Nebraska economy is expected to keep growing
Despite a number of risks and some general uncertainty, Nebraska’s economy should continue to grow over the next three years.
That’s the conclusion of the latest three-year forecast from the University of Nebraska–Lincoln’s Bureau of Business Research and the Nebraska Business Forecast Council.
Eric Thompson, director of the Bureau of Business Research at UNL’s College of Business, said the state faces two main threats to its economy over the next few years: The potential that the Federal Reserve Bank may need to increase interest rates rapidly in order to reduce the rate of inflation, and the possibility that the COVID-19 pandemic could worsen significantly next year.
Despite those risks, “the most likely path is continued economic growth,” Thompson said.
Employment is expected to rise with 1.4% job growth in 2022 as the state economy continues to recover jobs lost in the 2020 recession. Employment growth should then “normalize” to a 0.9% rate in 2023 and a 0.8% rate in 2024, according to the forecast.
Job growth will be stronger in 2022 as the leisure and hospitality sector and local government employment bounce back toward pre-pandemic levels. Job growth will then return to the long-term pattern of rising employment in services, finance, construction and non-durable goods manufacturing, and falling employment in retail and wholesale trade and durable goods manufacturing.
“Labor force growth will be modest in the coming years, given limited international migration and the aging of the population,” Thompson said. “Industries such as wholesale and retail trade will need to economize on labor, which will be drawn into faster-growing or higher-wage industries.”
Nebraska, which in October set a record for the lowest unemployment rate ever recorded in the U.S. at 1.9%, is already facing a labor shortage in many industries, and it’s unclear whether that will improve any time soon.
The outlook is also positive for Nebraska’s agriculture sector. Farm income is expected to reach a record level of $8.1 billion in Nebraska this year, thanks to high crop prices and generous government payments.
Income will fall in 2022, as payments decrease and prices moderate, but it is expected to remain at the historically high levels of $5.8 billion in 2022 and 2023, and $6.0 billion in 2024. Importantly, this elevated farm income will come overwhelmingly from earned income rather than government payments.
Nonfarm income growth will slow to 0.3% in Nebraska during 2022, as government stimulus payments are withdrawn. Income growth will then rise to 3.6% in 2023 and 3.1% in 2024 as inflation begins to normalize.
“Unspent stimulus funds should help Nebraska households expand spending in 2022 despite slow income growth,” Thompson said.
That spending increase could be blunted, though, if the Fed raises interest rates or the pandemic worsens, according to the forecast. Higher rates could also cause businesses to cut back on investment, while a worsened pandemic could cause even more supply chain problems.
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Reach the writer at 402-473-2647 or firstname.lastname@example.org.
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