Transcript Outlook for the Nebraska Economy

2011 Economic Outlook for Nebraska
2011 NIFA HOUSING INNOVATION
MARKETPLACE CONFERENCE
JANUARY 26, 2011
ERIC THOMPSON, DIRECTOR
UNL BUREAU OF BUSINESS RESEARCH &
NEBRASKA BUSINESS FORECAST COUNCIL
[email protected]
Outline
2
 Macroeconomic outlook
 Nebraska employment in 2010 and outlook for
2011
 Nebraska income and population outlook
UNL Bureau of Business Research
Forecast Process
3
 UNL Bureau of Business Research develops a
preliminary 3-year economic forecast from a
statistical model
 Nebraska Business Forecast Council meets to review
the preliminary forecast based on:


Industry contacts
Council member research
 Final report developed (Council met on Jan 21, 2011)
UNL Bureau of Business Research
Macroeconomic Outlook
4
 On balance, the recovery likely to continue
 However, there is an unusually high risk of double-
dip recession due to



Weakness in the real estate sector
Imbalances overseas
Uncertainty about fiscal policy
UNL Bureau of Business Research
Macroeconomic Outlook
5
 Positives
 Solid, positive savings rate
households less leveraged
 spending in-line with income.




Income growth supports consumption growth - some job
growth and growing weekly hours mean rising wage income
Corporate profits encourage business investment
Combination of fiscal restraint (divided government) and
accommodative Federal Reserve
UNL Bureau of Business Research
Macroeconomic Outlook
6
 Negatives
 Construction sector – hurting rather than helping
Improvement in repair, remodeling/additions
 Continued weakness in new home construction, and associated
commercial development


Policy environment
Risk that fiscal constraint will not materialize
 Concerns about ineffective regulation of the financial sector


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Collapse of Chinese real estate and financial sectors
European contagion
Spike in energy prices?
UNL Bureau of Business Research
Relative Strength of Key Industries
7
Major Nebraska Industries
Agriculture
Insurance
Manufacturing Related To Agriculture
Transportation
Professional Services
The first two performing relatively well in the
recession, the latter two will rebound in 2011
UNL Bureau of Business Research
Agriculture
8
 Farm Income
 There was a big drop in farm income in 2009 from record
levels in 2008.
 But, farm incomes returned to record levels in 2010 and are
expected to stay there in 2011
 Negatives
 Conditions for livestock producers
UNL Bureau of Business Research
UNL Bureau of Business Research
2011.4
2011.3
2011.2
2011.1
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
Strength of Insurance
Carriers
Industry
9
Insurance Carriers
32
31
30
29
28
27
26
UNL Bureau of Business Research
2011.4
2011.3
2011.2
2011.1
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
Manufacturing Employment
10
Manufacturing
104
102
100
98
96
94
92
90
88
86
Employment Outlook (pro-cyclical sectors)
Business and Professional Services
11
Bus & Professional Services
108
106
104
102
100
98
96
94
UNL Bureau of Business Research
2011.4
2011.3
2011.2
2011.1
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
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2007.1
92
Fewer Problems with Property Values and
Unemployment
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 Areas within Nebraska never had a large bubble in
housing prices, so it also never had a drastic price
decline

Nebraska consumer is in better shape, in terms of changes to
wealth and income
 Nebraska has maintained one of the lowest
unemployment rates in the county

This is due to the quality of the labor force
UNL Bureau of Business Research
Employment Trends and Outlook
Non-Farm Employment
13
Non-Farm Employment
990
970
950
930
910
890
870
UNL Bureau of Business Research
2011.4
2011.3
2011.2
2011.1
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
850
Employment Growth
2010 and 2011
14
Industry
Non-farm total
Construction
Manufacturing
Growth 2010
0.0%
-3.0%
-0.8%
UNL Bureau of Business Research
2011
1.4%
1.0%
1.0%
Employment Growth Other Industries
2010 and 2011
15
Industry
Growth 2010
Transportation
-2.5%
Wholesale Trade
-1.2%
Retail Trade
0.0%
Information
-4.0%
Financial Activities
-0.8%
Services
1.1%
Federal Government
0.5%
State & Local Gov’t
0.1%
2011
3.7%
0.5%
1.0%
0.0%
1.5%
2.3%
-4.6%
0.0%
UNL Bureau of Business Research
Other Measures of Growth
2010 and 2011
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Measure
Nominal Income
Growth 2010
2.5%
2011
3.8%
Taxable Sales
3.2%
4.5%
Population
0.8%
0.8%
UNL Bureau of Business Research
Risks For Nebraska Economy
A Lost Cost Advantage
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 In the latter half of the last 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
 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 2005-2008 period
UNL Bureau of Business Research
Opportunities For Nebraska Economy
Temporary Spike in Population Growth?
18
Year
2005
2006
2007
2008
2009
2010
2011
Nebraska Population
Growth Rate
0.6%
0.5%
0.6%
0.8%
0.8%
0.8%
0.8%
UNL Bureau of Business Research