Lincoln (Neb.)-Aug. 19, 1998-Nebraska's overall economic growth should continue through 2000 despite recent difficulties in the agriculture sector.
That's the prediction of the Nebraska Business Forecast Council in the July/August edition of Business in Nebraska, the 10-times-yearly newsletter of the Bureau of Business Research in the University of Nebraska-Lincoln College of Business Administration.
The council, which consists of economists in government and higher education, predicted that total personal income will increase by 6 percent or better in 1998, 1999 and 2000, and that net taxable retail sales will grow by nearly 6 percent in each of the three years, while nonfarm employment will grow 2.9 percent in 1998, then by 2.4 percent in 1999 and 2.2 percent in 2000.
Council member John Austin, research associate in the Bureau of Business Research and author of the report in Business in Nebraska, wrote that although the state's projected employment growth doesn't appear to be spectacular, it will put upward pressure on workers' take-home pay.
"Tight labor markets, fueled by continued employment growth, will lead to wage pressures," he wrote. "As a result, wages and salaries will increase by 7.5 percent or more each year in the forecast period. None of the other major components of personal income will grow as fast."
The forecast said the construction sector will lead the way in employment growth (8 percent in 1998, 6 percent in 1999 and 2000).
"Thus far in 1998, employment growth in the sector is 11.6 percent ahead of the same period in 1997," Austin wrote. "This increase follows healthy increases since 1991. Nebraska's construction sector employment currently is at its highest level since the historic series began (1970)."
Wholesale trade; transportation, communication and utilities; finance, insurance and real estate; and services also were predicted to experience above-average growth, but total manufacturing employment growth will be below the state average and retail trade employment growth will average less than 1 percent a year. Government is the only sector expected to experience employment losses.
The increases in employment and personal income will stimulate growth in retail sales, but aren't expected to push inflation above 3 percent. Therefore, more than half of the expected 6 percent average increase in sales will be "real gains," Austin wrote.
The farm economy is more problematic, however, thanks to a combination of factors.
"At harvest, crops will be large on both a statewide basis and in other agricultural states, leading to substantial downward pressures on short-term prices," he said. "Compounding the problem is weakness in the Asian markets that has reduced agricultural export prospects."
Many cattle feeders, meanwhile, report losses despite lower grain prices and could face lower cattle prices if operators in Texas decide to liquidate herds because of extremely hot weather.
Retail sales numbers don't yet indicate a carryover into lower investments in farm capital such as agricultural equipment, but that remains a possibility. All this is happening while direct government payments to producers are declining toward their eventual termination in 2002. The hope, he said, is that the market has hit the bottom and is ready to rebound, however slowly.
"Given the rather gloomy near-term outlook for farm income
this year, it may be reasonable to expect that next year will
improve," he concluded. "The recovery will likely be modest,
depending on some improvement in the Asian market for Nebraska
agricultural products. Prospects for substantial improvements in
grain prices are slim. However, lower feed prices could help
restore profitability to the livestock sector."
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