Economic and Business by kuyu3000123

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									                                DEPARTMENT OF ECONOMICS - COLLEGE OF BUSINESS ADMINISTRATION - UNIVERSITY OF NEBRASKA-LINCOLN
  Bureau of Business Research


                                                                                                                                2007-2008 Annual Report


                                                                                                                                        Economic and Business
                                                                                                                                        Research That’s Relevant,


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                                                                                                                                        Informative, Insightful, Timely




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                                    DEPARTMENT OF ECONOMICS - COLLEGE OF BUSINESS ADMINISTRATION - UNIVERSITY OF NEBRASKA-LINCOLN
      Bureau of Business Research


                                                                                                                                    2007-2008 Annual Report


                                                                                                                                            Economic and Business
                                                                                                                                            Research That’s Relevant,


http://chn-news.com
                                                                                                                                            Informative, Insightful, Timely




More:http://chn-news.com
  Page                                                                                                                                        UNL Bureau of Business Research
                                                                                                                                               UNL Bureau of Business Research
           A Letter from the Director




           At the Bureau of Business Research, our goal is to conduct
           research on factors influencing the growth and prosperity of
           the Nebraska economy and to do so in a way that enhances
           research and education opportunities for UNL students and
           research opportunities for University faculty. We provide
           these services to businesses, non-profit organizations, and
           government at the local, state, and national levels.

           This past year has brought exciting work to the Bureau of


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           Business Research. In this publication, we highlight and
           summarize special projects that we have completed in
           conjunction with various partners throughout the state. We
           also reproduce our Business in Nebraska reports, reports
           that focus on assessing the state’s economy.

           We look forward to working with many other groups as
           Nebraskans strive to improve the good life here in the state.


                          Dr. Eric C. Thompson
                          Associate Professor of Economics and
                          Director, Bureau of Business Research




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              Table of Contents

           About the Bureau of Business Research ............................4

           Selected Research Report Summaries

           The Tax Burden for Selected Households
           in Nebraska and Adjacent States ...................................... 8
  	        Prepared for
           The Nebraska Tax Research Council

           The Growth Dividend: How Has it Been Allocated? .........
           Prepared for
           The Lincoln Chamber of Commerce

           Omaha Area Projections to 050:
           The 007 Update ................................................................ 3


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  	        Prepared for
           The City of Omaha Planning Department

           The 006 Economic Impact of Nebraska Wineries
           and Grape Growers ............................................................ 8
  	        Prepared for
           The Nebraska Wine and Grape Growers Association

  	        The 007 Economic and Fiscal Impact
           of Omaha’s Henry Doorly Zoo on
           Omaha and Nebraska ........................................................ 0
  	        Prepared for
           The Omaha Zoo Foundation

  	        The Economic Impact of Husker Harvest Days
           on Hall County Nebraska
           007 Estimates ................................................................... 
  	        Prepared for
           The Grand Island Chamber of Commerce




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  Business in Nebraska Reprints

               Tourists and Travelers Generate Dollars
               And More ............................................................................ 5
  	            Dr. Randy Cantrell, University of Nebraska
               Rural Initiative
               Dr. Cheryl Burkhart-Kriesel
               University of Nebraska Extension
               October 2007

               Risk and Recovery ............................................................... 3
  	            Nebraska Business Forecast Council
               December 2007

  	            Non-Farm Proprietors and the Nebraska
               Economy: 997-006 ......................................................... 4
  	            Dr. Randy Cantrell, University of Nebraska
               Rural Initiative
               May 2008



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               A Long Spell of Uncertainty ............................................... 49
               Nebraska Business Forecast Council
               June 2008




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      Page 3                                                         UNL Bureau of Business Research
              About the BBR

  Economic and Business Research
  That’s Relevant, Informative, Insightful, Timely

  About the Bureau                           -Tourism analysis
  The Bureau of Business Research
  (BBR) is an applied economic and           In addition, the BBR also competes
  business research entity of the Col-       for research funding from federal
  lege of Business Administration at         government agencies and private
  the University of Nebraska–Lincoln.        foundations from around the nation.
  Located in the Department of Econom-       The BBR further contributes to the
  ics, the BBR exists to accomplish two      academic mission of the University of
  primary purposes. First, it provides       Nebraska–Lincoln through scholarly
  relevant information and insightful        publication and the education of stu-
  data on economic conditions in             dents.
  Nebraska, the Great Plains, and



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  the nation as a general service to         Publications
  individuals and businesses in the state.   The Bureau of Business Research
  Second, the BBR provides economists        regularly produces reports summariz-
  with practical opportunities to            ing our sponsored research on the
  conduct applied economic research          Nebraska and U.S. economy. These
  and trains students of economics and       reports are posted on our website:
  business in the conduct of applied         http://www.bbr.unl.edu.
  research on timely economic and
  business topics. The BBR regularly         BBR also produces the quarterly
  publishes reports summarizing its          publication Business in Nebraska. Two
  sponsored research studies and also        editions each year report outlooks for
  publishes outlooks and analyses in the     Nebraska employment, income, and
  newsletter The Nebraska Economy.           state government revenue that are
                                             developed by the Nebraska Business
  Research Areas                             Forecast Council. Two other editions
  The BBR conducts contract and              report special topics research on the
  sponsored research on the economy          Nebraska economy. Continuously
  of Nebraska and its communities            published since 1949, Business in
  including:                                 Nebraska is now principally distributed
  · Studies of economic competitiveness      via email. Interested parties should
  · Economic modeling and forecasting        contact the BBR to be added to the
  · Labor market analysis                    email list. This publication is available
  · Fiscal analysis                          at the Bureau website.
  · Policy analysis

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  Page 4                                               UNL Bureau of Business Research
  Nebraska and its local economies          and industry, non-profit organizations
  compete with areas in surrounding         and foundations, and government
  states, the nation, and globally for      agencies. Recent Bureau sponsors have
  industries and workers. The BBR is        included:
  committed to studying factors that
  affect competitiveness including taxa-    -The City of Omaha
  tion, business conditions, labor force,   -The Nebraska Tax Research Council
  and infrastructure. The Bureau also       -Lincoln Partnership for
  is currently developing indicators to      Economic Development
  compare competitiveness in Nebraska       -Omaha Zoological Society
  regions and peers in surrounding          -Grand Island Chamber of Commerce
  states.                                   -Nebraska Wine and Grape Growers
                                             Association
  Outlooks on
  the Nebraska Economy                      Personnel
  One of the BBR’s primary functions        Director: Dr. Eric C. Thompson
  is to provide outlooks for the            Dr. Thompson has 16 years experi-
  Nebraska economy. Bureau faculty has      ence conducting research on local,
  substantial experience in developing      state, and national economies. His
  outlook models for state, metropolitan    research fields include regional eco-
                                            nomics, economic forecasting, and


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  area, and local economies. The Bureau
  also produces semi-annual outlooks        state and local economic development.
  for Nebraska employment, income,          Dr. Thompson received his Ph.D.
  and state tax revenue by taking a         in agricultural economics from the
  leadership role in the Nebraska           University of Wisconsin–Madison
  Business Forecasting Council.             in 1992. His research has been pub-
                                            lished in Regional Science and Urban
  Labor Market,                             Economics, the Journal of Regional
                                            Science, Regional Studies, and the
  Policy, and Fiscal Analysis               American Journal of Acricultural
  The BBR studies key topic areas           Economics.
  facing the Nebraska economy. Labor
  market analysis examines factors that     The Bureau contributes to student
  influence earnings and effort of the      education by employing both graduate
  workforce. Policy analysis studies the    and undergraduate research assistants.
  effectiveness and economic conse-         The BBR also draws upon the expertise
  quences of existing or proposed           of the entire faculty of the Department
  policies. Fiscal analysis considers the   of Economics in the College of
  implication of particular policies and    Business Administration.
  programs on government revenue.

  Sources of Funding
  The BBR is supported by the Univer-
  sity of Nebraska and sponsored
  research projects funded by business      Contributing Faculty

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  Page 5                                             UNL Bureau of Business Research
  Randy Cantrell
  -Rural Development
  Chris Decker
  -Environmental and Urban Economics
  Scott Fuess
   -Labor Economics
  Mary McGarvey
   -Econometrics
  Roger Riefler, Professor Emeriti, UNL
  -Urban Economics
  David Rosenbaum
  -Economics

  Contact Us
  You can contact the BBR and any of its
  personnel:
  Bureau of Business Research
  Room 347
  College of Business Administration
  P.O. Box 880406
  Lincoln NE 68588-0406


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  Phone: (402) 472-3318
  E-mail: ethompson2@unl.edu
  Web: http://www.bbr.unl.edu




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  Page 6                                   UNL Bureau of Business Research
           BBR Research Reports




           Research Report
               Summaries
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  Page 7                     UNL Bureau of Business Research
              BBR Research Report

                                             The Tax Burden
                        for Selected Households in Nebraska
                                        and Adjacent States

                                                                    Prepared by the
                                                Nebraska Tax Research Council and
                                                 The University of Nebraska-Lincoln
                                                      Bureau of Business Research

                                                               Dr. Eric C. Thompson
                                                     University of Nebraska-Lincoln

                        Greg Lemon, President, Nebraska Tax Research Council

                                             Contributing Authors and Researchers:



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                                                                     Laural Holman
                                                                     David Solheim
                                                     University of Nebraska-Lincoln


  Executive Summary                            Iowa, Kansas, Missouri, South Dakota,
  The purpose of this study is to              and Wyoming.
  show taxes faced by seven selected
  households based upon demographic            The laws governing calculation of tax
  characteristics and adjusted gross           liability for similarly situated taxpayers
  income under 2007 tax law. The               in each of the seven states differ
  study was done in response to the            markedly, while the resultant taxes are
  recent reductions in individual              in many cases relatively close and in
  income and property taxes enacted            others, significantly different.
  in LB367 this year by the Nebraska
  Legislature. However, as the study           Sales and property taxes tend to be
  evolved it became clear that the more        regressive in nature, putting a higher
  important feature of the study is the        tax relative to income on lower-
  up-to-date nature of the results and         earning taxpayers, and income taxes
  the information it provides about the        tend to be more progressive, increasing
  differences (and similarities) between       the tax relative to income on citizens
  the individual income, sales, and            as income rises. While the study
  property tax structures in Nebraska          generally bears out this truism for all
  and its six contiguous states, Colorado,     the states, it becomes particularly clear


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  Page 8                                                 UNL Bureau of Business Research
  that Nebraska follows this pattern,               have a higher overall tax burden
  with one of the more progressive                  than the surrounding states with the
  income tax structures, and among the              exception of Iowa.
  most regressive sales and property tax
  systems.                                          In the tables below, estimates are
                                                    reported for the 2007 income, sales,
  Given the nature of the study it is not           and property taxes faced by each
  appropriate to rank the seven states              of the 7 household profiles. Tables
  relative tax burdens, because the study,          also are provided that show the total
  even with seven diverse household                 of income, sales, and property tax
  profiles, is a small snapshot and not             estimates for each household profile,
  the complete picture. However, the                as well as the total of the three taxes as
  results are generally consistent with             a percent of household adjusted gross
  other studies showing Nebraska to                 income:

  Income Tax Liability by Household Profile and State




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  Source: Author’s calculations. Note: There is no state income tax in South Dakota and Wyoming


  Estimates of Sales Tax Paid by Household Profile and State




  Source: Author’s Calculations


  Estimated Property Tax Payments by Household Profile and State




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  Source: Author’s Calculations

  Page 9                                                        UNL Bureau of Business Research
  Estimates of Income, Sales, and Property Tax Burden by Household
  Profile and State (Percentage of Adjusted Gross Income)




  Source: Author’s Calculations


  Estimated Income Sales and Property Tax Payments by Household
  Profile and State




  Source: Author’s Calculations




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  Page 0                                    UNL Bureau of Business Research
               BBR Research Report

                                               The Growth Dividend:
                                          How has it Been Allocated?

                                                                    Prepared for
                                               The Lincoln Chamber of Commerce

                                                              Dr. Eric C. Thompson
                                                    University of Nebraska-Lincoln
                                                        Department of Economics
                                                     Bureau of Business Research


  Executive Summary                           to 2005 period. In other words, city
  A growing economy and population            government is approximately the same
  in Lincoln, Nebraska have generated         share of the Lincoln economy in 2005
                                              as it was in 1990.


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  an expanding tax base for the city.
  Growth has been especially rapid in             •There was a significant decline in
  the property tax base. As noted in a        the City of Lincoln’s property tax levy
  recent report by the UNL Bureau of          during the period. The city’s wheel tax,
  Business Research (2005), the average       however, increased in the mid-1990s.
  new housing unit generates annual               •At the same time that expenditures
  property taxes for the City of Lincoln      rose and property tax rates fell, the city
  substantially greater than does the         also was able to rapidly increase capital
  average existing housing unit. This         outlay on infrastructure beginning in
  additional property value is referred       1999. Much of the increase in capital
  to as the “growth dividend” in the          outlay was for road infrastructure.
  Bureau of Business Research report.         Capital investment in roads occurred
  This growth dividend is available for       in both new neighborhoods and in
  a variety of uses, including capital        existing areas such as downtown
  outlays on infrastructure, tax relief, or   neighborhoods surrounding the
  increases in non-capital expenditures       Antelope Valley Project
  by the City of Lincoln. This report             •Lincoln’s property and sales tax
  examined how the city’s growth              base, including the growth dividend,
  dividend has been allocated.                contributed to capital outlay for
                                              parks, fire, library, storm sewer
  The main findings of the report are as      infrastructure, and street lights, but
  follows:                                    did not contribute to other types of
      •Government expenditures rose           infrastructure for streets and highways.
  at roughly the same rate as personal            •The increase in capital outlay


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  income in Lincoln during the 1990           for streets and highways was
  Page                                                UNL Bureau of Business Research
  largely fueled by rapid increases in
  intergovernmental transfers to the
  city, although local funding sources
  also expanded during the 1990 to 2005
  period. The city raised the wheel tax,
  instituted impact fees, and increased
  property taxes for the county-wide
  Railroad Transportation Safety District
  (RTSD). Part of the increase in wheel
  tax, however, was devoted to fund
  snow removal, rather than street
  infrastructure.
      •Options to maintain capital
  spending at the current level could
  include efforts to maintain recent
  large increases in intergovernmental
  transfers. Another approach would be
  for the City of Lincoln to allocate a
  larger portion of the growth dividend
  toward funding street and highway
  infrastructure while continuing to also


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  use a portion for tax relief or non-
  capital expenditures.




