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Economic forecasters: Nebraska to see steady growth in an uncertain world
Though the national economy likely will fluctuate, most Nebraskans can expect modest but steady economic growth during the next three years, economic forecasters say.
In the latest long-term forecast released by the Bureau of Business Research, Nebraska is depicted as a haven of steady growth in an uncertain world.
The forecast, produced in conjunction with the Nebraska Business Forecast Council, predicts Nebraska will add more than 32,000 jobs through 2017 – a 1.1 percent annual increase.
Many of the new jobs will come in the construction industry, with the forecasters predicting an upswing in new home construction, commercial construction and road construction.
Nonfarm income is expected to grow by an average annual rate of about 3.9 percent, nearly double the rate of inflation.
However, the state’s grain farmers likely will see declining income as the agriculture sector rebalances from a record $8.4 billion income in 2013. Farm income dropped more than 36 percent in 2014, to about $5.3 billion, and is expected to continue to decline another 7 percent in 2015, leveling off at about $4.8 billion to $4.9 billion in 2016 and 2017.
International economic shocks arising from China, Russia and Europe – combined with uncertainty about how and when the Federal Reserve will launch long-anticipated interest rate hikes – could hamper national economic growth through the first part of 2015. But the forecasters said the national economy should begin to accelerate in mid-2015, with the gross domestic product growing by about 2.6 percent a year in 2016 and 2017.
Recovery will be less robust in Nebraska, in part because declining farm income will limit rural job growth, but also because the state’s small population creates less need and capacity for quick job growth.
Other industry-specific projections in the new report:
➢ Construction is projected to be Nebraska’s fastest growing employment sector, with jobs increasing at a rate of 3 percent in 2015 and 2.5 percent each of the next two years. Construction currently provides more than 45,000 jobs in Nebraska and is expected to add more than 1,000 jobs a year in each of the next three years. New home construction is expected to increase, while a growing economy is expected to generate more commercial construction. Newly earmarked state government funds should boost road construction.
➢ The services industry is Nebraska’s largest sector, employing more than 382,000 people in health care, hospitality, professional, scientific and other service fields. It is expected to grow at a steady rate of about 1.5 percent annually. The fastest growth is expected in the health care industry, particularly in doctor’s offices and clinics.
➢ In agriculture, grain farmers are expected to collect less income as a result of lower crop prices. However, livestock producers recently have benefited from lower feed costs and record prices for their animals because of shortages caused by drought. Lower livestock prices will contribute to a 7 percent decline in farm income in 2015, thought the sector should stabilize at about $5 billion annual income in 2016 and 2017.
With net taxable sales predicted to increase 4.7 to 4.8 percent per year through 2017, retail trade jobs are also expected to grow, albeit far more slowly than sales. The sector, which currently employs nearly 110,000 people in the state, saw a decline in jobs during the past decade as retailers turned more to technology to reduce labor costs. Retail jobs are predicted to grow by 1 percent in 2015 and by 0.8 percent in 2016 and 0.6 percent in 2017.
Nebraska’s manufacturing sector faces two cross-cutting trends during the next three years. Reduced fuel costs should help boost domestic demand for goods and services, but a higher U.S. dollar will discourage exports. Nebraska factories also will continue to be hampered by a limited supply of skilled workers. The sector, which employs more than 44,000 people in manufacturing durable goods and more than 52,000 people in nondurable goods, is expected to add a few hundred more jobs each year.
The transportation sector lost thousands of jobs after the 2008 recession and has added few jobs since. A steadily growing national economy and favorable diesel fuel prices should result in solid job growth of 1 to 2 percent during the forecast period, increasing to nearly 55,000 jobs by 2017, nearly the level seen before the recession.
Strength in banking and real estate, which are bouncing back with the housing and construction industries, will add to 700 to 900 jobs per year to the financial services sector. However, insurance industry employment, flat in recent years, will see slower improvement. The sector as a whole will approach 75,000 workers by 2017.
Newspapers, media outlets and technology businesses will shed jobs as technology improves productivity. Forecasters predict 100 fewer people will be employed in the information sector in 2017 compared to currently. The sector now employs about 17,000 people in the state.
The full Business in Nebraska January 2015 report is available at the UNL Bureau of Business Resaerch website. The three-year forecast is released in January of each year and updated each July.