Low unemployment in Nebraska is a sign of a strong economy, but tightening labor markets and a weak agricultural base may be limiting future growth potential, said a study by the Federal Reserve Bank of Kansas City.
Nathan Kauffman, assistant vice president and Omaha Branch executive, along with John McCoy, research associate, authored the report, which went on to say that as the prices of most major agricultural commodities in Nebraska have remained low, industries connected to agriculture, like manufacturing, have weakened over the past two years.
In addition, the more limited supply of labor has continued to affect business growth prospects, and firms have continued to raise wages at a slightly faster pace. However, as these wage gains have outpaced recent increases in the average price of goods and services, Nebraska households appear to be in a relatively strong financial position with solid job opportunities.
ECONOMIC CONDITIONS
Nebraska’s economic growth slowed last year, the study said. While growth at the national level picked up, real gross domestic product in the second and third quarters declined in Nebraska.
The decrease in each quarter was the largest since 2012 when a severe drought cut agricultural production and limited economic output, the economists said. Agricultural commodity prices, however, which fell from 2013 to 2014, have remained relatively low since then.
In recent years, including 2017, the low-price environment for agricultural commodities has limited farm-sector growth potential in addition to those industries connected to agriculture.
Unlike the country as a whole, rural Nebraska accounts for a relatively large share of the state’s economy, the report said. Although Omaha and Lincoln account for about two-thirds of the state’s economic activity, non-metro regions accounted for nearly 30% of GDP in 2016.
Conversely, non-metro areas nationwide only account for about 10% of total economic output. Compared with the nation, then, economic growth in Nebraska is significantly more reliant on the economic health of its rural areas.
LABOR MARKETS
Similar to economic output, the state’s employment growth also slowed in 2017, the report said. The rate of statewide job growth fell throughout the year, including several months of job losses.
While employment growth has rebounded modestly the past several months, job growth since 2015 has slowed steadily, the economists said. Some of the slowdown, however, likely was a result of tightening labor markets.
With an unemployment rate of just 2.8%, employers have commented that the limited labor pool has made filling positions increasingly difficult.
Though employment growth has slowed at the state level, rural job gains in the last year have been weaker than in metro regions, the economists said.
In fact, non-metro employment has declined for more than 12 straight months as labor availability remained low and new job opportunities somewhat limited.
However, employment growth also declined in August and September in the state’s metro areas.
CATTLE, BEEF RECAP
No cattle sold last Wednesday on the Livestock Exchange Video Auction, after 166 head sold a week earlier at $125.63 per cwt, down $98.63.
Light cash trade was seen from $117 to $119 per cwt on a live basis, down $2 to $2.50 from last week. Dressed-basis trading was light at $188, down $4.
The USDA’s choice cutout Tuesday was down $0.12 per cwt at $219.68, while select was off $1.17 at $209.33. The choice/select spread widened to $10.35 from $9.30 with 109 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $134.94 per cwt, down $0.12. This compares with Tuesday’s Apr settlement of $130.52, down $1.35.