More moderate growth forecast for Nebraska

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Posted: Friday, February 8, 2013 12:00 am

Uncertainty over the fiscal picture in Washington and lingering effects of the drought will keep job and income growth modest in Nebraska this year, according to the latest forecast from a panel of leading state economists.

The forecast from the Nebraska Business Forecast Council isn't all bad. The state is expected to add more than 12,000 jobs this year, about equaling the number from the previous two years combined. But for a nation now five years past the start of the Great Recession, it's still not the robust kind of growth needed for the state and nation to finally put that historic downturn into the past.

“We continue to be disappointed we're not getting the rapid growth you often see after a recession ends,'' said Eric Thompson of the University of Nebraska-Lincoln's Bureau of Business Research, which puts out the twice-annual forecast.

The good news, Thompson said, is that since the recession was less severe in Nebraska, with a much more moderate spike in unemployment, the state can handle another year of moderate growth better than most places.

The other economists collaborating on the report were UNL's John Austin and Bruce Johnson; Jason Henderson, Omaha branch economist with the Federal Reserve; Chris Decker of the University of Nebraska at Omaha; Tom Doering of the Nebraska Department of Economic Development; Ernie Goss of Creighton University; Ken Lemke and Scott Loseke of the Nebraska Public Power District; Phil Baker of the Nebraska Department of Labor; Franz Schwarz of the Nebraska Department of Revenue; and Scott Strain of the Greater Omaha Chamber of Commerce.

Nationally, the recovery of the housing sector, easing of the European debt crisis and re-acceleration of the Chinese economy would suggest potential for strong growth in the U.S. economy in 2013. But in a report titled “An Underachieving Economy,'' the economists said the results are likely to again be disappointing.

The biggest reason is the daunting task President Barack Obama and Congress face reining in the nation's long-term budget deficits. For optimal economic growth, the economists said, policymakers need to avoid making deep cuts in the short-term but at the same time make the long-term cuts needed to restore economic confidence.

“Policymakers really need to thread the needle in terms of making difficult decisions but not making draconian cuts right away,'' Thompson said. “It's most likely that will not happen.''

Overall, the Nebraska forecast calls for nonfarm job growth of 1.3 percent in 2013 and 1.5 percent in 2014. Those are improved over the anemic 0.4 percent and 0.9 percent growth seen in 2011 and 2012.

Nonfarm personal income is expected to climb by 2.7 percent, below last year's 3.3 percent. That drop is largely due to the expiration of the 2 percent payroll tax cut that has helped prop up take-home pay the past two years.

Farm income is expected to continue to fall from the record $7.5 billion seen in 2011, retreating 13.5 percent on top of the 30.3 percent drop seen in 2012. Still, that will leave farm income during 2013 at about $4.5 billion, more than double what was seen just over a decade ago.

Even without another dry year, lingering moisture deficits could affect yields, and crop prices will likely be lower. The lower prices would actually be good news for the cattle industry, which was hit hard by high feed prices during the drought.

Other highlights from the report, by job sector:

Construction: Building permits and housing starts surged in 2012. Continued housing growth and other commercial construction should bring 1,300 new jobs in 2013 and another 1,300 in 2014.

Manufacturing: The industry saw a bit of a rebound in late 2012. There will likely be only moderate growth overall in 2013 as manufacturers that cater to the region's farm sector see a drop in sales. Sector will add about 800 jobs this year and about double that the following year.

Transportation: Growth trend as the national economy improves will be held back by difficulty in finding workers, particularly in trucking. Sector should add about 1,000 jobs in both 2013 and 2014.

Services: Sector including health care, business services and entertainment should continue broad, strong growth. It's expected to grow 2 percent in 2013, nearly 8,600 jobs, and 2.3 percent in 2014.

Financial services: Shed about 600 jobs during 2012. That should reverse with growth of about 500 jobs this year and 700 the next.

Information: Sector that includes data processing, telecommunications and the news media will shrink slightly as growing demand for services is outpaced by technology improvements. Total loss forecast at about 100 jobs.

Retail: Employment grew almost 1 percent in 2012, the largest increase since 2007, on sharp improvement in retail sales. But growing productivity due to labor-saving technology will limit growth to about 500 jobs this year and 600 next.

Government: Federal employment is expected to decline by 1 percent each of the next two years but should be more than offset by increase in state and local employment as tax revenue continues a rebound from recession losses. Sector overall should add more than 2,000 jobs over two years.

Contact the writer: 402-444-1130, henry.cordes@owh.com

Key Nebraska economic indicators

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Nonfarm employment Nonfarm personal income Net farm income
2011 +0.4% +5.2% $7.5 billion
2012* +0.9% +3.3% $5.2 billion
2013* +1.3% +2.7% $4.5 billion
2014* +1.5% +4.5% $4.2 billion
*Estimate/forecast    

Source: Nebraska Business Forecast Council

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