Growth expected next two years

Lincoln -- Buoyed by returning strength in several sectors, especially in the construction industry, the Nebraska economy is expected to grow in the next two years, according to a report of the Nebraska Business Forecast Council in the November/December issue of Business in Nebraska.

The council, composed of economists in government and higher education, predicted increases in three key economic growth rates:

- nonfarm employment, from 0.5 percent in 2002 to 1.4 percent in 2003 and 1.9 percent in 2004; - nonfarm personal income, from 3.6 percent in 2002 to 4.6 percent in 2003 and 5.3 percent in 2004; and - net taxable retail sales, from 2.9 percent in 2002 to 4.9 percent in 2003 and 5 percent in 2004.

All of those figures, however, are below the high growth rates the state experienced in the 1990s and reflect the fact that while Nebraska was affected by the 2001 national recession, the state did not fully partake in it.

John Austin, research associate in the University of Nebraska-Lincoln's Bureau of Business Research, wrote in Business in Nebraska that the reduced growth rates were caused by a number of different factors in different sectors of the economy, not all having to do with reverberations from the national economy.

And with the national outlook still uncertain, Austin and the council expressed guarded optimism about the performance of Nebraska's economy over the next two years.

"Despite the somewhat negative atmosphere engendered by current data, the council remains optimistic about the future of the Nebraska economy," Austin wrote. "By the end of the forecast period (2004), nonfarm employment will crawl out of its current doldrums and approach 2 percent growth. At that time, nonfarm personal income will advance at a rate in excess of 5 percent. Aided, in part, by the recent expansion in the list of items that are covered by the state's sales taxes, net taxable retail sales will grow at nearly 5 percent per year in 2003 and 2004."

In addition, Austin reported that the Bureau of Business Research's new monthly Nebraska Business Conditions Survey from July through September had just over 40 percent of respondents saying they expect general business conditions to improve in the next six months (followed by a small decrease in the outlook in the October survey).

Austin also said, however, that the council's optimism does not extend to the farm sector.

"Net farm income continues to crawl at depressed levels not seen in 15 years," he wrote. "Only the willingness of the federal government to continue to support the industry with a system of farm payments keeps the current near disaster in Nebraska's farm sector from becoming a complete disaster.

"The impact of the drought has left net farm income hovering at the 1984 dollar income levels before adjustment for price level advances. Once price adjustments are made, net farm income levels will be well below those of a generation ago."

With no end in sight for Omaha's building boom, and continued highway construction projects, the council predicted that the construction and mining sector will experience 2.9 percent employment growth in 2002 and 2.6 percent in both 2003 and 2004 -- after a 2.8 percent decrease in 2001. The major challenge facing the industry is a potential labor shortage.

The council also predicted that the transportation, communication and utilities, and services sectors will regain momentum in the last two years of the forecast period. It predicted an employment gain of 0.5 percent for transportation, communication and utilities in 2002, followed by 2.5 percent and 3 percent gains in 2003 and 2004. Employment in the service sector (the state's largest employer) is expected to increase 1.3 percent in 2002, 2.8 percent in 2003 and 3.2 percent in 2004.

Employment gains are expected to remain weak, however, in the manufacturing, retail and wholesale trade, and government sectors, especially in durable-goods manufacturing, where a 4.6 decrease is predicted for 2002, a 0.6 percent decrease in 2003 and a 0.2 percent increase in 2004.

Members of the Nebraska Business Forecast Council this session were Austin, Bruce Johnson and Charles Lamphear, UNL; Tom Doerring, Nebraska Department of Economic Development; Ernie Goss, Creighton University; Gene Koepke, University of Nebraska at Kearney; Donis Petersan, Nebraska Public Power District; Franz Schwarz, Nebraska Department of Revenue; Bryan Skalberg, Nebraska Department of Labor; and Keith Turner, University of Nebraska at Omaha (emeritus).