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  Page                                    UNL Bureau of Business Research
              BBR Research Report

                             Omaha Area Projections to 2050:
                                           The 2007 Update

                                                                     Prepared for
                                                               The City of Omaha

                                                            Dr. Eric C. Thompson
                                                  University of Nebraska-Lincoln

                                                                Dr. Chris Decker
                                               University of Nebraska at Omaha

                                                                 Dr. Roger Riefler
                                                  University of Nebraska-Lincoln

                                                              Noel Pavel Jeutang



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                                                  University of Nebraska-Lincoln



  Executive Summary                          Omaha contracted with the University
  The Omaha area is in a period of           of Nebraska-Lincoln Bureau of
  sustained expansion. Population,           Business Research to prepare a long-
  employment, housing stock, and             term outlook for the Omaha Area
  commercial and industrial space            economy. This report updates previous
  are growing together both in the           studies by the Bureau of Business
  City of Omaha and in surrounding           Research that provided an economic
  communities and counties. This             outlook for the Omaha area. Following
  pattern of growth is likely to continue    up on the most recent study in 2003,
  over the next few decades, but the pace    we estimate growth in a 12-county
  and nature of growth is in question. In    region in both Nebraska and Iowa
  particular, it is unclear whether growth   through the year 2050. The region
  in the Omaha area will accelerate from     includes Douglas, Sarpy, and 6 other
  its current pace, or moderate. Also        adjacent Nebraska Counties, and
  in question is the degree to which         Pottawattamie County and 3 adjacent
  growth will occur in core counties like    Iowa counties.
  Douglas and Sarpy or suburban and
  exurban areas of neighboring counties.     Our analysis begins by tracking
                                             the progress of the Omaha area
  To address these questions, the City of    economy over the last few decades


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  Page 3                                             UNL Bureau of Business Research
  and by studying a group of peer              has seen in many of Omaha’s key
  metropolitan areas from the middle-          industries. Along with the relative
  part of the United States. Omaha’s           strength of key industries such as
  recent performance has been                  manufacturing, there has been rapid
  characterized by strong employment           growth in employment in services,
  growth, and a moderate tendency              finance, construction, and retail
  for population to diffuse outward            trade industries. The net result is that
  within the Omaha area. The latter            the Omaha metropolitan area has
  point must be tempered, however,             averaged 1.8% employment growth
  with the observation that the central        since 1969.
  county of the Omaha area (Douglas)
  has continued to add population at a         At the same time that employment
  healthy rate, in contrast to the pattern     has grown, population has
  in some metropolitan areas.                  increased. Population in the Omaha
                                               metropolitan area grew by an average
  Figure ES.1 shows an example of the          of 0.8% annually since 1969. The
  strength of the Omaha economy.               difference between the employment
  The figure shows manufacturing               and population growth rates reflects
  job growth in the Omaha area and             an increase in female labor force
  the United States. Omaha has had             participation during the period and
  periods of both job loss and job             also a growing tendency towards


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  gain from 1990 to 2006, but has              multiple job holdings, or towards
  consistently outperformed the nation.        individuals both holding a wage and
  There were only two years out of             salary job and also operating a separate
  the 17-year period when national             business.
  employment grew faster. This is
  the sort of consistent strength we            There also has been a tendency

  Figure ES.1
  Annual Job Growth in the Manufacturing in Omaha MSA and
  United States 1990-2005




  Source: U.S. Department of Labor, Current Employment Survey


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  Page 4                                                 UNL Bureau of Business Research
  for population growth to spread             out within the Omaha area and the
  away from Douglas County, the               history of solid job growth in the
  employment center of the Omaha              region, provide the background for the
  area. Table ES.1 shows the change           economic and demographic outlook
  in commuting patterns within the            through the year 2050. In particular
  12-county area between the 1990             there is reason to believe that Omaha
  and 2000 Census. The figure shows           will continue to experience solid
  the percentage of workers who are           employment growth during the
  employed in the same county where           outlook period. We analyzed a group
  they reside (i.e., the percentage           of mid-size metropolitan areas to
  of non-commuters). There was a              assess how employment in various
  substantial decline in the share of         industries grows as metropolitan
  workers employed in their county of         areas grow. We found that for most
  residence. The percentage fell by 9%        services industries, employment
  in Sarpy and Saunders counties and          growth will continue to match, or
  5% in Washington County in just 10          nearly match population growth.
  years. As we show later in the report,      Further, there was a set of industries
  this has been coupled with an increase      such as management of companies,
  in the number of workers commuting          wholesale trade, finance and insurance,
  into Douglas and Sarpy counties.            information, and transportation and
  These results confirm that the Omaha        warehousing where employment


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  area is experiencing that same time of      growth will exceed population growth.
  population spread common to most            This occurs because businesses in
  metropolitan areas.                         these industries: 1) are able to expand
                                              their base of customers around the
  This tendency for population to spread      nation faster than they expand their

  Table ES.1
  Percent of Resident Workers Who Work in the Same County
                                 Percent Who Work in the Same County
  County                            1990         2000         Change
  Burt                             75.5%        61.5%         -14.0%
  Cass                             39.5%        33.8%          -5.7%
  Dodge                            78.9%        73.6%          -5.3%
  Douglas                          92.3%        90.2%          -2.1%
  Otoe                             78.9%        68.2%         -11.7%
  Sarpy                            49.5%        40.6%          -8.9%
  Saunders                         51.9%        43.0%          -8.9%
  Washington                       52.5%        47.4%          -5.1%
  Fremont, IA                      66.0%        54.8%         -11.2%
  Harrison, IA                     60.7%        54.6%          -6.1%
  Mills, IA                        60.9%        50.1%         -10.8%
  Pottawattamie, IA                56.6%        55.6%          -1.0%


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  Source: Bureau of Census, U.S. Department of Commerce
  Page 5                                                 UNL Bureau of Business Research
  local customer base, and 2) become           just under 1% per year, is less than
  increasingly important to local              the growth rate expected for the 10
  business customers in a larger, more         “suburban” counties as well as for
  sophisticated metropolitan area. These       Sarpy County. As a result, Douglas
  tendencies within metropolitan areas,        County’s share of population will fall
  along with Omaha’s relative strength         over time as population spreads out
  in key industries like manufacturing,        into suburban areas.
  create a relatively optimistic outlook
  for employment growth in the Omaha           At the same time, employment growth
  area. Omaha may not be a boom                is expected to be strong and to remain
  town like Denver, CO or Austin, TX,          relatively concentrated in Douglas

  Table ES.2
  Percent Change in Total Population, All Counties, 2000 - 2050
                                                                               Percent
                                Average Annual Percent Change by Decade        Change
                                2000-    2010-    2020-    2030-    2040-       2000-
  Counties                      2010     2020      2030    2040      2050        2050

  Douglas                       1.0%        0.8%   0.6%       0.5%     0.6%     41.1%
  Sarpy                         2.5%        2.0%   1.6%       1.3%     1.0%     130.3%




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  Douglas and Sarpy Total       1.3%        1.1%   0.9%       0.7%     0.7%     59.7%
  Suburuban Counties Total      0.5%        0.8%   1.0%       1.1%     1.2%     59.4%
  12-County Total               1.1%        1.0%   0.9%       0.8%     0.9%     59.6%
  Source: UNL Bureau of Business Research


  but there is reason to expect solid,         County, and particularly in Douglas
  sustained growth.                            and Sarpy counties combined, as is
                                               seen in Table ES.3. In Douglas and
  Each of these trends is evident in our       Sarpy counties, employment growth
  outlook for the Omaha area economy           will be more rapid than population
  over the next four decades. As seen in       growth. In the 10 “suburban” counties,
  Table ES.2, solid population growth          population growth will be more rapid
  is expected for Douglas County               than employment growth.
  through 2050, and rapid growth               Overall, the outlook is promising
  in Sarpy County. The cumulative              for the Omaha area economy.
  population growth rate of the two            Employment and population growth
  counties combined is nearly 60%              will be strong, slightly exceeding
  from 2000 to 2050. However, the              national averages for growth through
  population growth rate of the other          the year 2050. Omaha’s central county,
  10 “suburban” counties in the 12-            Douglas County, will continue to
  county region is also expected to be         experience strong employment growth
  around 60% cumulatively. Finally, the        as well as solid population growth.
  rate of population growth expected
  for Douglas County, while solid at           Finally, we acknowledge that the

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  Page 6                                                 UNL Bureau of Business Research
  outlook presented in Tables ES.2 and              have confidence in the underlying
  ES.3, or any outlook, is subject to some         picture which the outlook paints -
  forecast error. Actual growth rates              solid, geographically balanced growth
  may exceed or fall short of what is              over the next four decades.
  predicted. This said, the reader should

  Table ES.3
  Percent Change in Total Employment, All Counties, 2000-2050
                                                                                    Percent
                                 Annual Average Percent Change By Decade            Change
                               2000-     2010-     2020-     2030-     2040-         2000-
  Counties                     2010      2020       2030     2040      2050          2050

  Core Counties
        Douglas                0.4%         1.6%       1.2%       0.9%      1.0%      66.4%
        Sarpy                  4.2%         2.3%       1.7%       1.3%      1.2%     190.5%

  Core Counties Total          1.0%         1.7%       1.3%       1.0%      1.1%     81.4%
  Suburban Counties Total      0.5%         0.9%       0.7%       0.5%      0.7%     38.2%
  Grand Total All Counties     0.9%         1.5%       1.2%       0.9%      1.0%     72.5%
  Source: UNL Bureau of Business Research




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  Page 7                                                     UNL Bureau of Business Research
              BBR Research Report
                            The 2006 Economic Impact of
                    Nebraska Wineries and Grape Growers

                                                                    Prepared for
                                                          The Nebraska Wine and
                                                       Grape Growers Association

                                                             Dr. Eric C. Thompson
                                                   University of Nebraska-Lincoln

                                                                Seth Freudenberg
                                                   University of Nebraska-Lincoln


  Introduction                               currently 20 licensed farm wineries in
  The Nebraska wine and grape growing        Nebraska. We estimate that 18 were



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  industry makes a multifaceted              open at the time of this study. The 18
  contribution to the Nebraska economy.      are dispersed throughout rural areas
  Like all industries, the Nebraska          of the state. The industry also helps
  Wine industry creates employment           diversify the state’s agricultural sector,
  and earnings opportunities. But,           and adds another type of value-added
  the industry also contributes to the       agriculture to our economy. Finally,
  Nebraska economy by promoting              the industry encourages economic
  tourism and contributing to the            growth in the state through import
  quality-of-life of existing residents.     substitution, that is, producing a
  The latter point is critical. Population   product in Nebraska that is currently
  growth, including the retention and        imported from other states or around
  attraction of younger residents, is a      the world. If Nebraska wineries are
  key policy issue facing the state of       able to capture even a portion the wine
  Nebraska. The wine industry and other      market that is currently imported, the
  industries that provide new and varied     Nebraska economy will grow. And,
  entertainment and cultural options for     this has been the recent trend. The
  Nebraska residents play a key role in      Nebraska wine industry has seen a
  improving population growth in the         large amount of recent growth. As
  state.                                     chart 1 below shows, Nebraskan wine
                                             production is increasing rapidly.
  The Nebraska wine industry is also
  particularly important because it          This study examines the economic
  contributes to economic dynamism in        impact of the Nebraska wine industry.
  the rural areas of Nebraska. There are     We quantify the jobs, worker earnings,


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  Page 8                                              UNL Bureau of Business Research
  and total economic activity that                   Nebraska’s wine industry will grow
  the industry adds to the Nebraska                  along with the industry itself.
  economy. We examine the impact of
  1) wine production and marketing                   Summary
  and 2) grape production. We also                   The Nebraska wine and grape
  present some descriptive data on                   growing industry is expanding rapidly.
  the number of visitors to Nebraska                 We estimated the industry’s 2006
  wineries. This is a key gauge of the               economic impact was $5.3 million,
  industry’s contribution to quality                 including $1.6 million in worker wages
  of life, as it measures the number                 spread over an estimated 82 jobs. The
  of times residents (and tourists)                  employment figure includes part-
  take the opportunity to visit these                time workers, but excludes seasonal
  entertainment and cultural venues.                 workers and proprietors (besides
                                                     owners of wineries) involved in grape
  Finally, it is worth noting that this              production.1 We estimate that there
  study provides the 2006 economic                   were 110,000 visitors to Nebraska
  impact of the Nebraska wine industry.              wineries in 2006. This 2006 impact is
  We estimate the impact of this rapidly             significant for the Nebraska economy
  growing industry at a point in time.               and should grow as the industry grows.
  But, the reader should remember the




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   Chart 1

                  N e b ra s k a n F a rm W in e ry W in e P ro d u c tio n 1 9 9 4 to
                                                 2005

               40,000
               35,000
               30,000
               25,000
     Gallons




               20,000
               15,000
               10,000
                5,000
                    0
                        1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

   Source: Nebraska Liquor Control Commission


  trend of rapid growth in the Nebraska
  wine industry when reviewing the
  results of this report. If the trend               1 We did not feel it was appropriate to
                                                     consider farm proprietors in the grape
  evident in Chart 1 continues over the
                                                     growing industry as a job as most farm
  next decade, the economic impact of

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                                                     producers produce multiple crops.
  Page 9                                                       UNL Bureau of Business Research
             BBR Research Report
     The 2007 Economic Impact and Fiscal Impact of
         The Henry Doorly Zoo on Omaha, Nebraska

                                                                Prepared for
                                                  The Omaha Zoo Foundations

                                                          Dr. Eric C. Thompson
                                                University of Nebraska-Lincoln


  Executive Summary                       contribution to the quality of life in
  The City of Omaha and the State of      Omaha and Nebraska, and by many
  Nebraska benefit from the presence      indicators, Omaha’s Henry Doorly
  of leading national zoo in the city.    Zoo is among the largest and most
  The nationally-known Henry Doorly       affordable zoos to visit in North
  Zoo makes a significant contribution    America.



