestly have been kind of disappointed over the course of the last several months with regards to COVID, and this pandemic has unfortunately shown a spotlight on some of the economic and social disparity among various races or individuals. But I do believe that it's time that we can strengthen our communities by making funding that will help them start and grow businesses, expand their educational opportunities, and improve the quality of life because when we raise each other up, everyone in our communities benefit. So my grading system right now, and we got professors online, my grading system is not that high right now.
DAVID OPPEDAHL: All right, thank you for that. Many of the others, if you want to comment on that question before we move on to the next one? OK, I think the next question was about the derecho and how badly was Iowa's economy hurt last week and what are the implications for this in addition to the recovering from the pandemic. And I'll ask Kanlaya to start us off on that one.
KANLAYA BARR: Oh, thank you, David. That's a great question. My hearts go out to folks who are affected by the derecho last week.
The number that I've seen that the Iowa ag secretary reported was that over half of the counties in Iowa were affected. And you know, we can look at the map. The wind actually swept through the mid-section of the state there.
And a lot of damage disproportionately affected the crop sector. So we saw about 36 counties see severe damage on their crops. So right now, the number that I have seen is about 3 and 1/2 million acres of corn probably lose at least half of their yield now, and also maybe 2 and 1/2 million of soybeans has lost their yield, more than 50% of their yield. So right now, the governor actually asked last night, the president approved the disaster aid, about $4 billion.
Majority of that, $3.8 billion going to go into the damage for crops, corn, and soybeans, and also about $83 million going to go into home [INAUDIBLE] damages, which, the accounts come up to over 8,000 homes are being damaged during this season. When you think about this, the damage has significantly affected our producers. You know, you look at-- our producers have been experiencing multi-year low crop prices.
Then we had African swine fever outbreak in China back in 2018, significantly reduced the amount of soybean consumption globally. We had the trade war also significantly changed the trade pattern and put a lot of uncertainties on our producers. And then we have these national disasters that kind of, again, another setback for our producers.
So for comment that David made earlier that government relief-- and also the comment that Mayor Hart had mentioned earlier. The government relief, that's really helpful to our producers to get them back on their feet. But for the ag economy to thrive, as we talked about, the local economies are really hard right now.
And it's the same for the ag community as well-- that our producers are not only producing and competing within the US. We have to think bigger like the word that the media use-- reimagine, right? Because right now, we are looking at the global perspective.
We have competitors coming out all over the world-- South America, the Black Sea region. They are producing as good commodities. So we have-- our producers, we definitely have to have a good usage.
about the technology usage. Think about how can we efficiently produce better and all of that how can we market our grains better, all of those that the programs, the aid [INAUDIBLE] producer becoming more efficient, and be able to conserve the environment as we continue our journey becoming efficient. I think those are the focus that would be helping our producers in terms of difficulties like this.
DAVID OPPEDAHL: Thank you, Kanlaya. Are there [INAUDIBLE] panelists who would like to comment as well?
DAVID SWENSON: Yeah, the impact on the ag sector are awfully preliminary. You can't possibly know what the damage is going to be one of the things was the large number that's been put out there, $3.8 billion impact in the ag sector, whatever the final number is, huge fraction of those crops are insured. So the costs are reflecting the insurance loss as well as the structures. They're also going to be insured.
What we don't know is what are going to be the net losses to the ag sector and then how the federal government is going to be able to compensate those net losses. The other part about it is we like to look at the ag sector, but the concentrated effects of the derecho in terms of human suffering seems to be in several of our cities. And that [AUDIO OUT] being able to recover is going to be the most important thing, I think, for the state's economy.
The ag sector has built-in mechanisms that help it out. Cities, not so. And I think we're going to have to help our cities much more rapidly than has currently been the case.
DAVID OPPEDAHL: Thank you, and let's move on to the next question, then. Do we expect the COVID-19 recession to expand the urban-rural economic divide, and what should governments do to help those small towns maintain a decent quality of life? And Dave, why don't you start us off on that one?
DAVID SWENSON: Yeah, I think what we're going to see is continued stability in the smaller counties because they've done adjustments over the last 30 years, and they've basically gotten themselves into a level of ag productivity stability, and they seem to be doing OK. They're not losing as much retail sales. As I've always said or as I've said more recently, it's the mid-sized cities that are the ones that we worry about-- those that had been regional trade centers, but their importance over time is eroding, and their ability to retain their manufacturing bases have eroded over time as well.
