Outlook for the Nebraska Economy
WESTERN REGIONAL SCIENCE ASSOCIATION
4 9 TH A N N U A L M E E T I N G
SEDONA, ARIZONA
FEBRUARY 22, 2010
ERIC THOMPSON, DIRECTOR
BUREAU OF BUSINESS RESEARCH
UNIVERSITY OF NEBRASKA – LINCOLN
ETHOMPSON2@UNL.EDU
Outline
2
y Nebraska entered the recession late, and left on
ony
y
y
y
time (or perhaps even early)
Employment
p y
g
growth anticipated
p
for 2010
Opportunities/challenges related to the recession
Long-term
g
opportunities
pp
in manufacturing
g
Regional conditions within the State
UNL Bureau of Business Research
Reasons for Shallow Recession in Nebraska
Relative Strength of Key Industries
3
Major
j Nebraska Industries
Agriculture
Insurance
Manufacturing Related To Agriculture
The first two are p
performing
g relativelyy well in current
recession
UNL Bureau of Business Research
Reasons for Shallow Recession in Nebraska
Agriculture
4
y Farm Income
{ There has been a big drop in farm income in 2009 and
livestock producers are suffering.
{ However,
However while farm incomes in 2009 are down from record
levels in 2007 and 2008, incomes remain above the 10-year
average
y Therefore, in agriculture, 2009 is not a good year,
but it is (overall) not a disastrous year either
UNL Bureau of Business Research
Reasons for Shallow Recession in Nebraska
Strength of Insurance
Carriers
Industry
5
Insurance Carriers
33
33
32
32
31
31
30
UNL Bureau of Business Research
2010.4
2010.3
2010.2
2010.1
2009.4
2009.3
2009.2
2009.1
2008.4
2008.3
2008.2
2008.1
2007.4
2007.3
2007.2
2007.1
30
UNL Bureau of Business Research
2010.4
2010.3
2010.2
2010.1
2009.4
2009.3
2009.2
2009.1
2008.4
2008.3
2008.2
2008.1
2007.4
2007.3
2007.2
2007.1
Significant Losses in Manufacturing
6
Manufacturing
105
100
95
90
85
80
Shallow Recession in NE–Smaller Decline in
Property Values Means
Stronger
Consumer
7
y Nebraska never had a significant
g
bubble in housing
g
prices, so it also never had a drastic decline
y Further, during 2008, there was even a substantial
run-up in farm-land prices
y So, there was no dramatic decrease in household
property
t wealth
lth iin N
Nebraska
b k d
during
i th
the 2008-2009
8
period, as in other parts of the country
y Of course
course, one potential concern for 2010 is a
collapse in the price of farm land (this did not
pp in 2009)
9)
happen
UNL Bureau of Business Research
Recovery Gains Steam Throughout 2010
8
y Incomes are g
growing
g again
g
in Nebraska
{ This has spurred growth in consumer spending
y A relatively weak dollar also has aided Nebraska’s
export-oriented industries in agriculture,
manufacturing, and services
y As
A the
th year continues,
ti
growing
i consumer spending
di
and exports will support business investment
UNL Bureau of Business Research
Employment Trends and Outlook
Non-Farm Employment
9
Non-Farm Employment
970
965
960
955
950
945
940
UNL Bureau of Business Research
2010.4
4
2010.3
3
2010.2
2
2010.1
1
2009.4
4
2009.3
3
2009.2
2
2009.1
1
2008.4
4
2008.3
3
2008.2
2
2008.1
1
2007.4
4
2007.3
3
2007.2
2
2007.1
1
935
Employment Outlook (pro-cyclical sector)
Construction Employment
10
Construction
52
51
50
49
48
47
UNL Bureau of Business Research
2010.4
2010.3
2010.2
2010.1
2009.4
2009.3
2009.2
2009.1
2008.4
2008.3
2008.2
2008.1
2007.4
2007.3
2007.2
2007.1
46