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  to the Omaha economy. The Zoo
  attracted over 1.3 million visitors,    This study estimates the economic
  and their spending in 2007, including   impact of Omaha’s Henry Doorly
  many visitors from outside of Omaha     Zoo during 2007. The Zoo generated
  and outside of the State of Nebraska.   an economic impact on the city and
  The Zoo also makes a significant        state economy by 1) attracting new
                                          visitors to Omaha and Nebraska, 2)




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  Page 0                                           UNL Bureau of Business Research
  encouraging existing visitors to spend           Omaha economy. There also was $1.4
  more, and 3) retaining spending by              million in local sales, use, and lodging
  city and state residents in Nebraska.           taxes generated.
  The economic impact of the Zoo is
  large in part because a significant share       The other major findings of the report
  of visitors to Omaha’s Henry Doorly             were:
  Zoo comes from outside of the Omaha             · The 2007 overall economic impact of
  Metropolitan Area. Figure ES.1 shows            the Zoo on the State of Nebraska was
  the origin of the Henry Doorly Zoo’s            $74.5 million, including $24.8 million
  1.33 million visitors during calendar           in labor income. There was also $3.6
  year 2007. Around one-sixth of visitors         million in state sales, use, and lodging
  come from other states such as Kansas           taxes generated.1
  or South Dakota, or from “outstate”             · The amenity value for local and
  Nebraska and Iowa, that is, counties            state residents from nearby access to
  that are not adjacent to the Omaha              the Henry Doorly Zoo was estimated
  Metropolitan Area.                              at approximately $29.3 million for
                                                  residents of Omaha, and $47.5 million
  Omaha’s Henry Doorly Zoo had                    statewide.
  a substantial economic impact on
  Omaha during 2007, as is shown in               · The 2007 economic impact estimates
  Table ES.1. The 2007 overall economic           are consistent with the economic


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  impact on the City of Omaha was                 impact of the Zoo during the 1998
  $86.3 million. This impact included             to 2006 period, but below the impact
  $31.1 million in labor income paid to           during the “peak” years of 2002 and
  1,205 workers employed either at the            2004.
  Zoo or at businesses throughout the

  Table ES.1
  Overall Economic Impact and Labor Market Impact of the
  Henry Doorly Zoo 2007
  City of Omaha
      Economic             Labor Income             Employment            Local Sales, Use
       Impact               Component                 Impact              and Lodging Tax
     (Millions of $)       (Millions of $)             (Jobs)              (Millions of $)
        $86.34                $31.07                   1,205                   $1.39
  Source: Bureau of Business Research Estimates

                                                  1 Zoo visitors from communities such
                                                  as Grand Island or North Platte bring
                                                  new spending to the City of Omaha but
                                                  do not bring new spending to the State of
                                                  Nebraska. This is why it is not surprising
                                                  that the economic impact of the Zoo on
                                                  the State of Nebraska is slightly less than its


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                                                  impact on the City of Omaha.
  Page                                                     UNL Bureau of Business Research
              BBR Research Report
            The Economic Impact of Husker Harvest Days
                              on Hall County Nebraska
                                       2007 Estimates

                                                           Prepared for
                                 The Grand Island Chamber of Commerce

                                                    Dr. Eric C. Thompson
                                          University of Nebraska-Lincoln

                                                      Dr. Randy Cantrell
                                          University of Nebraska-Lincoln

                                                             Scott Frohn
                                          University of Nebraska-Lincoln




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  Executive Summary
  Husker Harvest Days is an annual
  agricultural exposition held in
                                     These data indicate that Husker
                                     Harvest Days generated over $3.2
                                     million in direct economic impact
  Grand Island, Nebraska. In 2007,   in Hall County in 2007 and over
  the three-day event included 501   $1.7 million in additional indirect
  exhibitors with 3,700 employees,   and induced impact. The overall
  and drew 59,000 visitors.          $4.8 million impact included a $1.5
                                     million in labor income.
  In this study, conducted by
  the University of Nebraska’s       Summary
  Bureau of Business Research and    Husker Harvest Days, in conjunction
  sponsored by the Grand Island      with other major visitor events held
  Chamber of Commerce, we utilize    in Hall County over the year, make a
                                     substantial contribution to the area’s
  a combination of focus groups,
                                     tourism economy. The events provide
  surveys and secondary data in
                                     a large boost to the tourism sector
  conjunction with economic          through the expenditures of event
  modeling to estimate the total     visitors and participants, such as the
  economic impact of Husker          exhibitors who participate in Husker
  Harvest Days on the Hall County    Harvest Days. This study provides
  economy.                           an estimate of the economic impact


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                                     of the Husker Harvest Days event
  Page                                      UNL Bureau of Business Research
  in 2007. More generally, however, it
  shows the substantial impact that
  each major tourism event in Grand
  Island can have on the economy by
  giving tourism businesses and their
  employees opportunities to have
  additional periods of peak sales and
  business activity.

  Table 9 presents the estimated total
  economic impact of the Husker
  Harvest Days on the Hall County
  economy. This total includes the
  impact of both exhibitor and visitor
  spending. The total economic impact
  was estimated at $4.8 million increase
  in business receipts in Hall County
  (excluding equipment sales at the
  event) as a result of exhibitor and
  visitors spending during Husker
  Harvest Days. Roughly one-third of


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  those business receipts, or $1.5 million,
  went to cover workers wages and
  benefits.

  Table 9
  Total Economic Impact of Husker
  Harvest Days on Hall County




  Source: IMPLAN and BBR calculations




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   Page 3                                    UNL Bureau of Business Research
            Business in Nebraska




          Business in
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   Nebraska Reprints




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  Page 4                      UNL Bureau of Business Research
            Business in Nebraska October 007

                    Tourists and Travelers Generate Dollars
                                               – And More
                        Results from a Survey of Visitors to
                                         Western Nebraska
                     By Dr. Randy Cantrell, University of Nebraska Rural Initiative
                     Dr. Cheryl Burkhart-Kriesel, University of Nebraska Extension

  Tourism Survey Results                    industry.

  A    ccording to statistics compiled by
       the Nebraska Division of Travel
  and Tourism (NDOTT), travelers
                                            In an attempt to better understand
                                            travel and tourism from the
  spent over $3-billion in Nebraska         consumer’s perspective, this report will
  in 2006, and that income supported        examine data from a variety of sources,
  over 42,000 Nebraska jobs and             including two studies conducted in
  numerous new Nebraska businesses.         Western Nebraska.


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  In addition to these economic
  impacts, the potential benefits of        Tourists Really do Visit
  tourism as a development strategy         Nebraska
  include contributions to the tax base,
  development of community facilities,      Table 1
  increased pride in communities and        Primary Residence of Western
  cultures, expanded civic involvement,     Nebraska Visitors
  conservation of shared resources and      2006 and 2007
  infrastructure improvements.

  Nebraska has the potential to expand
  its tourist economy. Pine and Gilmore
  (1999) have written of the emergence
  of an important “experience economy”
  in which consumers are seeking
  out unique experiences, not just
  consuming products and services.
  Tourism in Nebraska caters to the
  experience seeker with outdoor
  recreation, historical attractions and
  events and festivals that portray the
  culture of communities and regions.       NDOTT estimates that Nebraskans
  Nebraska is well-suited to compete in     and visitors combined made 19.4


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  this growing segment of the tourism
  Page 5                                               UNL Bureau of Business Research
  million trips that took them at           Table 2 - Primary Reason for
  least 100-miles from home in 2006.        Visiting Western Nebraska
  A survey of 204 visitor parties
  (representing 1,075 visitors) to
  Western Nebraska conducted that
  same year found that 60% of those
  responding were from outside of
  Nebraska (Western Nebraska Tourism
  Coalition, 2007). Those respondents
  came from 32 states and two foreign
  countries. Of those visitors who
  resided in Nebraska, only one in five
  indicated that they lived in Omaha or
  Lincoln.
                                            that all of the listed attractions had
                                            been visited by at least one party, for
  In the Western Nebraska study, 77%
                                            a total of 410 total attraction visits
  of those responding indicated that
                                            or an average of 2.7 attraction visits
  Nebraska was in fact their primary
                                            per party. Large outdoor attractions
  destination. Overnight visits were
                                            such as Lake McConaughy, state parks
  planned by 90% of those responding,
                                            and state recreation areas accounted
  with the average length of visit being


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                                            for about half of all reported visits
  4.2 days. For those spending the night
                                            to attractions. However, even small
  (or nights), 39% planned to spend
                                            county historical museums and
  at least one night in a motel or hotel,
                                            roadside attractions did receive
  23% in an RV, 19% in a cabin or
                                            visitors, and none of the 43 attractions
  resort, 17% in a tent and 14% in the
                                            listed was missed altogether.
  home of a friend or relative.
                                            The length of visits to specific sites
  The most frequently cited “primary”
                                            ranged from less than an hour at
  reason for visiting Western Nebraska
                                            smaller attractions such as county
  was outdoor recreation (24%),
                                            museums to several days at larger
  attending a festival or event (22%),
                                            attractions such as state parks. The
  touring (21%), general leisure (13%)
                                            most common time for respondents
  and visiting friends or relatives (9%).
                                            to have made the decision to visit a
                                            specific Western Nebraska attraction
  In 2007, NDOTT listed 13,897
                                            was after they had arrived in Western
  Nebraska attractions on their Web
                                            Nebraska.
  site, with 1,832 of those being located
  in the Panhandle portion of Western
                                            Respondents who indicated that they
  Nebraska. In 2006, visitors surveyed
                                            had made a visit to a specific Western
  were offered a much smaller list of
                                            Nebraska attraction also indicated that
  only 43 attractions and asked to
                                            they made the decision to do so after
  identify those where they had spent
                                            arriving in Western Nebraska 47% of
  any time. The 150 respondents who
                                            the time, before beginning their trip
  answered those questions indicated

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  Page 6                                             UNL Bureau of Business Research
  45% of the time, and while in route to    travelers is significant, and benefits
  Western Nebraska 8% of the time.          more than the hospitality industry.
                                            NDOTT estimates that each tourist
  Table 3 - Activities that Affect the      dollar spent in Nebraska produces an
  Western Nebraska Experience               additional $1.70 in business income,
                                            resulting in an overall economic
                                            impact of $2.70. For the Western
                                            Nebraska study, this would translate
                                            into nearly $287,000 in total economic
                                            impact from the 204 travel parties
                                            surveyed. Those 204 parties represent
                                            only a small portion of all such
                                            visitors.

                                            Visitors to Nebraska are
                                            Generally Satisfied with
                                            Their Experience
                                            Visitors to Western Nebraska were
  Tourists Represent                        generally pleased with what they found
                                            during their visit. When asked to rate
  Significant Spending


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                                            various attributes, 80% indicated
  NDOTT estimates that among                that they found local hospitality to
  all Nebraska visitors- the average        be above average or excellent. Similar
  nonresident traveling party of 2.4        levels of satisfaction were found
  persons spends an average of $420         for family attractions (76%), the
  (including lodging) while in Nebraska     condition of attractions (75%), the
  for an average of 2.2 nights. The         overall quality of recreation (70%),
  Western Nebraska study found an           prices (69%) and services and facilities
  average party size of 2.9 persons,        (67%).
  with estimated expenditures of $387
  per party excluding lodging over 3.2      The high ratings that visitors give
  nights.                                   to Western Nebraska explain why
                                            77% of those surveyed were repeat
  Spending estimates by all visitors to     visitors, and why 91% indicated that
  Western Nebraska included $70 at bars     it was likely or certain that they would
  and restaurants, $71 for transportation   return. Of those who indicated that
  (including fuel), $67 for shopping, $44   they would return, 32% felt that they
  for groceries and $60 for recreation      would do so within the year, and
  fees, equipment and attractions. On       85% within two years. Especially
  a per-visitor basis, overnight guests     encouraging was the fact that 56%
  estimated their expenditures to be        of repeat visitors felt that the overall
  roughly 20% greater than those of         visitor experience in Western Nebraska
  single day visitors.                      has improved in the time that they
                                            have been familiar with the area.


