Des Moines is among the areas of the country most capable of recovering quickly from the economic crash caused by the coronavirus pandemic, according to an analysis done by the credit rating and research company Moody’s.
The analysis, reported by Yahoo Finance on May 9, examined the top 100 metro areas in the U.S. The metros poised to recover quickly based on the analysis included San Jose, Calif.; Durham, N.C.; Austin, Texas; Seattle; and Minneapolis. It also included Des Moines and Omaha.
“The most dynamic recoveries may well bypass traditional powerhouses and take place instead in areas that [weren’t] poised to lead the way in 2020 before everything changed,” Adam Kamins, senior regional economist at Moody’s Analytics, wrote in the Yahoo Finance story.
Kamins wrote that the twin factors of low population density and educational attainment were going to boost these metro areas.
“A key difference between this recovery and the last recovery is the population density,” he said. “It’s going to have a different effect this time than it did last time.”
While there is optimism by local leaders and experts that Des Moines is positioned to recover faster than some other communities across the country, they urge caution, saying it will likely be a long slog until the economy returns to anything close to pre-COVID-19 levels.
Dave Swenson, economics professor at Iowa State University, said the analysis is “hinged on the supposition that … medium-density communities with relatively high college degree requirements are more likely to recover more rapidly from this crisis.”
“The point of it really rests on the fact that population density … in and of itself is going to become, at least in the near term, a strong determinant of economic vitality, and of course that remains to be seen,” Swenson said.
He said the cities identified in the analysis are cities one would think of as areas that would recover more quickly than other areas because they have less density and a workforce with higher education attainment.
“They are cities that have shown relatively strong growth throughout the past 10 years, of course the recovery of the Great Recession,” Swenson said. “They all stand out. If you would have asked me, ‘Who do you think is going to recover the most rapidly?’ I would have immediately said Des Moines, and then Omaha.”
He said while Des Moines’ leisure and retail industries have been hit hard, they each contribute just 3% to the metro area’s GDP. By comparison, the finance and insurance industries have fared well and contribute one-third of the GDP.
“[And] that right there is a foundation for resilience because of its lower dependence on its GDP from some of these smaller sectors,” Swenson said.
He said the analysis, which came just days before Des Moines was identified as one of the national hot spots for COVID-19, looks beyond the current situation.
“It is really driven by the assumption that density is really going to matter in the future, that an absence of density can create economic activity that more dense areas can’t sustain,” he said.
Swenson said that people should prepare for a long recovery, and that the phased reopening that has begun in Iowa isn’t going to suddenly jump-start the economy.
“Reasonably good estimates by the Congressional Budget Office and other kinds of modelers see us, even at the end of next year, not having recovered to the level of output that we had prior to this collapse in our economy,” Swenson said. “So, I’m really thinking in terms of an 18-month recovery to just claw our way back to a beginning point.”
Another factor in recovery will be the change in relationship between business relationships and structures, and in the relationship between consumer and service provider, Swenson said.
“There’s a lot of things we’re going to learn, but the one thing we’re not going to do, we’re not going to reclaim this year anything like what we had last year,” Swenson said.
Jay Byers, CEO of the Greater Des Moines Partnership, said Des Moines being an insurance and financial hub and a being a midsized region that makes social distancing easier will likely play in its favor as it moves forward in recovery.
“We have these global industries and world-class amenities … and have the time and resources to have a really great life, so in many ways, that’s kind of what we’ve been good at for a long time,” Byers said.
He said the Partnership is working with experts and leaders in various industries to develop “playbooks” that provide guidance to businesses when they get ready to reopen.
“We don’t see our role as saying when these industries should open, but when those decisions are made … we do have that road map in terms of how to do it safe, smart and collaborative,” he said.
Byers said the recovery won’t be about “hitting home runs all the time. This is about a ‘Moneyball’ approach to development,” where hitting a lot of singles and doubles will win the game. Byers said it’s important to look at how Des Moines has recovered from past economic downturns to gauge how it will recover from COVID-19.
“You do have to look to the past in terms of how resilient and strong our region has been in recession situations, and how we’ve come out of them in a methodical way and a smart way,” Byers said.
Other factors that should be looked at when determining the pace of recovery include the diversity of the region’s supply chain, innovation and startups, Byers said.
Greg Edwards, president and CEO of Catch Des Moines, said he is encouraged by reports, such as Moody’s analysis, but acknowledged Des Moines is facing a long recovery.
“Not that we’re in our own little bubble here, but we are lucky to have the core of business here with insurance and financial business, that can pretty much stay steady,” he said.
Edwards said he hopes that position will give Des Moines a boost over other areas.
“I think it’s going to be a slow comeback, but once things start to come back, we might be a little quicker to come back than other parts of the country.”
Even as businesses begin to reopen, there is yet another factor that can’t be ignored: consumer behavior.
“Educated, rational consumers right now are fearful for their lives,” Swenson said. “And because of this virus, that has to constrain behaviors and those constraints on behaviors are going to continue for the time being.”