And those are the cities that I worry the most about in terms of their ability to thrive. Evidence suggests over the last two decades, they've almost all done moving backwards while the metropolitan growth has continued to be more robust. So will it? I think so. I think the pandemic-- I think that over the longer period of time, those communities, those metropolitan areas, those urban areas that were much more diversified also have built in within them more resilience with regard to potential growth. And so the answer is, yes, it's going to exacerbate, I believe.
DAVID OPPEDAHL: Any other thoughts from the rest of the panel? I mean, certainly, quality of life is important whether you're in a big town or a small town. Are there certain things coming out of this that will lead to hopefully better quality of life possibly, or is it just going to be a challenge for all kinds of communities to improve their quality of life out of this pandemic and associated impacts?
Certainly an important question-- that one we can come back to. So I guess part of that is, what are the leading edge ideas to provide affordable capital and down payment assistance to expand homeownership opportunities and assure resilient homeownership as home prices are increasing and thus impacting affordability? And maybe, Johnny, you could start us off on that question.
JOHNNY ALCIVAR: Sure. And you know, that's one of the questions that even before the pandemic, it was big in a lot of people's minds because affordable housing, there is definitely a demand for it across the country, and we are falling behind on the supply side. I think some of the larger cities and Des Moines have attempted to change their zoning codes as an effort to lead to additional affordable housing and go a little-- not as far as you would think but to avoid that exclusionary zoning where you have the single family only zoning type and allow for a little more flexibility to provide more density within neighborhoods. That's one of the things that's been happening. I think Minneapolis provides a great example of including that their zoning codes to allow for duplexes and three unit households and four unit households just right off the bat as rights from different zoning perspectives.
But listening to some of the reports, it sounds like the real estate market is doing quite well, which, again, it's-- or stable at least. And again, it's just another thing that emphasizes the discrepancies between the people such as myself-- you know, I'm able to work from home. But what about the essential workforce, right?
So how do we help them with homeownership opportunities when we have information that's telling us that that's essentially what they need right now to pay the rent or pay their mortgages? But how do we provide them with opportunities to move on to homeownership opportunities? I think some of the cities-- like I mentioned, my experience with Des Moines, they work with some nonprofit organizations and provide some of that community development block grants or some other block grants that allow for lower down payments perhaps.
So instead of your usual 20%, I think the industry has gone to way lower than that right now. But you're talking about 5% down payment, things like that where the cities and the counties are more involved and to providing opportunities for homeownership for those individuals that in other circumstances may be pushed out of those. So those are some of the things that are happening. I would hope to see that collaboration between government and nonprofit organizations be reinforced following the effects of the pandemic to provide some more affordability in the housing market.
DAVID OPPEDAHL: Other thoughts from the rest of the panelists on that topic?
QUENTIN M. HART: And really quickly and to John's point, it's being very intentional with regards to those efforts. We have a local initiative that we're trying to expand right now going in and redeveloping an area that had been kind of left or forgotten about for many years and working with partnerships like with Hawkeye community college where we're teaching students how to go directly to neighborhoods and learn how to build houses. We just sold our first one last night.
So no labor with the costs of the house-- just their education. But that's one example. And then going back and revitalizing neighborhoods for those that are marginalized, creation of our housing trust fund, and taking a look at the ability to have land banks for property and working to incentivize developers to be able and do things-- after the floods in 2008, one of the best programs for home ownership was the state's partnerships with our local communities that gave x amount of dollars to go into the value of the house with regards to down payment assistance. We were able to take this program and go into areas that haven't had a house built in it for 80 years or so or go into other areas where there is blight, eliminate that blight, and then put something positive there. So the state really has a tremendous opportunity right now with some of those funds or the reallocation of some of those funds to do some creative housing initiatives and may be able to learn from the past on some of those successful programs that we were able to use and to do here locally.
DAVID OPPEDAHL: Oh great, that's great to hear about, and it also brings in the idea of workforce development in there in terms of the housing sector. And of course, that applies to many other sectors as well. So shout out to the community colleges for all they do to help educate Iowans. And that's certainly important for the future.
I guess the final question we have from the audience is one that is a little bit challenging. I'll leave it open for everyone, but it's, how can Iowa's recovery efforts also help prepare us for longer term risks associated with climate change? Can recovery efforts be constructed so that they prioritize long term environmental sustainability? And certainly some of the aspects of the pandemic come into that and with the weather effects and the flooding that's been mentioned. So any particular thoughts from any of you on that?