Employment Outlook (pro-cyclical sectors)
Business and Professional Services
11
Bus & Professional Services
108
106
104
102
100
98
96
UNL Bureau of Business Research
20
010.4
20
010.3
20
010.2
20
010.1
20
009.4
20
009.3
20
009.2
20
009.1
20
008.4
20
008.3
20
008.2
20
008.1
20
007.4
20
007.3
20
007.2
20
007.1
94
Employment Growth By Industry
2009 and 2010
12
Industry
y
Total Non-Farm
Construction
Manufacturing
p
Transportation
Wholesale Trade
Retail Trade
Growth 2009
9
-1.6%
-3.0%
3
-8.4%
-2.0%
-1.5%
-1.8%
UNL Bureau of Business Research
Growth 2010
+1.0%
+1.0%
-2.1%
+1.3%
3
+0.2%
+0.1%
Employment Growth By Industry
2009 and
2010
13
Industry
y
Growth 2009
9
Information
-5.5%
Financial Activities
-0.2%
Services
-1.2%
5
Federal Government
+2.5%
State & Local Gov’t
+2.5%
UNL Bureau of Business Research
Growth 2010
-1.7%
+1.3%
3
+2.2%
+2.4%
4
+0.8%
Other Measures of Growth
2009 and 2010
14
Measure
Nominal Income
Taxable Sales
Population
Growth 2009
9
-0.5%
-3.2%
3
+0.8%
Unemployment
p y
Rate
2009
4.8%
4
UNL Bureau of Business Research
Growth 2010
+4.1%
+3.5%
35
+0.8%
2010
4.8%
4
Unemployment Rate Trends and Outlook
15
Unemployment Rate
5 0%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
UNL Bureau of Business Research
20
010.4
20
010.3
20
010.2
20
010.1
20
009.4
20
009.3
20
009.2
20
009.1
20
008.4
20
008.3
20
008.2
20
008.1
20
007.4
20
007.3
20
007.2
20
007.1
2.0%
Risks For Nebraska Economy–
A Lost Cost Advantage
16
y In the latter half of this decade,, an exaggerated
gg
cost
of living made many areas on the West and East
Coasts less competitive.
{
Climate,
l
access to oceans h
have amenity value,
l
b
but property
prices had risen far in excess of those amenity values on the
East and West Coasts
y This problem has now been addressed
{ Property prices have declined, more in line with the real value
off amenities
iti
y As a result, Nebraska has lost a competitive
advantage that it held in the 2005
2005-2008
2008 period
UNL Bureau of Business Research
Opportunities For Nebraska Economy–
Temporary Spike in Population Growth?
17
Year
2005
5
2006
7
2007
2008
2009
9
Nebraska Population
p
Growth Rate
0.6%
0.5%
0.6%
0.8%
0.8%
UNL Bureau of Business Research
Opportunities for the Nebraska Economy–
Strength and Decentralization of Manufacturing
18
Average
g Annual Growth Rate
Manufacturing Value-Added 1972 to 2002
United States:
p
Areas:
Metropolitan
Non-Metropolitan Areas:
3.1%
3.0%
3
3.9%
Source: Hammond and Thompson (2009)
UNL Bureau of Business Research
Decentralization of Manufacturing
19
Component
p
of Growth 1972-2002
97
Metro
Labor Hours
-0.6
Capital Stock
1.3
2.3
3
Productivityy
Total
3.0
3
Source: Hammond and Thompson (2009)
UNL Bureau of Business Research
Non-Metro
0.1
1.6
2.2
3.9
3
9
Nebraska – A Leading Indicator for the United
States and The West?
20
y Nebraska’s recent strengths
g
and emerging
g g
advantages will carry it through the next few years
y But, more generally, he strength of the entire “Upper
Midwest” may provide a roadmap for national
recovery.
{
Stabilization of household wealth and a recovery in household
income
Ù
{
Both portend solid, steady growth in consumer spending
An economy with a larger export sector and a smaller housing
and real estate sector
UNL Bureau of Business Research