Nebraska’s economy appears to be healthy as we enter the new year. That’s the opinion of economist Eric Thompson, director of the Bureau of Business Research at the University of Nebraska-Lincoln. Thompson and his colleagues publish a monthly economic indicators report which measures and projects the condition of Nebraska’s economy. Mike Tobias talks one-on-one with Thompson about the latest economic indicators, and the outlook for 2013.
Mike Tobias talks with UNL economist Eric Thompson. (Photo by Bill Kelly, NET News)
RESOURCES FOR INFORMATION ON NEBRASKA'S ECONOMY
MIKE TOBIAS, NET NEWS: What do you attribute the building permits growth to?
THOMPSON: This is part of a national trend of finally the recovery of the housing sector. We’ve been waiting for the last couple of years for housing to bottom out and start to turn around. It seems like it’s finally starting to do that nationally and here in Lincoln and the rest of Nebraska.
TOBIAS: When we talk about some of the growth going into 2013, what are some of the other bright spots that you see?
THOMPSON: I think the overseas situation is starting to improve. Growth in China may be starting to accelerate again. Europe still has a lot of problems, but it seems like they’ve sort of resolved their crisis situation to an extent and we may be able to get some growth out of Europe next year as well. What that means is there’s potential for growth in export activity in the U.S. next year, which is going to be really positive, especially for a manufacturing sector. The problems in China and Europe have really been dragging down our manufacturing sector. It looks like those will turn around next year. If they do, you couple that with a strong auto sector, and we could have a pretty good year in manufacturing, which is still a pretty important part of our economy.
TOBIAS: Are we fully out of what has been considered the recession? And some would say that we’re close to maybe re-entering in some ways?
THOMPSON: No. The recession was so deep and our recovery from it is so slow that we’re still just starting to recover from the recession. If we have two or three more good years of economic growth, then we can start talking about being fully recovered or nearly recovered, as an economy, as a society overall. Of course, there are a lot of people who were really hurt by this recession and may never fully recover in terms of their income and so forth. It was a very negative event in our economy.
TOBIAS: For Nebraska, our agricultural economy really carried us through the recession. We didn’t get hit as hard in a lot of the sort of measurable ways as a lot of other states. Now we’re potentially facing a second year of a fairly severe drought. How much of a concern is that for you?
THOMPSON: A severe drought again next year, I think could be a significant drag on the Nebraska economy. The first year of drought that occurred in 2012 was a regional drought. It affected large parts of the Midwest and the Great Plains and what that meant unfortunately for a lot of people was that the prices of a lot of the crop commodities went up very sharply. So in Nebraska, if you couple those sharp prices increases with the fact that a significant share of our production was in irrigation, and of course, some crop insurance payments, that allowed our farm sector, it was harmed, and some people were harmed a lot, but overall it was able to do reasonably well. It was very hard on our livestock sector in 2012, so if there’s another drought next year, especially if it’s more localized to Nebraska so you don’t get the big price benefit, then it could start to be pretty harmful for the economy and start to affect, I guess the crop producers a lot more. Obviously, it’d be a benefit for the livestock people if the crop prices stayed moderated next year. So we got through it okay this year. Again, aggregate, there were some individuals that were harmed by it quite a bit, our livestock sector. But if it drags on for a second and third year, then it starts to have a more significant effect.
TOBIAS: Overall, as you said earlier, is our economy ready for a good year?
THOMPSON: Yes. I think the U.S. economy, the Nebraska economy is ready for a good year, assuming we can have a reasonable outcome in terms of the fiscal situation, and then, of course, in Nebraska and some of the surrounding states, the other big risk is whether the drought will continue.