QUENTIN M. HART: Well, I'll jump in first here. First of all, our economy can't be any healthier than our workforce. We need a healthy workforce.
When we have a pandemic, we have to get the workforce healthy and retain its health, and then our economy can recover. Over the longer term, though, it's just simply very clear that we have to not just accommodate. We have to address climate change issues.
Today, we've been accommodating it, making adjustments in agriculture, making adjustments in cities, making adjustments in disaster relief and hardening infrastructure, learning not to just cope with climate change but also learning how to transform industrial activity, business activity such that we are truly addressing climate change. It's probably the best opportunity for broad-based growth in our economy as well as jobs. The capital component of that just in terms of green energy production broadly distributed is extraordinary. So it's an incredible opportunity if we're capable of both politically and practically embracing it.
KANLAYA BARR: And I want to give a shout out for what the ag communities has been doing as well. I think we don't get enough good press. You know, there are practices that producers and farmers have been doing for years, for decades, right?
We start doing more and more till practice. That's helped saving the erosion. And also, we talk about the cover crops and even the new technology able to see and only spray certain weeds without just blast, spraying everything in the field. So all this technology is going to help with these sustainabilities.
And even also in terms of carbon sequestration, there are many practices, many things that the agriculture producers are doing is actually help sequester carbon. So I think that those efforts are on the way and definitely something that we'll be focusing on, as this is a thing that consumers are going to be demanding over the next few years, the more climate sustainability and more environmental friendly. So those are definitely something we were working on and making a lot of headroom for us.
DAVID OPPEDAHL: All right, thank you for those comments. And I guess that brings us to the last round here where everybody has one more chance to give a takeaway thought. And why don't we go in the order that you spoke initially? Kanlaya, will you lead us off?
KANLAYA BARR: I think the-- I want to continue to focus on there are things that we can't control. And I think business planning is definitely going to have to continue to adjust and to find the best-- to be able to leverage the tools and resources that you have. So Iowa has a lot of good people, lots of great skills. So leveraging that technology and people to overcome this, I think it will be very-- a path to recovery for Iowa.
DAVID OPPEDAHL: Dave, your turn.
DAVID SWENSON: Sure. What struck me is we are just a few months into this, and we think we know a lot. But we seem to be finding out daily that we don't know so much.
And we have surprises, like data aren't exactly what we expected them to be or thought they were going to be. So I'm not confident right now in a lot of categories. I'm not confident that some of our institutions aren't going to suffer.
I'm not confident that we might not see rolling layoffs in certain industries, things like that as we stumble through this. We talked about, you know, maybe our recovery is going to take a year and a half or maybe more. But all along the way, I don't believe it's going to be a smooth recovery. I think it's going to be a rocky recovery for many areas. So those are my closing comments.
DAVID OPPEDAHL: Mayor Hart.
QUENTIN M. HART: Right, I just want to say, one, going back to the comments that were made, that the virus is the challenge. And the more that we can partner together, the more that we can work together, the more that we can do together, the better we'll be able to recover and also to make note the fact that crises as a way of bringing innovation. So we can't do things the way we've done them for all these years.
We have to try new things, new technologies, new ways of performing task. And Mrs. Barr highlighted the incredible efforts to our agricultural community, and Mr. Swenson talked about resiliency. So we have to do things differently, and this is our moment in time and our moment in history to be able to capitalize on this crisis.
DAVID OPPEDAHL: All right, thank you. And Johnny.
JOHNNY ALCIVAR: I would like to echo those messages as well-- resiliency and reimagining not just what's going to happen as a society, but also for our workforce and the different safety measures that they have and environments at their job sites and how do we make sure that those are providing the things that they need-- you know, for example, our meatpacking plants, our farm workers, providing them the safety precautions that they need in order to avoid future issues and provide them with the safety measures that allow them to work safely.
DAVID OPPEDAHL: Well, thank you to all our panelists. We really appreciate everything that you've shared with us. It certainly is a challenging time.
We understand Iowa's going through a lot right now, and I know that based on what you've said that there's going to be a lot of hard work ahead. And yet it seems like Iowans are really willing to roll up their sleeves and get to work and hopefully get through this and work together, be able to come out of this in a position where that innovation that was discussed will help to lead to a better economy for all people. So we thank you very much, and the Chicago Fed really wants to continue this conversation.
And we have continuing hometown events that are arriving for other states as well as for the Chicago and Detroit areas. And so please check our website, and we appreciate all of you in the audience for your participating in this event as well. So thank you very much, and have a good rest of your day.