Forecasters predict Nebraska economy to grow

State forecasters announced today they expect modest economic and employment growth this year in Nebraska, as well as for farm incomes to slide back from recent all-time highs and the rate of non-farm income growth to slow in 2013.

But they also said many sectors of the state's economy were primed for solid progress in 2014 and predicted accelerated job and income growth for Nebraska workers beginning next year.

In its latest long-range report, the Nebraska Business Forecast Council said it anticipates Nebraska's total job growth to be 1.3 percent by the end of 2013 and then tick up — by 1.5 percent — next year. The council's job estimates for 2013 are somewhat lower than its July forecast, but slightly higher for 2014.

"Weather conditions and uncertainty about the national fiscal situation will limit economic growth in Nebraska during much of this year," said Eric Thompson, associate professor of economics and director of the Bureau for Business Research at UNL's College of Business Administration, which publishes the semi-annual report.

"Nonetheless, we continue to anticipate moderate economic growth in Nebraska in 2013 overall, with the pace of growth accelerating late in the year and in 2014."

Despite expected overall job growth, the rate of income growth for Nebraska's non-farm workers is expected to drop in 2013. This slowdown — from 3.3 percent in 2012 to 2.7 percent in 2013 — will result from the expiration of the temporary cut in the payroll tax rate this year, meaning the additional taxes will subtract from income. However, forecasters expect growth to pick up speed starting next year (4.5 percent).

The long-term outlook assumes a return to more normal weather conditions, the report notes.

While forecasters predict non-farm income growth will accelerate in 2014 along with job growth, annual farm incomes will continue to retreat in both years from record-shattering 2011 levels ($7.5 billion) and near-record totals ($5.2 billion) in 2012, according to the report.

This year, farm incomes are forecast to drop to $4.5 billion as high crop prices continue to moderate and lingering moisture deficits affect crop yields. Farm income also will fall back to $4.2 billion in 2014, according to the council’s forecast.

Other industry-specific forecasts in the report:

> The services sector, which makes up 38 percent of the state's employment and includes health care, professional and scientific jobs, and arts, recreation and entertainment, should continue broad growth through 2014. All major areas of the Nebraska services industry are expected to add employment in the next two years: Health care employment is expected to grow by 2 percent and 2.5 percent in 2013 and 2014, respectively. Similar rates are expected in the hospitality industry. The overall services industry is expected to grow by 2 percent this year and 2.3 percent next year — an estimated 8,600 jobs this year alone.

> Nebraska's housing comeback that began in 2012 should continue in 2013, leading forecasters to predict solid growth in smaller commercial projects and related employment in 2013 and 2014. New home construction will be paired with new commercial development for new and growing neighborhoods.

> The state's manufacturing industries that sell primarily to the region's farm sector are likely to see some dip in sales as farm incomes return to more normal levels after two straight record and near-record years. But the positive outlook for the national economy and manufacturing should help the state's manufacturers achieve steady employment growth — 1.1 percent in durable goods manufacturing in 2013 and 2 percent in 2014.

> Retail trade employment should continue its growth from 2012, thanks to a sharp improvement in retail sales. Growth in retail sales should be sufficient in the next two years to support job growth. Forecasters predict growth of 0.4 percent, (500 jobs) in 2013 and 0.5 percent (600 jobs) in 2014.

In addition to Thompson, members of the Nebraska Business Forecast Council are John Austin, economics, UNL (retired); Chris Decker, economics, University of Nebraska at Omaha; Tom Doering, Nebraska Department of Economic Development; Ernie Goss, economics, Creighton University; Jason Henderson, Federal Reserve Bank of Kansas City, Omaha Branch; Bruce Johnson, agricultural economics, UNL; Ken Lemke, Nebraska Public Power District; Scott Loseke, Nebraska Public Power District; Phil Baker, Nebraska Department of Labor; Franz Schwarz, Nebraska Department of Revenue; and Scott Strain, Greater Omaha Chamber of Commerce.

The full report is available in Adobe Acrobat PDF format at

— Steve Smith, University Communications