Forecasters: Nebraska's economy to see sustained growth through 2013

Nebraska's economy is expected to remain steady in the next two years, state forecasters said.
Nebraska's economy is expected to remain steady in the next two years, state forecasters said.

As the nation continues on a prolonged path of moderate economic recovery, Nebraska's economy is expected to remain steady in the next two years, state forecasters said.

In its latest report, the Nebraska Business Forecast Council said it anticipates slower job growth in the state in 2012, but strengthening employment prospects in 2013. Non-farm income growth also will slow because of lower inflation in 2012 and the end of the payroll tax holiday in 2013, while farm income should also drop modestly from 2011’s record levels.

"Overall, growth should remain solid in Nebraska," said Eric Thompson, assistant professor of economics at UNL and the director of the Bureau of Business Research, which publishes the bi-annual forecast. "However, unlike recent years, the state's growth should hover near national levels, rather than exceeding it."

Nebraska's total job growth will be moderate in 2012, the report projects, mainly because of weakening export markets as the value of the U.S. dollar rises and economic growth declines in Europe and slows in Asia. These forces will affect Nebraska, with its strong export sectors, forecasters said.

The council expects non-farm employment to climb 1.3 percent in 2012 and 1.7 percent in 2013. It is also projecting a 4.1 percent increase in non-farm personal income this year and 3.3 percent in 2013.

Farm income hit records in 2011, mainly from high commodity prices that reflected a long-term trend of rising incomes in the developing world. This has shifted the "terms of trade" in favor of U.S. agriculture, the report says. Another encouraging trend has been the rising importance of distiller's grain in feedlots, making Nebraska an attractive location for feeder cattle operations.

While this suggests that Nebraska's ag production sector will do well in the global economy in the long run, the outlook over the next few years is more uncertain because of possible outside shocks. The recent strengthening dollar does not bode well for U.S. ag exports or commodity prices, forecasters warned, and the removal of corn-based ethanol subsidies could happen early in 2013 -- a factor that is already being worked into early 2012 ethanol futures prices and, therefore, futures prices of corn.

Though the state's farm incomes are projected to dip below 2011's records in 2012 ($4.5 billion) and 2013 ($4.6 billion), they will still be relatively strong -- in fact, those projections would amount to the second- and third-highest annual farm incomes on record.

Other segment-specific forecasts in the report:

- The services sector, which makes up 38 percent of the state's employment and includes large industries such as health care, professional and scientific jobs, and arts, recreation and entertainment, is expected to add jobs in both 2012 and 2013. Health care and business services, two of the largest sectors of the services industry, are expected to grow solidly. Overall, the services industry is expected to grow by 2.3 percent in 2012 and 2.5 percent in 2013, amounting to 8,400 and 9,400 jobs, respectively.

- Commercial construction should aid modest overall construction industry growth in 2012. The rebound in commercial construction activity is the result of many small projects rather than major private-sector projects. In the public sector, large projects in Lincoln have replaced recently completed stadiums in the Omaha area. Infrastructure spending is expected to remain flat in 2012 but improve next year as highway projects backed with general funds begin.

- Nebraska's manufacturing industry will likely add only a few thousand new jobs in the next two years. Rising demand for food, food products and ag products will continue to bolster the industry, but rising labor productivity will limit job growth. Durable goods employment will rise 2.1 percent in both 2012 and 2013; non-durable goods jobs are forecast to grow just 0.8 percent both years.

- Financial services -- including finance, insurance and real estate -- should return to growth. Incremental improvements in the housing sector should be enough to help the industry see solid growth by 2013. Employment in the financial industry will grow by 0.5 percent in 2012 and by 1.5 percent in 2013.

Members of the Nebraska Business Forecast Council are Chris Decker, Department of Economics, University of Nebraska at Omaha; Tom Doering, Nebraska Department of Economic Development; Bruce Johnson, Department of Agricultural Economics, UNL; Ken Lemke, Nebraska Public Power District; Scott Loseke, Nebraska Public Power District; Jason Henderson, Federal Reserve Bank of Kansas City, Omaha Branch; Phil Baker, Nebraska Department of Labor; Franz Schwarz, Nebraska Department of Revenue; Scott Strain, Greater Omaha Chamber of Commerce; and Thompson.

- Steve Smith, University Communications