Nebraska’s economy has been shocked in ways bearing little resemblance to anything experienced in modern times, said the Federal Reserve Bank of Kansas City in a release from the Omaha Branch.
As COVID-19 began to spread across the globe from January to March, leading to widespread economic shutdowns, business activity collapsed and a massive number of individuals suddenly were out of work, the study said. Although the rapid deterioration of economic conditions in Nebraska was not as severe as other parts of the country, unemployment spiked in April to levels that previously may have been unimaginable.
Through June, many segments of Nebraska’s economy have reopened, at least partially, but the economic shock of COVID-19 appears likely to persist for months, if not years, the bank said.
Significant fiscal and monetary policy support likely has mitigated some of the direst potential outcomes of the economic crisis resulting from the pandemic, the study said. However, significant risks remain.
The severity of the shock still could lead to unforeseen ripples through the economy linked to a drop in business activity and associated layoffs, the study said. A resurgence in the virus could lead to further economic hardship, and while extreme disruption often can lead to longer-term growth, the path forward still may be arduous.
SITUATION TURNED GRIM QUICKLY
After appearing in China in late 2019, the number of COVID-19 cases in China had risen to about 80,000 by late February. At that time, the virus was only beginning to be detected outside China.
Confirmed US infections began to increase substantially in February and March, leading to extensive disruptions, the bank said. Whereas confirmed cases in China began to plateau in late February. The World Health Organization on March 11 declared a global pandemic.
Closures began to weigh heavily on the economy and, to a slightly lesser extent, in Nebraska, the bank said. Surprised by the speed and severity of the global economic shutdown, US equity markets dropped sharply in March, closing almost 50% of small businesses.
In Nebraska, almost 30% of small businesses were closed, the study said. Unemployment filings spiked, and activity in industries dependent on the gathering and movement of people ground to a halt. Air traffic dropped more than 90% from February to the end of March.
Congress and the Federal Reserve implemented policy actions to provide support to businesses, households and financial markets, the bank said. The Coronavirus Aid, Relief, and Economic Security Act, a $2.2 trillion fiscal support program, was signed into law on March 27. And the Federal Open Market Committee cut interest rates to provide additional support.
ECONOMY GROWING
Nebraska’s economy began to turn around in May, reopening small businesses and allowing people to move around more freely, the bank said. Agricultural prices also rebounded slightly as demand began to regrow.
Cattle prices had improved significantly but remained below Jan. 1 levels, the study said. Corn prices also increased slightly as ethanol use grew.
However, unemployment remains an issue since it is unevenly spread among the population.
CATTLE, BEEF RECAP
Fed cattle sold this week at $95 per cwt on a live basis, up $2 to down $1 from last week and at $155 to $160 dressed, up $3 to $5.
The USDA choice cutout Wednesday was down $1.47 per cwt at $203.83, while select was down $1.32 at $195.52. The choice/select spread narrowed to $8.32 from $8.46 with 132 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $130.15 per cwt, up $0.02. This compares with Wednesday’s Aug contract settlement of $134.05, down $0.87.