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Lincoln, Nebraska economies appear to be booming. How long can it last?
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Lincoln, Nebraska economies appear to be booming. How long can it last?

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Kawasaki

Welders put together vehicle frames last July at Kawasaki in Lincoln.

Jun.29 -- From oil to steel, raw material prices are surging. As the world economy recovers, how much further does the boom have to run? Bloomberg's Julian Lee reports.

The U.S. Commerce Department last week announced the nation's economy had grown 6.5% in the second quarter and is now larger than it was before the pandemic.

While hard data for the local and state economies won't be available for quite some time, all signs point to very strong growth in both the Lincoln area and across Nebraska.

Nebraska has had the lowest unemployment rate in the country all but one month this year, and its rate of 2.5% in June was the lowest it's been in more than 20 years.

The Lincoln and Omaha areas also have sported historically low unemployment rates recently, and personal finance website WalletHub last week ranked the cities No. 1 and No. 2 nationwide for the recovery in their unemployment rates.

"The pandemic continues to have less of an impact on the Nebraska economy and on the metropolitan economies within the state," said Creighton University economist Ernie Goss. "This, of course, spills over into the broader economy via lower unemployment rates and other positive economic outcomes."

There are many signs of those other positive outcomes. For example, the state recently reported that it brought in nearly $960 million more tax revenue in fiscal year 2021 than it forecast. Lincoln's sales tax revenues, with one month of the fiscal year still to be counted, are running more than 13% ahead of projections and more than 10% over the previous year.

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A monthly economic indicator put out by the University of Nebraska-Lincoln's Bureau of Business Research showed an increase for the ninth straight month in June, which "confirms that economic growth will be strong in Nebraska through the end of the year,” said Eric Thompson, economist and bureau director.

While there are some concerns that the current robust economy could slow down once pandemic-related government stimulus programs end, Thompson said there are some good signs that the economic growth may have staying power.

"Government stimulus is also likely to be spent over time rather than just this year, which will also support further growth in the coming year," Thompson said in an email.

Another positive sign for Nebraska's economy is higher agricultural commodity prices.

"The agriculture sector continues to benefit from some of the best prices and economic conditions since 2012-13," Goss said.

Since agriculture is by far the state's top economic sector, its success trickles down through the rest of the economy, leading to more jobs, higher wages and demand for other products and services.

Another sector that is doing well is manufacturing, with Goss noting that Nebraska's manufacturing industry has shown strong growth as measured by Creighton's monthly MidAmerica Economic Conditions surveys.

Nebraska unemployment rate drops further, while Lincoln's ticks up

In a recent example of the manufacturing economy's strength locally, Kawasaki Motors Manufacturing last month announced plans to spend $200 million over 18 months to expand its Lincoln operation.

Kawasaki also said it plans to hire 550 additional workers, although it said it also will increase automation, citing Lincoln's low unemployment rate as a barrier to hiring.

Both Goss and Thompson mentioned labor shortages as the main challenge to the local and state economies.

Part of the reason the unemployment rate is so low in both Lincoln and Nebraska as a whole is because the labor force is actually smaller than it was pre-pandemic. Goss called lower labor force participation "a significant and negative factor slowing growth in the state."

Nebraska in mid-June stopped participating in a federal program that offered an extra $300 a week in unemployment benefits, but it's too early to tell if that has had any effect on increasing labor force participation.

However, even discounting those additional payments, Goss said there are other factors keeping people out of the workforce. Those include other government payments, such as stimulus checks and advance payments of child tax credits, as well as a lack of child care options for some parents.

Kawasaki to expand in Lincoln, add hundreds of jobs

The leisure and hospitality industry, which was hit hardest during the pandemic, has been experiencing the most employment growth over the past few months as restrictions loosened and people chose to travel and go out more. Employment in the sector in June was up 18.5% in Nebraska compared with a year ago, according to the Bureau of Labor Statistics.

But it also is the industry that has the most trouble filling jobs, due in large part to low pay and difficult working conditions.

A number of restaurants have trimmed menu items and cut back on operating hours because of the inability to hire enough staff.

Lincoln recently made national news after employees working their last shift at the Burger King in Havelock changed the marquee sign outside to read, "WE ALL QUIT. SORRY FOR THE INCONVENIENCE."

Greg Sulentic, who owns an Express Employment staffing agency franchise in Lincoln, said pay rates have jumped since the pandemic, with workers who made $10 to $11 an hour last year now getting $15 or $16.

“We’ve seen wage growth like we’ve never before seen in this industry, and I’ve been doing this for 25 years,” he said.

Some employers, he said, have been reluctant to increase pay, but “it’s been very difficult for those companies to hire on and retain employees.”

Pay issues aren't just limited to private employers.

On Friday, Gov. Pete Ricketts announced new incentive programs for state employees working in facilities that are open 24 hours a day.

The program mainly targets the state's prisons, which have experienced chronic shortages of workers for years.

Incentives include commuting, transfer and retention bonuses, as well as a boost to the existing sign-on bonus program.

“The positions in this incentive plan were identified as critical for ongoing operations of our 24/7 facilities," Jason Jackson, the state's chief human resources officer, said in a news release. "We will continue to monitor the labor market and our staffing needs to ensure the State remains a competitive employer of choice.”

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The Associated Press contributed to this story.

Reach the writer at 402-473-2647 or molberding@journalstar.com.

On Twitter @LincolnBizBuzz.

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Business reporter

Matt Olberding is a Lincoln native and University of Nebraska-Lincoln graduate who has been covering business for the Journal Star since 2005.

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