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  The money spent by tourists and other
  Page 7                                            UNL Bureau of Business Research
  Table 4 - Perceptions of Repeat            Table 5 - Factors in Creating
  Visitors                                   Awareness of Western Nebraska




  Learning about Western
  Nebraska                                   The Experience Economy
  Respondents to the Western Nebraska        Requires Community
  Survey were asked what information
  resources helped them to become
                                             Involvement
                                             Travelers seeking authenticity and
  aware of Western Nebraska.
                                             unique experiences can be enticed


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                                             to stay longer, and spend more, if
  The most frequently identified
                                             they can be made aware of the full
  method of learning about Western
                                             array of attractions and activities that
  Nebraska was a previous visit or visits.
                                             can be found off of the main tourist
  Respondents indicated that such an
                                             routes. Unfortunately, front line
  experience was important or very
                                             service workers often fail to create that
  important in creating awareness of the
                                             awareness.
  community 68% of the time.
                                             Red Carpet Service, a tourism
  Information or recommendations
                                             hospitality program for front-
  received from friends or relatives were
                                             line employees, was created by
  reported as being important or very
                                             the University of Nebraska Rural
  important in creating awareness of
                                             Initiative as a way to provide guest
  Western Nebraska 58% of the time.
                                             services training for rural community
                                             businesses. As part of the Red Carpet
  This suggests that the best time to
                                             Service program, mystery shopper
  inform visitors about the attractions
                                             interviews were done with a sample
  that are available to visitors in a
                                             of local front-line business employees.
  specific region is while they are
                                             Since the program was created, over
  there. However, the organizations
                                             150 mystery shopper interviews have
  that represent the industry are also
                                             been conducted in Nebraska, from
  effective in reaching at least half of
                                             Scottsbluff to Nebraska City.
  potential visitors, and the Internet is
  an important resource.
                                             During the interviews people are

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  Page 8                                              UNL Bureau of Business Research
  asked questions such as “What is            development options are often scarce.
  there to see and do in the area? Could      Tourism supporters also remind us
  you tell me where to go for more            that Nebraska (and especially non-
  information about the area? What            Metropolitan Nebraska) is among the
  would you suggest I do while I am in        nation’s leaders in multiple job holding
  town?” University faculty members           and that, for better or worse, those
  have found that it is commonplace           part-time and seasonal jobs make an
  for people to share the obvious             important contribution to household
  attractions and then forget some of         income in those places where they are
  the most unique aspects of the area.        available.
  The problem is that it is those unique
  Nebraska attractions and events that        Data can be found to support
  often encourage people to stay a day or     both viewpoints. But critics
  two longer. And it is those extended        notwithstanding, most Nebraska
  stays that translate into increased         counties are indeed home to at least
  revenue for the community.                  one group that is actively promoting
                                              tourism for economic development
  It is natural for residents, regardless     purposes.
  of location, to become oblivious to
  their local attractions and “hidden         Even among tourism advocates, those
  treasures”. In the experience economy,      who look at the hospitality industry


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  communities can’t afford to overlook        only from the perspective of jobs
  assets that can translate into premier      and wages may be missing other,
  traveler memories.                          more subtle reasons to consider the
                                              importance of such enterprises in their
  Visitors May Bring More                     communities.
  than Money                                  Tourists and other visitors gain an
  Nebraskans seem to have divergent           awareness of the quality of life in the
  views regarding the economic impact         places that they visit that they would
  of travel and tourism. Some are             not otherwise have. That awareness
  skeptical; believing that the hospitality   can lead to a variety of investments,
  industry supports only low wage and         and can even attract new residents.
  part-time or seasonal jobs and that
  significant travel related income is        A recent University of Nebraska survey
  generated only in the metropolitan          of 321 households that had moved
  centers and along the I-80 corridor         to Western Nebraska between 2002
  by travelers who are merely passing         and 2007 found that 36% of those
  through either on business or on their      households had gained awareness of
  way to more interesting destinations in     their new locations while vacationing
  other parts of the country.                 or visiting friends in the area, and
                                              another 16% had learned of the area
  Others see tourism as a viable              through business related travel.
  economic development and
  diversification strategy in areas where     Perhaps more importantly, among
                                              those newcomers who had purchased

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  Page 9                                              UNL Bureau of Business Research
  or established businesses in Western         interactions between residents and
  Nebraska, 15% became aware of                visitors, to community Web pages,
  the location where they now reside           the experience of a western Nebraska
  through vacation related travel.             tourist is a product which can be an
  Another 17% gained such awareness            important economic generator.
  through business related travel, and
  30% had learned about the area while         References
  visiting friends.                            Burkhart-Kriesel, Cheryl, with
                                               Randolph Cantrell, Bruce Johnson,
  Data from this study indicate that           Charlotte Narjes and Rebecca Vogt
  the presence of a job alone is not           (2007). Newcomers to the Nebraska
  always a sufficient reason for people        Panhandle: Why Did They Move Here?
  to relocate. Indeed, in an era of labor      University of Nebraska Center for
  force shortages, people often have an        Applied Rural Innovation.
  array of choices regarding where they        http://cari.unl.edu/buffalo/documents/
  will live. Quality of life considerations    WhyDidTheyMove.pdf
  such as recreational opportunities,
  environmental quality and community          Nebraska Division of Travel and
  values weigh heavily in such decisions.      Tourism (2007). Nebraska Travel and
  For many people their first exposure to      Tourism Facts.
  what an area offers in this regard come      http://www.visitnebraska.org/pdfs/


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  from visits made for entirely other          industry/2006facts.pdf
  purposes.
                                               Pine, B.J II, and H.J. Gilmore (1999).
  Certainly, nobody invests in a place if      The Experience Economy: Work is
  they don’t know it is there. Awareness       Theatre & Every Business a Stage.
  can be created by capitalizing upon          Boston, MA; Harvard Business School
  the changes happening in the travel          Press
  industry. It is not only about the
  attractions and events that we have          Western Nebraska Tourism Coalition
  in our communities. It is about              and University of Nebraska Rural
  authenticity and the image that we           Initiative (2007). Western Nebraska
  convey and services that we extend to        Visitors Survey: September, 2005
  guests. It is about taking advantage of      – August 2006.
  the opportunity to make their time           http://ruralinitiative.nebraska.edu/
  in our communities memorable.                includes/downloads/wnevisitorsurvey.
  Ultimately, it is about the experience.      pdf

  Tourism encourages communities to
  examine themselves in a new light;
  from a visitor’s perspective. In that
  light, the visitor’s experience has a cash
  value and the community comes to
  be seen as a product. Products can be
  improved and marketed. From routine

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  Page 30                                               UNL Bureau of Business Research
        Business in Nebraska December 007


                                                  RISK AND RECOVERY
                                      By the Nebraska Business Forecast Council



  U.S. Macroeconomic                         have lead to stress at many financial
  Outlook                                    institutions. This has led some

  T   he crisis in the housing and           financial institutions to cut back on
      financial sectors has led to a         lending. Recent evidence suggests that
  dramatic slowdown in U.S. economic         weakness in selected industries and
  growth. Fourth quarter GDP growth          these concerns about credit may have
  and job growth are expected to be          slowed consumer spending and lead
  anemic and the economy may fall into       to a decline in manufacturing activity.
  recession in 2008. Indeed, several of      Rising oil and gasoline prices also have
  the dozen members of the Nebraska          limited consumer income available
                                             to spend on other goods and services.


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  Business Forecast Council do believe
  that the U.S. economy will likely slip     The combined force of all of these
  into recession during 2008. However,       factors is what has caused economic
  the overall consensus of the Council       growth to slow and raised legitimate
  is that the U.S. economy will avoid a      concerns that the economy could fall
  recession. Economic growth will be         into recession.
  slow in the first three quarters of 2008
  before recovering in late 2008 and         However, there is also a case to be
  2009.                                      made for continued economic growth
                                             in 2008. First the housing crisis, while
  The reasons for concern about the          significant, is limited to only a portion
  economy are well understood. There         of the economy. This may explain why
  has been a decline in both new home        total employment has continued to
  construction and the sales of existing     grow through the end of 2007, at least
  homes. Housing permits and starts          according to preliminary estimates.
  are each down by approximately 25%         Secondly, a weak U.S. dollar has lead to
  in 2007. This decline has had a ripple     a substantial improvement in exports,
  effect not only in construction but in     and an overall improvement in the
  related industries such as real estate,    nation’s trade deficit, which supports
  and segments of manufacturing and          growth. The third and final reason is
  finance.                                   the Federal Reserve Bank has shown
                                             a willingness to cut interest rates, or
  Rising mortgage delinquencies,             take other actions to improve liquidity.
  particularly for sub-prime mortgages       Not everyone has been satisfied with


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                                             the pace of the Fed’s actions but the
  Page 3                                              UNL Bureau of Business Research
  institution stands willing to make          recovering in 2009. Growth was solid
  further cuts in short-term interest         in 2007 as well, though a bit weak as
  rates in 2008.                              the economy slowed in late 2007. A
                                              summary of the Nebraska outlook is
  Nationwide in 2007, non-farm job            reported in Table 1.
  growth is thought to have expanded
  by 1.2 percent. Job growth is expected      Table 
  to slow to 0.9 percent in 2008 before       Key Economic Growth Rates
  bouncing back to 1.7 percent growth
  in 2009 as the economic growth
  accelerates again. Growth in real
  (inflation-adjusted) gross domestic
  product (GDP) is expected to have
  been 2.5 percent in 2007. The rate
  of growth will dip in the first half
  of 2008. Overall real GDP growth is
  expected to be 2.2 percent in 2008.         Employment
  Growth in real gross domestic product       Nebraska employment will continue
  will improve in 2009 as the economy         to grow through 2009, but the pace
  recovers, to 3.1 percent.                   of employment growth will slow
                                              significantly in 2008 as the economy


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  As noted earlier, there is a significant    slows. The construction sector will
  chance, approaching 40 percent that         be weak in both 2007 and 2008.
  the economy will fall into recession        Despite overall weak conditions
  in 2008. If this occurs, job growth is      in the economy, sectors such as
  expected to be negative during 2008.        transportation will benefit from
  This is not the Council’s expectation       nationwide strength in the commodity
  but it is a possibility.                    sectors such as agriculture and mining.
                                              As is seen in Table 2, this outlook is
  Nebraska Outlook                            similar to our previous outlook from

  G     iven strength in the commodity        June 2007, except that the outlook
        sector, and related industries such   for job growth in 2008 is significantly
  as manufacturing and transportation,        lower.
  the panel remains optimistic about the
                                              Table 2
  outlook for the Nebraska economy. In
                                              Comparison of Non-Farm
  fact, the Nebraska economy is expected
                                              Employment Forecasts
  to outperform the national economy.
  Employment will continue to expand
  in Nebraska. Aggregate farm income
  grew rapidly in 2007 and farm income
  is expected to remain high in 2008 and
  2009.                                       Construction and Mining
                                              Despite the onslaught of negative
  Both employment and income growth           news at the national level, Nebraska


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  is expected to be weak in 2008, before
  Page 3                                               UNL Bureau of Business Research
  construction activity is holding            of Nebraska construction activity:
  its own. While the state’s housing          road construction. Flat fuel tax
  industry has contracted slightly,           revenues, due to high fuel prices, have
  increases in nonresidential building        limited available funding.
  activity have more than offset the
  downturn. Preliminary data for 2007         Manufacturing
  suggests that total construction activity   Preliminary manufacturing
  in the state will increase by one-half      employment data for 2007 suggest
  percent from that of 2006. Expect           slow growth in the durable goods
  another small increase in 2008, again       manufacturing sector. Slow growth
  due to a weak housing sector. Once          of 0.2 percent is expected in 2008 and
  the state’s housing activity begins to      0.3 percent in 2009. Strong crop prices
  increase in 2009, total construction        continue to benefit Nebraska’s farm
  activity should begin to return to its      machinery, equipment manufacturing,
  historic rates of growth. For 2009          and fabricated metal products
  expect an increase of 2.0 percent.          manufacturing sectors. However, the
                                              motor vehicle parts, and miscellaneous
  As in most parts of the Midwest,            manufacturing sectors are likely to
  housing construction in Nebraska            experience declines in employment.
  did not boom as much as on the
  east and west coasts of the country.        In the case of non-durable


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  Nevertheless, inventories of completed      manufacturing, preliminary data
  and unsold units in Nebraska are            suggest that the sector grew by 0.6
  high. It may well be the summer of          percent in 2007. An annual growth
  2008 before inventories are brought         rate of 0.4 percent is expected in 2008
  under control. Thus a turnaround in         and 0.6 percent in 2009. Employment
  activity may not occur until late 2008.     recovery and growth in Nebraska’s
  Thereafter demographic and financial        food processing sector and increased
  conditions should drive the rate of         capacity and production in its ethanol
  growth in homebuilding. Fortunately         industry will be the major contributors
  Nebraska lenders are and have been          to sustained employment growth in
  more conservative than their national       non durable goods manufacturing.
  counterparts, and remain in solid           One key factor is that beef sales to Asia
  shape to meet demand for mortgages          are expected to improve during the
  by qualified borrowers.                     period.

