Nebraska’s economy is likely to fall into recession next year.
That’s the conclusion of the latest forecast from the University of Nebraska–Lincoln Office of Business Research and the Nebraska Business Forecasting Council.
“With the Federal Reserve Bank raising interest rates, Nebraska’s economy is expected to fall into recession in 2023, although it is possible that the state’s slowing economy could narrowly avoid a recession,” said Eric Thompson, director of the Bureau of Business Research.
Thompson said two key factors are likely to influence the extent of the state’s decline.
“The first is the size and speed of the decline in property values, and the second is the degree to which employers choose to hold onto workers’ shortfalls,” he said.
While employment remains high, it is forecast to decline by 0.2% next year before picking up again in 2024 and 2025.
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Thompson said job growth over the two years is likely to be concentrated in certain industries, including business services, health care, leisure and hospitality, manufacturing, transportation and financial services.
Housing is already in steep decline, at least in terms of sales.
In October, the most recent month for which data is available, existing home sales fell 29% in the Omaha area and 20% in the Lincoln area, according to data from the Great Plains Regional Multiple Listing Service.
Prices have not yet started to fall, but higher mortgage rates appear to have slowed the pace of price growth.
Personal incomes are expected to grow for all three years, but will likely lag behind inflation, according to the report. In 2023, Nebraskans can expect an average increase in income of 4.2%, which is below the projected inflation rate of 4.5%.
The increases will be lower in 2024 and 2025, at 3.7% and 4% respectively, but higher than the expected inflation rate of 2.5%.
“Nebraska households will experience real income growth in 2024 and 2025 as employment recovers,” Thompson said.
Farm income is projected to decline in all three forecast years, falling about 1% in 2023 from a near-record high of $8 billion this year.
Farm income is projected to decline by more than 11% in 2024 and by about 2% in 2025.
However, Thompson noted that income from 2023-2025 will reflect higher levels of earned income and lower levels of government payments.
The latest forecast is in line with other economic reports that have shown a decline in the state’s economy over the past few months.
The nation’s leading economic indicator, also released by UNL’s Office of Business Research, has fallen four times over the past six months, pointing to a slowdown in the economy over the next six months.
Creighton University’s Central American Business Conditions Index posted its sixth monthly decline in eight months in November and fell below neutral growth for the month for the first time since May 2020.
Creighton economist Ernie Goss said the index is “flashing recession warnings for the first half of 2023.”
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