Nebraska Economy – Growing or Shrinking?
Preliminary estimates by the Bureau of Economic Analysis (BEA) show Nebraska’s inflation-adjusted gross domestic product (GDP) declined 3.4 percent in the fourth quarter of last year (Figure 1). The decline put Nebraska second only to South Dakota in terms of poor GDP performance and one of only three states with a shrinking economy in the fourth quarter relative to the third. Nebraska’s real GDP growth rate for the year was 1.1 percent, ranking 37th among states. Idaho saw the swiftest growth of 4.9 percent while six states saw their economies shrink. Agriculture was the largest contributor to Nebraska’s declining GDP in the fourth quarter. Agriculture’s contribution sunk 5.85 percent according to the BEA. The finance and insurance sector also shrunk.
However, other data was more positive for the state’s economy. Utilities, manufacturing, construction, and wholesale and retail trade made positive contributions to GDP in the fourth quarter. In addition, the BEA says the state’s personal income rose 4.3 percent. And Nebraska’s unemployment rate in March was 2.1 percent according to the Bureau of Labor Statistics and remains one of the lowest rates in the nation. So current data paints a messy picture of the current status of the state’s economy and which direction it is heading.
Figure 1. Real GDP, Percent Change, Fourth vs. Third Quarter, 2022
Source: U.S. Bureau of Economic Analysis
What might the future hold for Nebraska’s economy? The latest University of Nebraska, Bureau of Business Research’s Leading Economic Indicator rose by 1.24 percent, suggesting Nebraska’s economy will see growth through the third quarter of 2023. Beyond the next six months, though, uncertainty reigns. Will inflation continue to fall? Will the Federal Reserve pause in raising interest rates? Will the shakeup in the banking industry affect Nebraska’s financial sector? Will consumer spending remain strong? Agriculture too will have its say. Producers entered the year in strong financial condition, but farm income in 2023 will be less this year putting a drag on the economy. One suspects that given the uncertainties and challenges ahead, economic growth will continue for Nebraska but in fits and starts.