  Nonresidential building construction        Finally, two other trends are expected
  is doing well in comparison to the          to impact the manufacturing industry.
  housing sector. Builders and designers      A weak dollar is expected to improve
  are moderately busy with lists of           exports and potential for foreign direct
  upcoming projects. Activity is not          investment. At the same time, labor
  restricted to Nebraska’s metropolitan       supply constraints, particularly in
  areas, but is spread across the state.      nonmetropolitan Nebraska, may limit
  Fiscal considerations will likely limit     growth.
  growth in the other main component

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  Page 33                                               UNL Bureau of Business Research
  Table 3—Number of Nonfarm Jobs and Percent Changes by Industry
  Annual Averages (in thousands of jobs)
                 Construction                                Trans-
                  Mining &                                  portation
          Nonfarm Natural             Non- Wholesale Retail   and                      All Federal   Local
           Total Resources Durables durables Trade   Trade Utilities Info Financial Services Gov’t   Gov’t
   1997    857.1    40,9      57.3    55.4    41.2   105.3    41.6    25.1  55.7     283.5 16.1      136.1
   1998    879.9    42.4      58.5    55.9    42.2   107.5    43.3    26.3  58.8     294.2    16     134.9
   1999    897.4    44.3      57.7    55.7    42.5   110.2    44.5    27.1  60.9     303.1 15.9      135.6
   2000    914.0    45.2      58.9    55.4    41.9   111.3    45.1    26.9  60.5     314.3 16.6      137.9
   2001    919.7    45.3      54.6    56.2    42.5    110     45.2    25.8  60.2      323     16     140.8
   2002    911.5    46.1      50.6    55.4    41.5   108.5    44.9    23.2  61.4     321.2 16.3      142.6
   2003    914.2    47.4      47.3    55.1     41    106.7    46.4    21.5  62.4     327.3 16.7      143.1
   2004    922.3    48.4      47.0     54     40.8   106.5    48.9    21.1  63.2     332.2 16.5      143.6
   2005    935.0    47.8      48.4    52.9    40.6    107     52.3    20.2  64.5     340.1 16.3      144.9
   2006    946.9    48.4      49.5    52.2    40.8   106.5    53.4    19.5  65.7     348.5 16.2      146.2
   Forecast Number
    2007 962.3     48.6        49.6    52.5     41.0   107.7   54.9    19.5   66.4   358.3   16.2    147.7
    2008 973.2     48.9        49.7    52.7     41.0   108.3   56.3    19.4   67.0   364.7   16.2    148.8
    2009 989.3     49.9        49.9    53.0     41.1   109.4   57.9    19.4   68.4   373.8   16.2    150.3
   Forecast Number
    2007 1.6%      0.5%       0.3%    0.6%     0.5%     1.1%   2.8%   -0.2%   1.0%   2.8%    0.0%    1.0%
    2008 1.1%      0.5%       0.2%    0.4%     0.0%     0.6%   2.5%   -0.1%   1.0%   1.8%    0.0%    0.8%
    2009 1.7%      2.0%       0.3%    0.6%     0.2%     1.0%   2.9%   -0.2%   2.0%   2.5%    0.0%    1.0%




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  Source: http://data.bls.gov/cgi-bin/dsrv, 007

  Transportation and                                    warehousing employment is expected
  Warehousing                                           to have grown by 2.8% in 2007.
  Employment growth in 2007 in                          Growth will continue at a similar rate
  the Nebraska transportation and                       in 2008 and 2009 as growth accelerates
  warehousing sector has proven to be                   in trucking but moderates in other
  less robust than originally thought.                  portions of the industry. Factors
  Trucking employment has grown                         such as favorable demographics and
  little due to reduced demand for                      infrastructure, low entry costs, and
  construction materials, slow growth                   state economic development efforts
  in imports (due to the declining                      will aid growth in the industry.
  dollar), and a general reduction in
  goods shipments as the economy has                    Wholesale Trade
  slowed. However, other segments of                    Wholesale trade employment in
  the industry have done well. The rail                 Nebraska has grown little over
  sector has been aggressively hiring                   the last decade, despite a growing
  to rebuild its workforce in response                  economy in the state. Such a pattern
  to growing exports (exports are said                  is characteristic of industries with
  to favor rail, and imports to favor                   rising labor productivity, where rising
  trucking). Warehousing employment                     productivity causes employment to
  also continues to gain.                               remain steady even as total industry
                                                        activity increases. The industry is
  Overall, transportation and                           expected to add employment in 2007


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  Page 34                                                             UNL Bureau of Business Research
  and 2009, but growth will be modest.         2001. We anticipate the loss of another
  Preliminary data suggests that industry      hundred additional jobs in 2007, 2008
  employment grew by 0.5 percent               and 2009.
  in 2007. Industry employment is
  expected to be flat in 2008 and grow by      Financial Services
  just 0.2% in 2009.                           The financial services industry
                                               comprises finance, insurance, and
  Retail Trade                                 real estate. The industry has grown
  Employment in the retail trade               consistently over the last 10 years, but
  industry is very sensitive to retail sales   segments of the industry such as real
  growth. Further, long term trends have       estate, loan activity, and mortgage
  lead to increased labor productivity         brokers are being negatively impacted
  in the industry, generally dampening         by weakness in the housing sector. For
  employment growth. These trends              this reason, relatively weak growth is
  include the tendency of larger retailers     expected in 2007 and 2008. Overall
  to capture a growing share of the            industry job growth will reach 1.0% in
  market and the increased sales by on-        2007 and 2008. Growth will return to
  line and other nontraditional retailers.     the long-term trend rate in 2009, with
  Retail employment has declined earlier       2.0% growth.
  in the decade, including a 1.2 percent
  decline in 2001, a 1.4 percent decline


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                                               Services
  in 2002, and a 1.7 percent decline in        Accounting for one-third of
  2003. Industry employment stabilized         employment in the economy, the
  in recent years, but employment              diverse and rapidly growing service
  growth has only just returned. Retail        industry is key to our employment
  employment is expected to have               forecast. As is evident in Table 3,
  increased by 1.1 percent in 2007. The        65,000 of the approximately 90,000
  rate of growth is forecast to slow to        jobs added to the Nebraska economy
  0.6 percent in 2008 and improve to 1.0       from 1997 to 2006 were added in the
  percent in 2009.                             services sector. When service sector
                                               employment grows by more than 2
  Information                                  percent, as it has in the last few years,
  The information industry contains a          total Nebraska employment growth
  diverse group of industries including        handily exceeds 1 percent.
  newspapers, movie theatres and
  sound studios. These locally-oriented        Despite weakness in the overall
  portions of the industry are stable. The     economy during the second half
  industry also contains high technology       of 2007, we anticipate that the
  or information processing industries         industry grew in 2007, by 2.8 percent.
  such as telecommunications, data             Employment growth is expected to
  processing, web site devel¬opment,           fall to just 1.8 percent in 2008 before
  and web publishing. These industries         recovering to 2.5 percent growth in
  have consolidated and downsized in           2009. Job growth is expected even in
  recent years, losing 6,000 jobs since        difficult times because the services


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  Page 35                                                UNL Bureau of Business Research
  industry contains one of the largest       and market research.
  and most rapidly growing portions
  of the economy: health services.           Government
  Other portions of the services             Our outlook calls for no change in
  industry include professional and          federal government employment
  business services, education services,     through 2009. However, steady
  personal services, accommodations,         growth is expected in state and local
  food and drinking places, and arts,        government employment, following
  entertainment, and recreation.             recent trends. Growth in state and
                                             local government employment
  Health care and social assistance          has tended to exceed, though only
  comprises the largest part of the          slightly, the rate of population
  services industry and expands steadily     growth in Nebraska. State and local
  as Nebraska’s population grows and         gov¬ernment employment historically
  ages. Ambulatory health care services      has grown 1% per year on average, as
  such as home health care services,         the need for teachers, police, fire, and
  ambulance services, blood donor            other state and local employ¬ees who
  stations, and health screening services    work directly with the public rises with
  are the fastest growing portions of        population. Also, as incomes rise, the
  health care. One weak point is the         demand for government services per
  relatively small social assistance         person also rises. Growth is steady,


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  part of the industry which has lost        and not closely tied to business cycles,
  employment in 2007. Health care and        so solid growth is expected for 2007,
  social assistance employment will grow     2008, and 2009. Our expectation
  by about 2.5 percent each year during      is that state and local government
  the forecast period, employing 118,000     employment will grow 1.0 percent in
  Nebraskans by 2009. Food services and      2007. Growth will dip to 0.8 percent
  drinking places is another industry        in 2008 as the economy slows and
  that consistently generates job growth     budgets tighten but recover to 1.0
  as population grows, and households        percent growth in 2009.
  spend more of their rising disposable
  income on dining out. Employment           Personal Income
  will grow by 2.0 percent per year.         Personal income growth will be solid
                                             in Nebraska over the outlook period,
  Business and professional services is      though non-farm income growth will
  the pro-cyclical portion of the services   moderate as the economy slows in
  industry. Growth in this sector will       2008. Farm income growth was very
  be weakest in 2008 as the economy          strong in 2007 and modest gains are
  slows, but should recover in 2009.         anticipated for 2008 and 2009. Table
  The industry contains high wage            4 below compares the current forecast
  occupations such as management,            for the two major components of
  legal services, accounting and             personal income to our June 2007
  bookkeeping, architecture and              forecast. Non-farm income growth
  engineering, computer systems design,      slows significantly in 2008 as the
  management consulting, advertising,

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  Page 36                                              UNL Bureau of Business Research
  Table 4 - Comparison of Forecasts           Profits are very pro-cyclical. As a
  for Nominal Personal Income                 result, non-farm proprietor income
                                              growth will slow as the economy slows
                                              in 2008. Non-farm proprietor income
                                              is expected to have increased by 7.1
                                              percent in 2007, but the rate of growth
                                              will decline to 5.6 percent in 2008. The
                                              rate of growth in non-farm proprietor
                                              income will increase to 7.2 percent in
                                              2009.
  Note: Nominal income growth is the sum of
  real income growth and the inflation rate   Declining profits will affect dividend,
                                              interest, and rental income as well.
  economy slows. The outlook for farm         Declining profits will lead some
  income is even stronger than in the         firms to cut their dividend payment
  previous outlook.                           to their stockholders. Interest rates
                                              on certificates of deposits, money
  Non-Farm Personal Income                    market funds, checking accounts, and
  Non-farm personal income is expected        other interest bearing accounts also
  to moderate as economic growth              decline as the economy weakens. This
  slows. In particular, non-farm personal     is because falling slowing economic


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  income growth is expected to slow           growth reduces future inflationary
  in 2008 before recovering in 2009.          pressures. Lower inflationary pressures
  The largest component of non-farm           mean lower nominal interest rates. All
  income, wage and salary income, will        of these factors create an expectation
  rise at a slower pace in 2008 as the rate   of modest growth in dividend, interest,
  of job growth declines. A weak labor        and rent income. Growth is expected
  market also will limit growth in wages      to have reached 6.0 percent in 2007,
  per job in 2008.                            but will decline to 5.0 percent in 2008.
                                              Growth is expected to be 5.5 percent
  As seen in Table 5, we expect non-          in 2009.
  farm wages and salaries to grow by 5.1
  percent in 2007 slow to 4.6 percent         Farm Income
  growth in 2008 and snap back to 5.2         Rising grain prices over the past year
  percent in 2009. Employee benefits          and good crop yield levels lead to a
  (other labor income) are expected to        sharp increase in farm income in 2007.
  grow by 6.1 percent to 6.9 percent each     These price increases have been driven
  year. Changes in other labor income         by the dramatic expansion of ethanol
  are primarily driven by increasing          production in America’s heartland.
  health care costs.                          This has lead directly to rapid increases
                                              in corn prices, and corn acreage.
  Slower economic growth in 2008 is           More generally, a weak U.S. Dollar has
  expected to impact growth in both           helped with farm exports. Further,
  non-farm proprietor income and              ethanol production and higher
  dividend, interest, and rent income.

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                                              corn prices and a weak dollar are
   Page 37                                              UNL Bureau of Business Research
  Table 5—Non-farm Personal Income and Selected Components and
  Net farm Income (USDA) ($ millions)
                                                Non-farm
                                                Wages &
                                       Total     Salaries
                      Non-           Personal   (Wages &                                               Net
         Consumer farm Dividends, Current        Salaries     Other Contributions         Non-Farm Farm
            Price Personal Interest, Transfer    — Farm       Labor to Social Residential Proprietor Income
           Index Income & Rent Receipts          Wages)      Income Insurance Adjustment Income (USDA)
    Millions of Dollars
    1997 160.5 $39,053 $8,272         $5,132    $22,236       $4,456   $3,462      -$653    $3,073   $2,023
    1998 163.0 $41,932 $9,096         $5,477    $23,684       $4,744   $3,686      -$684    $3,300   $1,816
    1999 166.6 $43,966 $9,148         $5,822    $25,117       $4,999   $3,874      -$762    $3,517   $1,707
    2000 172.2 $46,719 $9,991         $6,075    $26,540       $5,317   $4,032      -$825    $3,654   $1,440
    2001 177.0 $48,511 $9,998         $6,667    $27,316       $5,612   $4,200      -$833    $3,952   $1,894
    2002 179.9 $50,103 $10,023 $7,069           $28,086       $6,362   $4,350      -$869    $3,782    $857
    2003 184.0 $51,863 $10,002 $7,426           $29,110       $6,753   $4,520      -$911    $4,003   $2,785
    2004 188.9 $54,028 $9,835         $7,742    $30,497       $7,181   $4,724      -$930    $4,428   $3,542
    2005 195.3 $56,622 $10,373 $8,130           $31,692       $7,640   $4,960      -$940    $4,687   $2,667
    2006 201.6 $60,207 $11,392 $8,853           $33,349       $8,028   $5,287      -$982    $4,855   $2,700
    Forecast Number
    2007 207.4 $63,811 $12,075 $9,517           $35,059       $8,560   $5,559     -$1,042   $5,201 $3,650
    2008 212.6 $67,205 $12,679 $10,183          $36,681       $9,084   $5,816     -$1,101   $5,493 $3,850
    2009 217.9 $71,087 $13,377 $10,845          $38,574       $9,689   $6,116     -$1,169   $5,887 $3,900
    Forecast % (nominal growth)




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    2007 2.9%         6.0%   6.0%      7.5%       5.1%        6.6%      5.1%       6.1%      7.1%    35.2%
    2008 2.5%         5.3%   5.0%      7.0%       4.6%        6.1%      4.6%       5.6%      5.6%    5.5%
    2009 2.5%         5.8%   5.5%      6.5%       5.2%        6.7%      5.2%       6.2%      7.2%    1.3%

  Source: http://www.bea.gov, 007
  Note: nominal income growth is the sum of real income growth and the inflation rate.

  expected to be maintained throughout                      will increase, income from livestock
  the outlook period. Nebraska’s                            production is expected to remain
  prominence in corn production                             steady. Higher production costs for
  combined with the complement of                           livestock producers will in part be
  being a major cattle feeding state                        passed on to final consumers and
  makes the state well situated to capture                  exports. Further, the cattle industry
  economic opportunities in ethanol                         is going through a transition as cattle
  production. This is because distiller’s                   feeders adjust to greater reliance on
  grain, a cattle feed, is a by-product of                  distiller’s grain in their rations. As
  ethanol production. Areas with both                       a result, Nebraska producers have a
  corn and feeder cattle production have                    distinct advantage over other major
  a competitive advantage as a location                     cattle feeding states. The state’s cattle
  for ethanol plants. The price of farm                     industry could even experience some
  inputs will rise with crop prices. Our                    future production expansion given
  outlook for farm income accounts for                      the synergy between corn-based
  this increase. High incomes will be                       ethanol production and feedlots.
  maintained in 2008 and 2009.                              NIMBY1 issues may limit the location


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  While income from crop production                         1 Not in My Backyard
  Page 38                                                              UNL Bureau of Business Research
  of feedlots in some areas of Nebraska,          vehicle taxable sales over the 2007
  however. Nebraska farm income is                to 2009 period. Current year to date
  expected to have jumped by 35 percent           non-motor vehicle net taxable sales
  in 2007. Nebraska farm income is                suggest an estimated increase of 4.8
  expected to grow by 5.5 percent in              percent for 2007 as a whole. In 2008,
  2008 and 1.3 percent in 2009. This will         growth is projected to be 3.3 percent,
  all occur despite a substantially lower         due to slower economic growth and
  direct government payments.                     the repeal of the tax on contract labor.

