‘Last in, first out' in recession?

The Fed and most economists say the recovery is on, and here in the Midlands that raises a question.

Omaha and Nebraska lagged most of the country by months falling into the deepest recession since the Great Depression. Could we also lag coming out?

Fortunately, economists say the opposite is more likely to be true.

“It's last one in, first one out,'' said Jason Henderson, chief executive for the Federal Reserve branch in Omaha.

While every recession is different, Henderson said, regions of the country that lag going into downturns historically tend to be the first to emerge.

Recent employment trends also suggest that the recovery here may already be a step ahead of the nation's.

Federal employment estimates for Omaha and Nebraska have been up and down over the last five months. The latest figures last week showed Nebraska lost nearly 6,000 jobs in September after having gained more than 4,000 in the two previous months.

But those fluctuations have come as the nation as a whole has continued to steadily lose hundreds of thousands of jobs. Iowa employment overall has tracked more closely to the nation's during the recession.

To get a better idea of how employment has trended in the recession, Scott Strain, an economist with the Greater Omaha Chamber of Commerce, recently took job numbers through August and ran them through a program that smooths out monthly fluctuations.

Those results showed that Omaha and Nebraska employment bottomed after the nation's, but with much shallower losses. The subsequent pace of job improvement also has exceeded that of the nation at large.

“When I look at the data, I see improvement and a suggestion we'll have job growth by the end of the year,'' Strain said.

It's unclear how September's poor job numbers for Nebraska would impact the chamber analysis. New job numbers for Omaha will be out this week.

There are other signs that the local economy is on the mend.

New jobs posted with the Nebraska Workforce Development office in Omaha were up 10 percent in September over a year ago, an indication that some employers are returning to the market for workers.

Also, Moody's Economy.com recently said that about 20 percent of the nation's metro areas, including Omaha, Lincoln and Des Moines, moved during August into what it considered recovery mode. Moody's defined recovery using a formula that measured employment, industrial production, housing starts and home prices.

Moody's predicts Nebraska will post net job growth by the first quarter of 2010, with Iowa growing by the second quarter. One reason Iowa is expected to lag is its stronger dependence on manufacturing, which isn't expected to recover as quickly.

Regardless of when overall job growth returns, many workers' jobs will still be at risk.

And almost everyone is projecting a long, slow slog before employment again approaches pre-recession peaks, thanks largely to continued slack consumer demand. Since the recession began in December 2007, the Omaha metro area has lost about 7,000 jobs. The number is 23,000 for the state, 49,000 for Iowa and 7 million nationally.

The slow pace of expected job growth is one reason Creighton University economist Ernie Goss is labeling this “an economist's recovery.''

“When economists talk of recovery, we're looking at (increased) economic output,'' he said. “Everyone else is looking at jobs, and there's not very much right now on jobs.''

It was about a year ago that the falling dominoes nationally finally brought the recession home: The nation's financial markets locked up; the stock market plunged; consumers shut down; employers started shedding workers.

The Omaha metro saw its first monthly job loss in November, some 10 months after jobs started to decline nationally. The losses steadily mounted and peaked in March. Nearly 5,000 Omahans lost their jobs in that month alone.

Despite such job losses, Omaha and Des Moines both have ranked among the best places in the nation to ride out this recession. A study by the Brookings Institution ranked Omaha as the 10th-strongest-performing large metro in the recession, while Des Moines ranked 13th.

Both stood out for their low unemployment, with Omaha's 5 percent rate in August ranked as the lowest of any large metro area in the nation. The two cities also posted lower overall job losses and more stable housing values, leading to below-average foreclosures and more retention of household wealth.

Because Omaha and Des Moines have not been as deeply affected by recession, the study's authors think the cities also will be among the first to recover.

“If I were a betting man, I would bet that Omaha will be among the first to emerge,'' said Brookings' Alan Berube. “There are others likely to remain in recession for months to come.''

The Federal Reserve Bank of Kansas City, Mo., recently studied how regions of the country performed in past recessions, finding that regions entering late were often the first out.

That was particularly true for the Kansas City district, of which Nebraska is part. Overall, the district entered six of the previous eight recessions after the nation as a whole and exited five of them earlier. Only once did the region lag in exiting a recession.

In past recoveries, the nation has often snapped back with strong, above-average growth because of pent-up consumer demand. But this time most economists expect anemic growth.

Goss said it is likely to take a year for Nebraska to recoup lost jobs. It could take even longer, he said, depending on what transpires in Washington in debates on health care, climate change and taxes.

Another wild card for Nebraska and Iowa is the farm economy, with farm profits projected to be down 38 percent in 2009.

The Federal Reserve's Henderson sounds a somewhat more upbeat tone about Nebraska's recovery prospects.

Farm income is merely falling back to more historical levels after some record years, he said, and farmers' balance sheets are in very good shape. He also sees potential for consumer spending to bounce back more quickly in Nebraska, largely because unemployment is so low.

“Our people have income,'' he said. “And as confidence is restored, people with those incomes will start spending.''

Contact the writer: 444-1130, henry.cordes@owh.com

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