Outlook for the Nebraska Economy

Transcription

1 Outlook for the Nebraska Economy WESTERN REGIONAL SCIENCE ASSOCIATION 49 TH ANNUAL MEETING SEDONA, ARIZONA FEBRUARY 22, 2010 ERIC THOMPSON, DIRECTOR BUREAU OF BUSINESS RESEARCH UNIVERSITY OF NEBRASKA LINCOLN

2 Outline Nebraska entered the recession late, and left on- time (or perhaps even early) Employment growth anticipated for 2010 Opportunities/challenges related to the recession Long-term opportunities in manufacturing Regional conditions within the State 2

3 Reasons for Shallow Recession in Nebraska Relative Strength of Key Industries Major Nebraska Industries Agriculture Insurance Manufacturing Related To Agriculture 3 The first two are performing relatively well in current recession

4 Reasons for Shallow Recession in Nebraska Agriculture Farm Income There has been a big drop in farm income in 2009 and livestock producers are suffering. However, while farm incomes in 2009 are down from record levels in 2007 and 2008, incomes remain above the 10-year average Therefore, in agriculture, 2009 is not a good year, but it is (overall) not a disastrous year either 4

5 Reasons for Shallow Recession in Nebraska Strength of Insurance Carriers Industry 5 Insurance Carriers

6 Significant Losses in Manufacturing 6 Manufacturing

7 Shallow Recession in NE Smaller Decline in Property Values Means Stronger Consumer Nebraska never had a significant bubble in housing prices, so it also never had a drastic decline Further, during 2008, there was even a substantial run-up in farm-land prices So, there was no dramatic decrease in household property wealth in Nebraska during the period, as in other parts of the country Of course, one potential concern for 2010 is a collapse in the price of farm land (this did not happen in 2009) 7

8 Recovery Gains Steam Throughout 2010 Incomes are growing gagain in Nebraska This has spurred growth in consumer spending A relatively weak dollar also has aided Nebraska s export-oriented industries in agriculture, manufacturing, and services As the year continues, growing consumer spending and exports will support business investment 8

9 Employment Trends and Outlook Non-Farm Employment 9 Non-Farm Employment

10 Employment Outlook (pro-cyclical sector) Construction Employment 10 Construction

11 Employment Outlook (pro-cyclical sectors) Business and Professional Services 11 Bus & Professional Services

12 Employment Growth By Industry 2009 and 2010 Industry Growth 2009 Growth 2010 Total Non-Farm -1.6% +1.0% Construction -3.0% +1.0% Manufacturing -8.4% -2.1% Transportation -2.0% +1.3% Wholesale Trade -1.5% +0.2% Retail Trade -1.8% +0.1% 12

13 Employment Growth By Industry 2009 and 2010 Industry Growth 2009 Growth 2010 Information -5.5% -1.7% Financial Activities -0.2% +1.3% Services -1.2% +2.2% Federal Government +2.5% +2.4% State & Local Gov t +2.5% +0.8% 13

14 Other Measures of Growth 2009 and 2010 Measure Growth 2009 Growth 2010 Nominal Income -0.5% +4.1% Taxable Sales -3.2% +3.5% 35 Population +0.8% +0.8% Unemployment Rate 4.8% 4.8%

15 50% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% Unemployment Rate Trends and Outlook 15 Unemployment Rate

16 Risks For Nebraska Economy A Lost Cost Advantage In the latter half of this decade, an exaggerated cost of living made many areas on the West and East Coasts less competitive. Climate, access to oceans have amenity value, but property prices had risen far in excess of those amenity values on the East and West Coasts This problem has now been addressed 16 Property prices have declined, more in line with the real value of amenities As a result, Nebraska has lost a competitive advantage that it held in the period

17 Opportunities For Nebraska Economy Temporary Spike in Population Growth? 17 Nebraska Population Year Growth Rate % % % % %

18 Opportunities for the Nebraska Economy Strength and Decentralization of Manufacturing 18 Average Annual Growth Rate Manufacturing Value-Added 1972 to 2002 United States: 3.1% Metropolitan Areas: 3.0% Non-Metropolitan Areas: 3.9% Source: Hammond and Thompson (2009)

19 Decentralization of Manufacturing Component of Growth Metro Non-Metro Labor Hours Capital Stock Productivity Total Source: Hammond and Thompson (2009)

20 Nebraska A Leading Indicator for the United States and The West? Nebraska s recent strengths and emerging g advantages will carry it through the next few years 20 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 Both portend solid, steady growth in consumer spending An economy with a larger export sector and a smaller housing and real estate sector