  Table 6 - Net Taxable Retail Sales, Annual Totals ($ millions)




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  Source: Nebraska Department of Revenue
  Note: nominal taxable sales growth is the sum of real growth and the inflation rate


  Net Taxable Retail Sales                        Growth will rebound to 4.9 percent in
  In Table 6, data on net taxable retail          2009.
  sales are divided into motor vehicle
  sales and non-motor vehicle sales.              Motor vehicle net taxable sales have
  The distinction is important. Motor             undergone a sharp turn-around in
  vehicle net taxable sales are growing           2007 after years of decline. Growth
  over time, but from year to year follow         is expected to reach 6.7 percent. For
  a very cyclical pattern. Non-motor              2008 and 2009 only moderate growth
  vehicle taxable sales rise steadily, but        is expected. Automotive sales are
  are affected by periodic changes to             expected to increase by 3.7 percent and
  Nebraska’s sales tax base.                      3.1 percent, respectively.

                                                  Overall growth in net taxable sales is

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  Table 6 shows growing non-motor
  Page 39                                                    UNL Bureau of Business Research
  expected to reach 5.0 percent in 2007.
  This is well above the inflation rate of
  approximately 3 percent. Growth is
  expected to fall to 3.3 percent in 2008,
  as economic growth declines. But,
  net taxable sales will rebound as the
  economy rebounds in 2009. Growth in
  net taxable sales is expected to reach
  nearly 4.9 percent in 2009.




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  Page 40                                    UNL Bureau of Business Research
        Business in Nebraska May 008
                  Non-Farm Proprietors and the Nebraska
                                    Economy: 1997-2006
                     By Randy Cantrell – University of Nebraska Rural Initiative


  N      on-farm proprietors are of
         growing importance in the
  Nebraska economy. This paper utilizes
                                              business such as a trucking firm or
                                              seed distributorship as well. Such
                                              reporting of multiple income sources
                                              is a partial explanation of why we
  recently released data from the U.S.
                                              often observe more jobs than workers
  Department of Commerce’s Bureau             in a given location.
  of Economic Analysis (BEA) to
  further explore this important class        The BEA monitors the number of
  of workers, and to identify trends in       jobs in all three categories for states
  their distribution and impact across        and counties, and reports those
                                              numbers annually through their
  Nebraska’s 93 counties. These data
                                              Regional Economic Reporting System
  demonstrate that growth in non-farm


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                                              (REIS). The REIS reports are based
  proprietor jobs has not been matched        on an algorithm that utilizes IRS tax
  by growth in income for those jobs,         filings by employers, employees and
  and that the discrepancy between jobs       proprietors. REIS data have been
  and income is most pronounced in            reported since 1969, with the latest
                                              reporting year being 2006 (released
  rural portions of the state.
                                              in April, 2008). All data for this paper
                                              were retrieved from that source.
  A Growing Share of the
  Labor Market                                REIS reported that in 2006 the
  Government statistics classify job          Nebraska economy supported 983,446
  holders as either wage and salary           wage and salary jobs and 256,753
  workers, who work for others, or as         proprietors, of which 210,371 were
  proprietors, who are self employed.         non-farm and 46,382 were farm
  Proprietors, which can include both         proprietors. Non-farm proprietors
  sole proprietors and partnerships,          in 2006 accounted for 17.0% of all
  are further classified as being farm        Nebraska jobs in the REIS data base.
  proprietors or non-farm proprietors.        Wage and salary workers comprised
  All income earners fall into at least one   the dominant job group at 79.3% of all
  of these classifications, and frequently    jobs, while farm proprietors accounted
  report their incomes in two or even         for the remaining 3.7%.
  all three areas. For instance, a farm
  proprietor may work some portion            According to REIS, while farm
  of the year in a traditional wage and       proprietors have generally been


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  salary job and may operate a small
  Page 4                                               UNL Bureau of Business Research
  declining in number (Nebraska               “Large trade center counties” include
  reportedly lost 7,011 between 1997          all of those with a population
  and 2006) non-farm proprietors              center of 7,500 or more. “Small
  have been on the increase. Over the         trade center counties” contain a
  ten-year period 1997 through 2006,          population center of 2,500 to 7,499.
  Nebraska saw non-farm proprietor            “Small town counties” contain no
  numbers increase by 31.3% (50,132           population center as large as 2,500,
  jobs), replacing the state’s loss of farm   and “frontier counties” not only
  proprietors seven times over. Through       have no such population center but
  the same ten years, wage and salary job     have an average population density
  numbers increased by 8.8% (79,404           of fewer than 6 persons per square
  jobs).                                      mile (the traditional definition of the
                                              “frontier”).
  The importance of non-farm
  proprietors for the economy increases       As seen in Table 1, Nebraska’s more
  as one looks at more rural areas.           rural county groups are characterized
  Within the state’s nine metropolitan        by a higher proportion of their labor
  counties, non-farm proprietors              force being found in the non-farm
  account for 14.8% of all jobs, but          proprietor category, offset by smaller
  within the 84 non-metropolitan              percentages of wage and salary jobs.
  counties, non-farm proprietors              Farm proprietors are of course also


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  account for 22.3% of all jobs, up from      more frequently found in more rural
  19% ten years earlier.                      counties, but as we have seen their
                                              numbers are decreasing.
  Table 1 - Jobs by Type




  In this paper, non-metropolitan             In general the relative importance of
  counties have been further classified       non-farm proprietors is increasing
  according to the size of their largest      in all parts of the state while the
  community and population density.           relative importance of wage and

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  Page 4                                               UNL Bureau of Business Research
  salary and farm proprietor jobs slowly     increased by 42.5%. Farm proprietor
  declines, with that trend being most       incomes are generally too volatile for
  pronounced in the most rural areas         such comparisons (and in fact showed
  of the state. This pattern is seen again   an actual decline when comparing
  in Figure 1, which depicts the relative    1997 to 2006), and are not included in
  distribution of non-farm proprietor        this part of the analysis.
  jobs in map form.

  Figure 1




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  Growth in Total Earnings is                As seen in Table 2, despite growth
  Considerably Slower                        in the non-farm proprietor share
  While non-farm proprietor jobs may         of the total labor market, non-farm
  be growing more quickly than wage          proprietor income declined as a
  and salary jobs, the same can not be       percentage of total income between
  said for their earnings. As reported by    1997 and 2006 in all but Nebraska’s
  REIS, earnings per job in Nebraska         Metropolitan counties. During the
  increased by 35% between 1997              same period the share of total earnings
  and 2006 in nominal (not inflation         generated by wage and salary jobs
  adjusted) dollars. During the same         increased across all non-metropolitan
  period, earnings per non-farm              county types, decreasing only in the
  proprietor job grew by 20.3% while         metropolitan counties. Part of this
  earnings per wage and salary job           change is an artifact of reported
                                             declines in farm income between

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  Page 43                                             UNL Bureau of Business Research
  Table 2 – Percent of Total Earnings by Type of Employment




  those two time periods, but for this        the slower growing or even shrinking



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  analysis it is the relative magnitude       wage and salary labor force has been
  and direction of change for non-farm        characterized by an increase in the
  proprietor and wage and salary jobs         earnings of the average job holder.
  that matters.
                                              Making this scenario even more
  Earnings per Job Declining                  problematic is the fact that these
  The problem with growth in non-farm         statistics are based on nominal dollars.
  proprietor employment outside of            Had we corrected for inflationary
  Nebraska’s Metropolitan counties is         factors the rate of decline in non-farm
  that earnings per non-farm proprietor       proprietor earnings would be even
  job have actually declined since 1997.      more dramatic.
  Moreover, that decrease in average
  earnings is relatively greater in the       Not Keeping Pace with
  most rural portions of the state where      Wage and Salary Growth
  the trend is least likely to be offset by   Non-farm proprietor earnings
  growth in the higher earnings of the        declined as a proportion of wage and
  wage and salary labor force.                salary earnings statewide between
                                              1997 and 2006. In 1997, the average
  This phenomenon is clearly portrayed        non-farm proprietor reported earnings
  in Table 3, where it can be seen that in    equal to 64.9% of the average wage
  the most rural portions of the state the    and salary worker. By 2006, the average
  rapidly growing non-farm proprietor         non-farm proprietor reported earnings
  labor force has been characterized          equal to 54.8% of the average wage
  by declining earnings per job, while        and salary worker.

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  Page 44                                               UNL Bureau of Business Research
  Table 3 – Percent Change in Jobs and Earnings Per Job: 1997 – 2006




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  For rural portions of Nebraska,
                                             Table 4 - Average Earnings of
  poor growth in non-farm proprietor
                                             Non-farm Proprietors as a Per-
  earnings in comparison to wage and
                                             centage of Average Wage and
  salary earning is especially apparent.
                                             Salary Earnings
  As seen in Table 4, among Nebraska’s
  most rural counties (frontier counties),                                                Non-farm Proprietor
                                                                                       Earnings/Wage and Salary
  the average non-farm proprietor’s          County Group (# Counties)
                                                                                        1997
                                                                                                Earnings
                                                                                                           2006

  earnings declined from 62% of average      Nebraska (93)                             64.9%                54.8%


  wage and salary earnings in 1997 to        Metropolitan (9)                          71.9%                69.2%


  only 34.2% of average wage and salary      Non-Metropolitan (84)         61.1%         38.6%
                                             ___________________________________________________________
  earnings in 2006.                          Large Trade Center (13)       59.6%         40.4%


                                             Small Trade Center (21)                   66.0%                39.1%


  What is Being Measured                     Small Town (22)                           65.8%                38.4%


  According to data from REIS, the 71        Frontier (28)                             62.0%                34.2%

  most rural counties in Nebraska added      Source: U.S. Department of Commerce, Regional Economic Information
                                             System
  a total of 1,732 jobs to their combined

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  Page 45                                                    UNL Bureau of Business Research
  economies between 2005 and 2006.            Table 5 - Change in Non-farm
  This growth in jobs was comprised of        Proprietorships as a Percentage
  2,624 new non-farm proprietor jobs          of Change in Total Jobs
  coupled with losses among both farm
  proprietor jobs (-381) and wage and                                            % of Total Change
                                               County Group (# Counties)            2005 - 2006
  salary jobs (-511). Thus, the total net
  growth in jobs for those counties was        Nebraska (93)                           54.3%
  entirely accounted for by growth in          Metropolitan (9)                        43.5%
  non-farm proprietor employment.
  In fact, the increase in non-farm            Non-Metropolitan (84)               134.8%
                                               ___________________________________________
  proprietor jobs was equal to 151% of         Large Trade Center (13)              48.6%
  total job growth. As demonstrated in
                                               Small Trade Center (21)                 174.8%
  Table 5, this is the case for all but the
  Metropolitan and large trade center          Small Town (22)                         118.4%
  county groups.
                                               Frontier (28)                           181.2%

  Between 1997 and 2006, a total of            Source: U.S. Department of Commerce, Regional
                                               Economic Information System
  39 Nebraska counties experienced
  declines in wage and salary
  employment, accompanied by growth           However, these data also suggest that
  in non-farm proprietor employment.          we may be looking at a fundamental



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  During the same period, only eight          change in the relationship between
  counties experienced the opposite           employers and employees. This
  pattern, with wage and salary               explanation is rooted in the way in
  employment growing while non-farm           which one becomes classified as a
  proprietor numbers declined. Five           non-farm proprietor in the first place.
  counties saw declines in both.              Essentially, anyone who files a Federal
                                              IRS Schedule C fits the definition of a
  Historically, we have looked at non-        sole proprietor. But, in this case, sole
  farm proprietorships as an indicator        proprietor and business owner are not
  of entrepreneurial activity, which it       necessarily synonymous. In 2006, of
  undoubtedly is. In rural places, growth     the 121,593 Nebraskans who filed such
  in non-farm proprietor numbers has          returns, 80% claimed wage, salary and
  been explained in two ways. First, we       tip income through self employment,
  have seen non-farm proprietor growth        accounting for 63% of all sole
  as an entrepreneurial activity in which     proprietor income. This represents a
  rural residents seek to augment their       1% increase over 1997 in both filing
  incomes through the creation of small       and income percentages.
  businesses. Second, we have seen such
  growth as an adaptation to declining        It is likely that some percentage of
  farm numbers and a response to              these self employed wage and salary
  the desire among displaced farm             earners do not fit the common
  proprietors and their offspring to          definition of small business owners,
  remain in their home communities.           but rather are “independent
                                              contractors” who are indeed working

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  Page 46                                                      UNL Bureau of Business Research
  for a paycheck, but not as traditional    jobs certainly serves to mitigate (at
  employees. These workers receive          least partially) the economic and
  a W2 form which identifies them           demographic effects of declines among
  as “statutory employees.” Such            the farm proprietor population.
  jobs, in which payments for social        However, students of Nebraska’s labor
  security along with health and other      force should be cautious in assuming
  benefits are the exclusive obligation     that all non-farm proprietors represent
  of employees, are in fact fairly          conventional entrepreneurs. At the
  common. They would, for instance,         least it is unlikely that all of these
  describe many if not most home            individuals are, will become or even
  based telemarketing and information       intend to become employers in their
  processing jobs. These data suggest the   own right, as a traditional reading of
  possibility that growth in such jobs      non-farm proprietor numbers would
  is having an effect in Nebraska, and      optimistically suggest.
  especially in rural portions of the
  state.                                    Having said that, it is also the
                                            case that those individuals who
  These data do not necessarily             comprise the non-farm proprietor
  demonstrate a “problem” in replacing      population are certainly in some way
  traditional wage and salary jobs          entrepreneurial, regardless of how they
  with self employment and contracts.       are remunerated. They have chosen


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  Indeed, the availability of such          to base their future on their own

  Figure 2




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  Page 47                                            UNL Bureau of Business Research
  productivity rather than tie it to the
  productivity of specific employer, and
  their numbers are growing.

