Forecasters say Nebraska, nation will evade recession

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BY RICHARD PIERSOL / Lincoln Journal Star

The Nebraska Business Forecast Council expects the Nebraska economy to outperform the nation’s economy and for both to evade recession and spiking inflation.

The council is a group of 11 economists and staff members from utilities, chambers of commerce and educational institutions who report periodically in Business in Nebraska, published by the Bureau of Business Research at the University of Nebraska-Lincoln.

“The Nebraska economy will outperform the national economy given the state’s strong farm sector, a manufacturing sector linked to farm implements and food processing and limited exposure to housing price declines,” the council said. “As a consequence, the Nebraska economy is expected to grow modestly in 2008...”

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They expect employment growth to be weak this year in Nebraska at 1.2 percent, but to recover to 1.5 percent next year and 1.7 percent the year after.

Farm income is expected to leap 24.7 percent this year, then moderate to 9.3 percent growth next year and decline 2.4 percent in 2010.  

Nebraska nonfarm income is expected to grow steadily at almost 5 percent through 2010.

Weak for this year, perhaps, but a positive view, nonetheless, given the dire warnings circulating in the national and world media.

“I think that the group does have a positive outlook in the sense that, despite the substantial risks of recession, the U.S. economy will narrowly avoid recession in the next 6 months, as it likely has for the first 6 months of the year,” said Eric Thompson, director of the Bureau of Business Research, in an -mail. “I guess it is fair to use your word optimistic, as well ... I want to convey that the group is expecting that outcome (narrowly avoiding a recession), so it’s more than just hopeful.”

The council was less optimistic about the national economy, but still predicted the nation will evade recession.

“Strong exports will encourage growth, and consumers and the financial sector will slowly work their way through their current difficulties,” the council said. “Inflation largely will be contained to the food and energy sectors. But, the scenario is far from rosy.”

They expect growth in Gross Domestic Product to be weak for the next year or so, then return to trend-level growth of 2.9 percent in 2010.

Inflation will hit 4.0 percent in 2008, and will be well above 2 percent in subsequent years, at 2.6 percent in 2009, and 2.7 percent in 2010, the council predicted.

“A significant slowdown will be avoided because the weak dollar will encourage strong exports, and because consumer spending will expand modestly despite a weak employment situation and high energy prices,” they concluded. “Consumer confidence has declined rapidly but consumer spending should stay steady thanks to lower interest rates, and in the very short-term, federal government rebate checks.

“Current high energy prices also are expected to stabilize, and therefore, will not cause even further strain on consumer spending for other goods and services.

This relatively positive scenario naturally assumes that the U.S. economy will avoid other major dislocations,” the council concluded.

Members of the council for this report were: John Austin, Department of Economics, UNL; Chris Decker, Department of Economics, University of Nebraska at Omaha; Tom Doering, Nebraska Department of Economic Development; Ernie Goss, Department of Economics, Creighton University; Bruce Johnson, Department of Agricultural Economics, UNL; Lisa Johnson, Lincoln Partnership for Economic Development; Ken Lemke, Nebraska Public Power District; Franz Schwarz, Nebraska Department of Revenue; Scott Strain, Greater Omaha Chamber of Commerce; Eric Thompson, Bureau of Business Research UNL; Keith Turner, Department of Economics, UNO (emeritus).

The report can be viewed online at www.bbr.unl.edu.

Reach Richard Piersol at 473-7241 or at dpiersol@journalstar.com.