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2011 NIFA HOUSING INNOVATION MARKETPLACE CONFERENCE
JANUARY 26, 2011
ERIC THOMPSON, DIRECTORUNL BUREAU OF BUSINESS RESEARCH &
NEBRASKA BUSINESS FORECAST COUNCIL [email protected]
2011 Economic Outlook for Nebraska
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Outline
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Macroeconomic outlook
Nebraska employment in 2010 and outlook for 2011
Nebraska income and population outlook
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Forecast Process
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)
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Macroeconomic Outlook
On balance, the recovery likely to continueHowever, there is an unusually high risk of
double-dip recession due to Weakness in the real estate sector Imbalances overseas Uncertainty about fiscal policy
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Macroeconomic Outlook
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
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Macroeconomic Outlook
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 Collapse of Chinese real estate and financial sectors European contagion Spike in energy prices?
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Major Nebraska IndustriesAgricultureInsuranceManufacturing Related To AgricultureTransportationProfessional Services
The first two performing relatively well in the recession, the latter two will rebound in 2011
Relative Strength of Key Industries
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Agriculture
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
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Strength of Insurance Carriers Industry
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Manufacturing Employment
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Employment Outlook (pro-cyclical sectors)
Business and Professional Services
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Fewer Problems with Property Values and Unemployment
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
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Employment Trends and Outlook Non-Farm Employment
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Employment Growth 2010 and 2011
Industry Growth 2010 2011
Non-farm total 0.0% 1.4%Construction -3.0% 1.0%
Manufacturing -0.8% 1.0%
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Employment Growth Other Industries2010 and 2011
Industry Growth 2010 2011 Transportation -2.5% 3.7%Wholesale Trade -1.2% 0.5%Retail Trade 0.0% 1.0%Information -4.0% 0.0%Financial Activities -0.8% 1.5%Services 1.1% 2.3%Federal Government 0.5% -4.6% State & Local Gov’t 0.1% 0.0%
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Other Measures of Growth 2010 and 2011
Measure Growth 2010 2011Nominal Income 2.5% 3.8%
Taxable Sales 3.2% 4.5%
Population 0.8% 0.8%
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Risks For Nebraska Economy A Lost Cost Advantage
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
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Opportunities For Nebraska Economy Temporary Spike in Population
Growth?
Nebraska Population Year Growth Rate2005 0.6%2006 0.5%2007 0.6%2008 0.8%2009 0.8%2010 0.8%2011 0.8%
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