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How fast can Nebraska's economy come back?

How fast can Nebraska's economy come back?

20200505_new_reopen (copy)

Harold’s Koffee House on North 30th was among businesses in Omaha that reopened this week.

Restaurants and bars in Nebraska are finding new ways to reach their customers amid social distancing. 

Nebraska jobs lost to the coronavirus pandemic should come back at a rapid pace, but the effects of the bug’s blow to the Nebraska economy will likely linger for some time.

Those are among the conclusions of a new state economic forecast from the University of Nebraska-Lincoln’s Bureau of Business Research, the first it has issued since the worldwide pandemic descended on Nebraska.

“It has been a sharp contraction, but we will also rebound more quickly than we do after a typical recession,” said Eric Thompson, a UNL economist who authored the report.

Thompson said by the end of the year, he expects “a lot of progress” in getting back the thousands of jobs lost in recent weeks. But he said overall employment probably won’t return to where it was earlier this year until sometime in 2021.

The report also suggests nonfarm income for Nebraskans will be down about 1% in 2020. The impact would be much worse were it not for all the government assistance in the form of unemployment and stimulus payments.

And the bureau’s farm income forecast for Nebraska also has taken a big dive — now projected to be down 23% from last year. That’s due to a number of factors, including reduced ethanol production, the impact of COVID-19 on meatpacking plants, and continued trade disruptions.

Thompson acknowledged that the forecast remains fraught with uncertainty.

Nebraska and a number of other states are taking first steps to loosen restrictions on gatherings and reopen the economy.

But any recovery will depend on how quickly consumers feel it’s safe to go out publicly again and when they regain confidence in their personal finances. And it remains to be seen whether virus cases peak in the coming weeks, as expected, or there is a second wave of sickness later this year.

“This is first and foremost a health crisis,” Thompson said. “The economy is important. But our first concern should be people’s health.”

The Bureau of Business Research twice each year makes an economic forecast for the state in consultation with a panel of state officials and academic economists.

Since the last forecast in December, thousands of Nebraskans have at least temporarily lost their jobs due to business restrictions intended to limit the spread of the coronavirus. Since mid-March, more than 100,000 Nebraskans have filed new unemployment claims.

The bureau’s forecast does not track employment peaks and valleys but expresses employment on an average annual basis. With the recent disruptions, the state forecast has gone from modest 1% job growth for this year to an average 2.4% decline.

That projected job loss is about half what is forecast nationally, as Nebraska does not have as many jobs in particularly hard-hit industries like travel and hospitality, oil production and automobile parts and assembly.

While the virus initially had a big impact in Nebraska’s retail and service sectors, the job losses have since been seen across all sectors, including manufacturing.

For the year, retail employment will be down an average of nearly 4%, services 3.6%, nondurable manufacturing about 3% and durable manufacturing about 2%, the forecast projects.

The financial services, construction, local government and transportation sectors should be much more stable, all down about 1% for the year on average, and they should likewise see quicker recoveries.

There will also be big variances within broad sectors.

Inside the services sector, professional and business services have been lightly affected because employees can more easily work from home.

Health care, another component of the services sector, should recover quickly as workers thrown out of jobs because of restrictions on nonemergency medical procedures get back to work, Thompson said.

In retail, some jobs may take much longer to recover — if ever — especially if consumer responses to recent store closures help accelerate the long-term national trend toward online retailing. Some stores probably won’t survive the crisis, Thompson said.

On personal income, the biggest hit is lost wages because of unemployment.

With the recent agricultural disruptions, the 2020 state farm income forecast went from a gain of 7% over past year to a decline of 23%. The projected hit would be much more if not for government safety net programs, which are forecast to account for more than 50% of farm income in Nebraska.

By 2022, the bureau’s forecast projects average annual employment in every sector except for retail to be above 2019 levels.

But that does not mean Nebraska will escape a long-term impact from the coronavirus.

Overall, the cumulative job growth from 2019 to 2022 is forecast to be about half what was projected before the virus hit the state.

Our best staff photos of May 2020

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Reporter - Metro News

Henry is a general assignment reporter, but his specialty is deep dives into state issues and public policy. He's also into the numbers behind a story, yet to meet a spreadsheet he didn't like. Follow him on Twitter @HenryCordes. Phone: 402-444-1130.

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