  If non-farm proprietors in fact include
  significant numbers of independent
  contractors, then educational
  programs aimed at small businesses
  might well be beneficially expanded
  to include the general population
  of self employed persons. If that
  population is to continue growing,
  it makes good sense to invest in the
  skills that will ensure their success.
  Fortunately, several programs exist
  within Nebraska state agencies and
  the University of Nebraska that either
  currently fit or could be adapted to
  fit the requirements of independent
  contractors as well as small businesses.
  Knowing more about the motivations


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  and aspirations of independent
  contractors would strengthen our
  ability to encourage their economic
  success.

  Whether they are seen or even see
  themselves as small business owners or
  independent contractors, the growing
  importance of non-farm proprietors in
  Nebraska’s economy and especially in
  our rural economy merits additional
  attention.


  References

  U.S. Bureau of Economic Analysis,
  Regional Economic Information
  System. County Income and
  Employment Summary, 1997 – 2006.
  Retrieved in April, 2007 from http://
  www.bea.gov



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  Page 48                                    UNL Bureau of Business Research
       Business in Nebraska June 008
                                        A Long Spell of Uncertainty
                                       Bythe Nebraska Business Forecast Council


  U.S. Macroeconomic                         quite a lot. If the U.S. economy falls
                                             into recession, or if a recession has
  Outlook                                    already begun, job losses will accelerate
                                             and unemployment will rise sharply.
                                             The real estate and financial markets
  W       e find ourselves in a period of
          sustained economic uncertainty.
  Today, like 6 months ago, the U.S.
                                             may spiral down faster. There is also a
                                             risk that prices increases will accelerate
                                             if inflation in food and energy spreads
  economy is on the brink of a recession.    into wage inflation impacting a broad
  Weakness in lending activity, coupled      spectrum of sectors.
  with weakness in the housing sector
  and related manufacturing industries       Our view is that the economy will
  has stymied economic growth since          avoid both a significant recession and
  late 2007. At times, recession seems


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                                             rapid inflation. Strong exports will
  imminent. But, the official measures,      encourage growth, and consumers
  such as quarterly gross domestic           and the financial sector will slowly
  product, do not clearly signal that the    work their way through their current
  economy is contracting. Further, prices    difficulties. Inflation largely will be
  are rising rapidly for food and energy.    contained to the food and energy
  That is the uncertainty. Will 2008 be      sectors. But, the scenario is far from
  remembered as a recession year, or         rosy. We expect weak economic
  as a period of disappointing but slow      growth through 2008 and early 2009,
  growth? And, will 2008 be known as         and elevated inflation rates through
  the year when inflation reignited in       2010. In particular, we expected
  America.                                   annual growth in real GDP of 1.1%
                                             in 2008, 1.7% in 2009. GDP growth
  In some sense, the answer does not         rates only returns to trend growth of
  matter. The United States and its          2.8% in 2010. Inflation will hit 4.0%
  citizens already are experiencing some     in 2008, and will be well above 2% in
  of the consequences of recession, and      subsequent years, at 2.6% in 2009, and
  of higher inflation. Job counts are        2.7% in 2010.
  declining and unemployment is rising.
  Many face the prospect of losing their     A significant slowdown will be avoided
  homes. Prices including food and           because the weak dollar will encourage
  energy are rising 2% faster than in        strong exports, and because consumer
  most recent years.                         spending will expand modestly despite
                                             a weak employment situation and high
  But, of course, the answer matters

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  Page 49                                              UNL Bureau of Business Research
  energy prices. Consumer confidence          Table 1
  has declined rapidly but consumer           Key Economic Growth Rates
  spending should stay steady thanks
  to lower interest rates, and in the very
  short-term, federal government rebate
  checks. Current high energy prices also
  are expected to stabilize, and therefore,
  will not cause even further strain on
                                              Note: Nominal income growth includes
  consumer spending for other goods           inflation
  and services.

  This relatively positive scenario           Employment
  naturally assumes that the U.S.             The pace of employment growth
  economy will avoid other major              will slow in 2008 as the economy
  dislocations. The economy may fall          slows. Job losses in manufacturing
  into a significant recession if there       and information will limit growth as
  are other major disruptions in the          will relatively slow growth expected
  financial system that limit access to       for the insurance industry and the
  capital. Inflation may spike further if     transportation and utilities industry.
  oil prices rise or additional weather       But, growth will remain solid in
  causes further increases in food prices.    services, and employment is expected



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                                              to grow in the construction sector.
                                              As is seen in Table 2, this outlook
  Nebraska Outlook                            is similar to our previous outlook

   T  he panel remains relatively
      optimistic about the outlook for
  the Nebraska economy. The Nebraska
                                              from December 2007. For some
                                              time, growth in 2008 was expected
                                              to be slow. The estimates for 2009
  economy will outperform the national        are somewhat lower in the current
  economy given the state’s strong            forecast, as slow growth is now
  farm sector, a manufacturing sector         expected to continue into early 2009.
  linked to farm implements and food          The December 2007 forecast did not
  processing and limited exposure             cover the year 2010.
  to housing price declines. As a
  consequence, the Nebraska economy is        Table 2 - Comparison of Non-
  expected to grow modestly in 2008, as       Farm Employment Forecasts
  seen in Table 1 below.

  Employment growth is expected to
  be weak in 2008, before recovering
  in mid-2009. Strong growth only
  will return in 2010. Farm income
  will continue to grow in 2008, and
  maintain most of its recent growth in       Construction and Mining
  2009 and 2010.                              Despite continuing woes in new
                                              home construction, overall levels of


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  Page 50                                               UNL Bureau of Business Research
  construction employment will rise in                perhaps in spring 2009.
  the next few years. The main reason
  for the rise will be strength in non-               The non-residential building sector is
  residential building construction.                  doing well in Nebraska. Many major
  Construction employment will grow                   projects are planned and set well in
  by 2.0% in 2008, and then jump to                   advance, so the sector has considerable
  4.0% in 2009, due to a resurgence in                momentum for the next few years.
  home construction later in that year.               Both builders and architects describe
  Growth will moderate to 3.0% in 2010.               themselves as busy, and major projects
                                                      such as Aksarben Village and the Mid-
  Since home mortgage financing                       town project are underway. There are
  conditions are determined in national               many in-fill buildings as well in other
  markets, Nebraska shares in national                parts of the Omaha metropolitan Area.
  woes in home construction. Closings                 Rural areas also are described as busy.
  have become more difficult, with                    Highway construction activity will
  borrowers required to put up more                   continue to increase in dollars terms
  money than expected and jumbo loans                 but real activity will rise only slightly
  are placeable only in private markets.              in 2008 and 2009 amid weak growth in
  Further, builders are trying to get                 fuel tax revenues.
  their inventories reduced. Inventory
  correction, however, will allow a


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  turnaround in home construction,

  Table 3 - Number of Non-Farm Jobs and Percent Changes by Industry
  Annual Averages (in thousands of jobs)
               Construction,                               Trans-
                 Mining &                                 portation
       Nonfarm   Natural             Non- Wholesale Retail and                           All Federal Local
        Total   Resources Durables durables Trade Trade Utilities      Info Financial Services Gov’t Gov’t
   1998 880.0      42.4      58.5    55.9    42.2 107.2 43.3           26.3 58.8       295.9    16 134.9
   1999 897.5      44.3      57.7    55.7    42.5 110.1 44.5           27.1 60.9       304.6 15.9 135.6
   2000 914.1      45.2      58.9    55.4    41.9 111.2 45.1           26.9 60.5       315.8 16.6 137.9
   2001 919.7      45.3      54.6    56.2    42.5 110.5 45.2           25.8 60.2       322.4    16 140.8
   2002 911.5      46.1      50.6    55.4    41.5 108.9 44.9           23.2 61.4       320.5 16.3 142.6
   2003 914.2      47.4      47.3    55.1    41.0 107.2 46.4           21.5 62.4       326.1 16.7 143.1
   2004 922.2      48.4      47.0    54.0    40.8 106.9 48.9           21.1 63.2       331.8 16.5 143.6
   2005 934.9      47.8      48.4    52.9    40.6 107.2 52.3           20.2 64.5       339.8 16.3 144.9
   2006 946.8      48.4      49.7    51.8    40.8 106.4 53.4           19.5 66.7       347.8 16.2 146.1
   2007 962.6      50.5      50.0    51.3    40.7 107.7 56.1           19.3 69.0       353.9 15.9 148.2
   Forecast Number
   2008 973.9        51.5     50.0    50.7     40.5   108.5   56.6     19.1   69.6    362.0   15.9 149.4
   2009 988.3        53.6     50.0    50.2     40.4   109.0   58.4     19.0   71.0    370.4   15.9 150.6
   2010 1,005.3      55.2     50.5    50.2     40.3   109.5   60.6     18.9   72.4    378.9   16.7 152.1
   Forecast Number
   2008 1.2%         2.0%     0.0%    -1.1%   -0.5%   0.7%    0.9% -1.0% 0.9%         2.3%    0.0% 0.8%
   2009 1.5%         4.0%     0.0%    -1.1%   -0.3%   0.5%    3.1% -0.5% 2.0%         2.3%    0.0% 0.8%
   2010 1.7%         3.0%     1.0%     0.0%   -0.3%   0.5%    3.9% -0.5% 2.0%         2.3%    5.0% 1.0%



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  Source: http://data.bls.gov/cgi-bin.dsrv, 008

  Page 5                                                            UNL Bureau of Business Research
  Manufacturing                              construction materials and general
  Manufacturing is among the most            merchandise will slow demand for new
  cyclical industries in the economy,        drivers. Moreover, the aggressive hiring
  and manufacturing employment               in the rail industry in the early part of
  is declining in the current national       this decade to rebuild its workforce has
  economy. Nebraska manufacturing            largely run its course. This hiring was
  should perform relatively well over        in response to healthy export growth
  the next few years, given that the         (which tends to favor rail), and also
  durable goods sector has strength in       necessary because of dramatic cuts in
  manufacturing farm machinery, and          the late 1990s.
  components for the emerging wind
  energy sector. And, the non-durable        After growing 0.9 percent in 2008,
  goods sector is focused on food            employment will recover moderately
  processing, which is s relatively stable   through 2009 and 2010. Factors such
  sector within manufacturing.               as favorable demographics, the state’s
                                             central location, low entry costs and
  But, even in Nebraska, manufacturing       state economic development efforts in
  employment is likely to decline            trucking and warehousing will foster
  modestly in 2008 and 2009. Durable         long-term job growth in this sector.
  goods employment will be flat in           Overall, employment in the sector is
  both 2008 and 2009, and grow by 1.0        expected to grow by 3.1 percent in


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  percent in 2010 when the economy           2009 and 3.9 percent in 2010.
  is well into recovery. Non-durable
  goods employment will decline by           Wholesale Trade
  1.1 percent per year in 2008 and           Wholesale trade employment in
  2009, but remain flat in 2010. Overall     Nebraska has declined since the year
  manufacturing employment will fall         2000. Rising labor productivity has
  by 0.6 percent in 2008, 0.5 percent in     meant that employment has failed
  2009, and grow by 0.5 percent in 2010.     to grow even as industry output has
                                             expanded in a growing Nebraska
  Finally, two other trends are expected     economy. This pattern is expected
  to impact the manufacturing industry.      to continue through 2010. Industry
  A weak dollar is expected to improve       employment will decline by 0.5
  exports and potential for foreign direct   percent in 2008 and 0.3 percent in
  investment. At the same time, labor        both 2009 and 2010.
  supply constraints, particularly in
  nonmetropolitan Nebraska, may limit        Retail Trade
  growth.                                    After years of decline, job growth has
                                             returned to the retail industry. Retail
  Transportation and Utilities               trade employment grew rapidly in
  After posting healthy gains in 2007,       2007, by 1.2 percent. But despite recent
  this sector is poised for a cyclical       strength, it remains true that the retail
  slowdown in 2008 A combination             trade sector is no longer a consistent
  of higher than anticipated diesel          source of job growth in Nebraska.


