Business forecast council optimistic about Nebraska economy through 2008

The Nebraska Business Forecast Council is "optimistic" about the outlook for Nebraska's economy through 2008 according to a report in the December issue of Business in Nebraska.

The council, composed of eight Nebraska economists in government, the public utility industry and higher education, said that while farm incomes are expected to moderate, non-farm employment is expected to expand during the forecast period, including manufacturing employment.

"Manufacturing employment data for 2004 and preliminary data for 2005 indicate the decline in durable goods employment may be approaching the bottom," the council reported in Business in Nebraska, the quarterly newsletter of the University of Nebraska-Lincoln's Bureau of Business Research.

"With significant improvement in farm income, the farm machinery and equipment manufacturing sector appears to have stabilized and started to experience employment growth," the report said. "Nebraska's durable goods manufacturers also have benefited from an improving national economy."

The council predicted a 0.2 percent increase in durable goods manufacturing employment in Nebraska when final figures are in for 2005, with the growth rate accelerating to 0.9 percent in 2006, 1.3 percent in 2007 and 1.5 percent in 2008 -- good news after the sector lost more than 20 percent of its employment from 2000 to 2004. The forecast for the nondurable goods manufacturing sector was not as strong, but it was made before Japan announced it would resume imports of American beef.

Nebraska's total non-farm employment is expected to increase by 1.1 percent in 2005 and average 1.6 percent per year for the following three years after averaging less than 4 percent growth per year for the four previous years.

The council predicted solid job growth in several economic sectors:

* Transportation and utilities to average 2.8 percent growth per year, despite the recent spike in diesel fuel prices;

* Financial to average 2.4 percent growth per year, with the growth encompassing banking and financial services, real estate, and insurance;

* Services to average 2.3 percent growth per year, with the strongest growth in health care and professional services employment.

"Moderate employment growth will help generate growth in both income and taxable sales in Nebraska," the report in Business in Nebraska said. "Income growth is expected to average 5.7 percent per year over the outlook period. Net taxable sales growth will average 4 percent per year over the 2006 through 2008 period."

The council also saw some softness in growth in the wholesale and retail trade sectors (0.2 and 0.9 percent average growth per year), while the information sector will average slightly over 1 percent growth per year. Construction employment growth is expected to slow to 0.5 percent in 2005, begin to recover in 2006 and return to moderate rates of 1.6 percent in 2007 and 2008. The forecast sees no growth in federal government employment and a 0.8 percent per year increase in state and local government employment.

Farm income is expect to equal $2.75 billion in 2005 -- strong by historical standards, but some 20 percent below 2004 levels, due mostly to somewhat lower crop yields and plunging commodity prices. The forecast calls for farm income to continue a slight downward trend through 2008 due to modest declines in crop and livestock income and the expectation of declining government payments to agriculture.

Members of the council are John Austin, UNL; Ernie Goss, Creighton University; Scott Hunzeker, Nebraska Department of Labor; Bruce Johnson, UNL agricultural economist; Donis Petersan, Nebraska Public Power District; Franz Schwarz, Nebraska Department of Revenue; Eric Thompson, director of the Bureau of Business Research; and Keith Turner, University of Nebraska at Omaha (emeritus).

CONTACT: Eric Thompson, Director, Bureau of Business Research, (402) 472-3318