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  fuel prices and slowing demand for
  Page 5                                              UNL Bureau of Business Research
  There are several factors that limit       beginning in 2009. Other portions of
  growth in retail employment. First         the industry, such as insurance and
  of all, larger retailers, who utilize      investments, should exhibit steady
  fewer workers relative to sales, are       growth throughout the next three
  capturing a growing share of the retail    years. Taking all of this into account,
  market. Another factor has been the        we expected employment growth of
  increased sales by on-line and other       just 0.9 percent in 2008. Growth will
  nontraditional retailers. These factors    then return to the long-term trend rate
  will limit retail employment growth        of 2.0 percent in both 2009 and 2010.
  over the next three years. Retail          Services
  employment is expected to increase by      Accounting for one-third of
  0.7 percent in 2008 and by 0.5 percent     employment in the economy, the
  in 2009 and 2010.                          diverse and rapidly growing services
                                             industry is a key to our employment
  Information                                forecast. As is evident in Table 3,
  The information industry contains a        65,000 of the approximately 90,000
  diverse group of industries included       jobs added to the Nebraska economy
  newspapers, movie theatres and             from 1998 to 2007 were added in
  sound studios. These locally-oriented      the services industry. Nebraska can
  portions of the industry are stable. The   maintain a health rate of employment
  industry also contains high technology     growth if services industry


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  or information processing industries       employment grows by more than 2
  such as telecommunications, data           percent.
  processing, web site devel¬opment,
  and web publishing. These industries       Despite weakness in the overall
  have consolidated and downsized in         economy, we anticipate that services
  recent years, losing 7,500 jobs since      industry employment will grow by
  2000. Consolidation also is anticipated    2.3 percent in 2008. Similar rates of
  in 2008. Industry employment is            growth will be achieved in 2009 and
  expected to decline by 1.0 percent in      2010. The health care sector will be the
  2008. Losses of just 0.5 percent are       key to job growth in services. Industry
  expected in 2009 and 2010.                 employment continues to expand as
                                             an aging population requires more
  Financial Services                         health care services, and as innovation
  The financial services industry            in the industry continually adds new
  comprises finance, insurance, and          treatments and products. Further,
  real estate. Segments of the industry      solid health care growth is expected
  such real estate, loan activity, and       even in difficult times since health care
  mortgage brokers are being negatively      is a necessity rather than the type of
  impacted by weakness in the housing        discretionary spending that is curtailed
  sector. We expect that these industry      during times of economic stress. We
  segments will continue to be impacted      anticipate that health care employment
  throughout 2008, but should recover        will grow by around 2.5 percent per
  as the housing sector recovers             year during the period. Ambulatory


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                                             health care services such as home
  Page 53                                             UNL Bureau of Business Research
  health care services, ambulance            tended to exceed, though only slightly,
  services, blood donor stations, and        the rate of population growth in
  health screening services are the fast     Nebraska. State and local gov-ernment
  growing portion of health care.            employment historically has grown
                                             1% per year on average, as the need
  Other portions of the services             for teachers, police, fire, and other
  industry include professional and          state and local employ¬ees who work
  business services, education services,     directly with the public rises with
  personal services, accommodations,         population. Also, as incomes rise, the
  food and drinking places, and arts,        demand for government services per
  entertainment, and recreation. Among       person also rises. This said, there may
  remaining industries, a strong growth      be some weakness in government
  rate also is expected for administrative   employment in the next few years
  support services, and arts,                given that stagnant or declining
  entertainment, and recreation. Growth      property values have reduced growth
  in arts, entertainment, and recreation     in local property tax revenues. Our
  is also aided by demographic trends,       expectation is that state and local
  particularly increasing leisure time and   government employment will grow
  disposable income among retired and        0.8 percent in 2008, and 2009. Growth
  “baby-boomer” age groups. In 2008,         will recover to the historic trend of 1.0
  slower growth is expected for both         percent in 2010.


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  the accommodations and for food
  and drinking places. Accommodation         Personal Income
  activity in Nebraska has been affected     Personal income growth will be solid
  by declining highway traffic counts on     in Nebraska over the outlook period,
  Interstate 80 and other major routes in    though non-farm income growth
  Nebraska in reaction to rapidly rising     will moderate as the economy slows
  gasoline prices. Food and drinking         in 2008. Farm income growth was
  places have been hurt by rapidly           very strong in 2007. Strong growth is
  increasing food prices, which have         expected to continue in 2008 before
  caused some consumers to cut back on
  dining away from home.                     Table 4 - Comparison of Forecasts
                                             for Nominal Income
  Government
  Our outlook calls for no change in
  federal government employment
  in 2008 and 2009, and a 5 percent
  increase in 2010 in order to conduct
  the decennial census. This was the
  percentage increase observed in
  the last census year of 2000. Steady
  growth is expected in state and local
  government employment, following
  recent trends. Growth in state and         Note: Nominal income growth includes


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  local government employment has            inflation
  Page 54                                              UNL Bureau of Business Research
  incomes pull back from record levels
  in 2009 and 2010. Table 4 below                           As seen in Table 5, we expect non-
  compares the current income forecast                      farm wages and salaries to grow
  with our June 2007 forecast. We                           by 4.7 percent in 2008 slow to 4.3
  now expect slower growth in non-                          percent growth in 2009 and rise to 4.5
  farm income due to much lower                             percent in 2010. Employee benefits
  expectations for dividend, interest, and                  (other labor income) are expected to
  proprietor income.                                        grow about 1% faster than wage and
                                                            salary income, by 5.3 percent to 5.7
  Non-Farm Personal Income                                  percent each year. Changes in other
  Non-farm personal income growth                           labor income are primarily driven by
  is expected to moderate as economic                       increasing health care costs.
  growth slows. In particular, non-farm                     Slower economic growth in 2008
  personal income growth is expected to                     and early 2009 is expected to impact
  slow to around 5% per year beginning                      growth in both non-farm proprietor
  in 2008. A weak labor market also will                    income and dividend, interest,
  limit growth in wages per job in 2008,                    and rent income. Profits are very
  2009, and 2010.                                           pro-cyclical. As a result, non-farm
                                                            proprietor income growth will be
  Table 5 - Non-Farm Personal Income and Selected Components and



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  Net Farm Income (USDA) ($millions)

                                                Non-farm
                                                Wages &
                                       Total     Salaries
                      Non-           Personal   (Wages &                                                 Net
         Consumer farm Dividends, Current        Salaries     Other Contributions           Non-Farm Farm
            Price Personal Interest, Transfer    — Farm       Labor   to Social Residential Proprietor Income
           Index Income & Rent Receipts          Wages)      Income Insurance Adjustment Income (USDA)
    Millions of Dollars
    1998 163.7 $41,591 $9,096         $5,477    $23,343      $4,744    $3,686       -$684     $3,300   $1,816
    1999 167.8 $43,644 $9,148         $5,822    $24,796      $4,999    $3,874       -$762     $3,517   $1,707
    2000 173.6 $46,366 $9,991         $6,075    $26,186      $5,317    $4,032       -$825     $3,654   $1,446
    2001 177.5 $48,102 $9,998         $6,667    $26,908      $5,612    $4,200       -$833     $3,952   $1,906
    2002 180.9 $49,730 $10,023 $7,069           $27,713      $6,362    $4,350       -$869     $3,782    $862
    2003 184.6 $51,441 $10,002 $7,426           $28,688      $6,753    $4,520       -$911     $4,003   $2,730
    2004 190.2 $53,547 $9,835         $7,710    $30,050      $7,181    $4,724       -$933     $4,428   $3,554
    2005 197.4 $56,131 $10,373 $8,094           $31,242      $7,641    $4,960       -$946     $4,687   $2,847
    2006 202.6 $59,648 $11,392 $8,695           $32,901      $8,027    $5,288       -$933     $4,855   $2,600
    2007 209.0 $63,091 $12,338 $9,259           $34,666      $8,402    $5,586      -$1,003    $5,015   $3,625
    Forecast Number
    2008 217.3 $66,188 $12,858 $9,769           $36,280      $8,881    $5,742      -$1,051    $5,194 $4,520
    2009 223.0 $69,347 $13,431 $10,376          $37,834      $9,385    $5,995      -$1,081    $5,397 $4,100
    2010 229.0 $72,650 $14,159 $10,916          $39,530      $9,883    $6,344      -$1,124    $5,631 $4,000
    Forecast % (nominal growth)
    2008 4.0%         4.9%   4.2%      5.5%       4.7%        5.7%      2.8%        4.8%      3.6%     24.7%
    2009 2.6%         4.8%   4.5%      6.2%       4.3%        5.7%      4.4%        2.8%      3.9%     -9.3%
    2010 2.7%         4.8%   5.4%      5.2%       4.5%        5.3%      5.8%        4.0%      4.3%     -2.4%

  Source: http://www.bea.gov, 008



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  Note: Nominal income growth includes inflation

  Page 55                                                              UNL Bureau of Business Research
  weak in both 2008 and 2009 before            of the bio-fuels industry, have created
  recovering in 2010. Non-farm                 a surge in commodity crop prices.
  proprietor income is expected to             Nebraska’s agricultural production
  increase by 3.6 percent in 2008 and 3.9      industry is a major player in this
  percent in 2009. The rate of growth          new emerging era. That said, while
  will increase to 4.3 percent in 2010,        strong prices will translate into higher
  as the economy continues to recover.         farm incomes in the state, several
  At the same time, growth in transfer         factors will limit the growth in farm
  income is expected to be robust,             incomes. First, input costs for crop
  between 5.2 percent and 6.2 percent          producers have also moved up sharply,
  per year.                                    particularly those inputs tied directly
                                               to petroleum. There been substantial
  Declining profits will affect dividend,      price increases for fertilizer, fuels, seed,
  interest, and rent income as well.           and land rents.
  Declining profits will lead some
  firms to cut their dividend payment          The second factor is that high crop
  to stockholders. Interest rates on           prices have lead to higher feed prices
  certificates of deposits, money market       for livestock producers. As a result,
  funds, checking accounts, and other          the state’s livestock sector is struggling
  interest bearing accounts also will          through a difficult economic period.
  decline as the economy weakens.              Pork production is currently not


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  This is because falling dividends            profitable for most operators. Cattle
  and heightened risk of declining             feeders are dealing with slim profit
  stock prices increase the appeal of          margins, at best, even with the
  investments in money market funds            opportunity of utilizing ethanol by-
  or certificates of deposit. A growing        products in their rations. Until prices
  supply of potential lenders means            to the final consumer rise, income
  that interest rates can fall. All of these   for the state’s livestock sector will fail
  factors create an expectation of modest      to grow. Livestock prices could rise
  growth in dividend, interest, and rent       to reflect higher input costs later in
  income. Growth is expected to fall to        the forecast period, But, at this point,
  4.2 percent in 2008, just above the rate     dairy and egg producers are the only
  of inflation. Growth is expected to be       components of the livestock sector
  4.5 percent in 2009 before accelerating      where such cost flow-through has
  to 5.4 percent growth in 2010.               occurred,.

  Farm Income                                  After growing by over 30 percent
  Over the past 24 months. U.S.                in 2007, Nebraska farm income is
  production agriculture has entered           expected to jump by another 24.7
  into a new period. Record agricultural       percent in 2008. Farm income will hit a
  exports occurred in 2007 due to rising       record of just over $4.5 billion in 2008.
  world demand and a falling dollar.           Farm income will retreat modestly in
  U.S. agricultural exports are projected      2009 and 2010, which is not surprising
  to rise another 25% in 2008. These           after two years of 25 percent to 30
                                               percent growth. However, farm income

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  factors, along with the rapid expansion
  Page 56                                                 UNL Bureau of Business Research
  will remain at or above $4.0 billion           period. With a weak economy, 2008
  in both years, making the $4 billion           non-motor vehicle taxable sales will
  mark the new income plateau for                grow at just 2.4 percent, below the rate
  Nebraska agriculture. Further, the vast        of inflation. Growth in non-motor
  majority of this income will come              vehicle taxable sales will strengthen to
  from profitable sales rather than farm         3.6 percent in 2009, as the economy
  programs.                                      begins to recover, and reach 5.1
                                                 percent in 2010. In the latter years,
  Net Taxable Retail Sales                       revenue also will be aided by efforts
  In Table 6, data on net taxable retail         to improve compliance by non-
  sales are divided into motor vehicle           traditional retailers.
  sales and non-motor vehicle sales.
  The distinction is important. Motor            Motor vehicle net taxable sales, always
  vehicle net taxable sales are growing          very cyclical, begin a sharp turn-
  over time, but from year to year follow        around in 2007, growing by 9 percent
  a very cyclical pattern. Non-motor             after years of decline. Growth will
  vehicle taxable sales rise steadily, but       moderate in 2008, when motor vehicle
  are affected by periodic changes to            taxable sales are expected to grow by
  Nebraska’s sales tax base.                     5.0 percent. Growth will continue to
                                                 moderate to 3.2 percent in 2009, and
  Table 6 shows non-motor vehicle                growth will stall in 2010, when 0.3


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  taxable sales over the 2008 to 2010            percent growth is anticipated.

  Table 6 - Net Taxable Retail Sales, Annual Totals ($millions)




  Source: Nebraska Department of Revenue, 008


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  Note: Nominal taxable sales growth includes inflation

  Page 57                                                 UNL Bureau of Business Research
  Overall growth in net taxable sales
  is expected to reach 2.7 percent in
  2008. This is below the anticipated
  inflation rate of 4 percent. Growth
  will accelerate to 3.6 percent in 2009.
  Growth in net taxable sales is expected
  to reach nearly 4.6 percent in 2010,
  well above the 2.7 percent inflation
  rate anticipated during that year. The
  State of Nebraska therefore will not see
  a solid year for real sales tax growth
  until 2010.




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  age, disability, race, color, religion, marital status, veteran’s status,
  national or ethnic origin or sexual orientation.




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        Bureau of Business Research
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        College of Business Administration
        P.O. Box 880406
        Lincoln NE 68588-0406
        E-mail: ethompson@unl.edu


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