Economic Roller Coaster: Sidney Economy Strong Though U.S. Economy Weak By Klark Byrd kbyrd@suntelegraph.com SIDNEY - It’s in every newspaper, on every radio station and heard nightly in television broadcasts - the U.S. economy is not doing well and the outlook is grim. The subprime mortgage business is on the rocks, the U.S. dollar isn’t worth as much as it used to be and gas prices are through the roof. If you were to ask an economic analyst about the cause of the state of the economy, the immediate response would be the bursting of the housing bubble. The signs were easy to spot, even back in 2005 when the housing market reached its peak. A report published by the Center for Economic and Policy Research in July 2005 warned that “the collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession ...”. Such is not the case - at least not yet - according to analysts. The United States managed to make it through 2007 without a recession, though one was predicted. Now halfway through this year, analysts are predicting that the bursting housing bubble won’t create a recession after all, but the economy will come close to it. The last recession to strike the United States occurred between March and November 2001, but it was the housing bubble that help protect against the $7 trillion bursting of the stock market bubble that year. Comparable in size, the housing bubble was estimated to be at $5 trillion during its peak. Analysts are asking what - if anything - could help protect the economy against this huge loss. When it comes to mortgage-finance giants Fannie Mae and Freddie Mac, the federal government is planning on coming to the rescue. According to The Washington Post, the rescue could cost as much as $25 billion over the next two years. The companies combined portfolios tally up to as much as $1.5 trillion in mortgages. The Associate Press reported Tuesday that U.S. Treasury Secretary Henry M. Paulson, Jr. urged Congress to quickly approve the proposal for Fannie and Freddie saying that their continued operations are “central to the speed with which we emerge from this housing correction. “Because of their size and scope, Fannie and Freddie’s stability is critical to the financial market stability,” Paulson said. “Investors in our nation and around the world need to know that we understand how important these institutions are to our capital markets broadly and to the U.S. economy.” When it comes to housing in Sidney, there might be a shortage of it, but there certainly isn’t as much to worry about financially. According to Sidney Federal Savings and Loan President Steven Smith, the economy in Sidney is good. “I think our local economy remains strong,” Smith said. “[SFSL] never got into offering risky loans so it hasn’t affected our business. We were doing things the right way all along.” But that doesn’t mean Sidney and the state of Nebraska aren’t feeling the pinch of the U.S. economy. According to the Nebraska Department of Economic Development, Nebraska’s economic growth tends to follow growth in the national economy, and it’s saying slow but steady growth is likely to characterize the state’s economy in the near future. As far as Sidney is concerned, City Manager Gary Person says diversity in economic growth has been the key to putting Sidney in its own protective bubble, where the effects of the down-trending national economy are lessened in the local economy. “As a community, you can’t rest on your laurels,” Person told The Sun-Telegraph. “You’ve got to continue to forge ahead until things turn around.” Person said Sidney learned its lesson the hard way after the local economy took a downturn more than 40 years ago and left Sidney sitting still. Once the city took an aggressive stance toward economic development, the local economy began to make a comeback. Nebraska also learned its lesson of putting all its eggs in a basket. Person said the state has learned to diversify its economy since the agricultural bubble burst 25 years ago. By diversifying the economy with construction, agriculture, home-grown entrepreneurs and businesses that offer almost everything, Sidney is able to keep afloat and continue to prosper even when things are going from bad to worse on a national level. “We have a number of businesses that are affected by the U.S. economy,” Person said. “But we feel very good about our position compared to other [communities].” Sidney and Nebraska are not without challenges created by the U.S. economy. Rising fuel prices are contributing to higher merchandise prices and the need to raise city department budgets to cover the cost. However, it is that aggressive stance toward economic growth that continues to refuel the Nebraska economy when others are feeling the pinch. “We’ve worked hard to build housing and infrastructure,” Person said. “We’re continuing to see new commercial business interest in Sidney.” But that’s not all Sidney has up its sleeve. Person said there are plans to reconstruct the East Old Post Road area, more homes are being built in city limits and a new wastewater treatment plant is scheduled for construction. “We’ve developed a reputation as a community that embraces development,” Person said. Jack Shultz, author of the book “Boom Town”, said Sidney has more jobs per capita than any other community in the United States. The NDED backed up that statement when it researched jobs per capita in cities across Nebraska and discovered that Sidney and Cheyenne County has the highest number in the state. It wasn’t easy getting to this point, Person says. “It took a lot of people working together to get a diversified economy,” he said. “We’ve got a lot of groups in town working toward their goals.” Those groups include the Vision 20/20 group, Community of Employers Committee and many others with plans to brighten the future economy of Sidney. “There are so many feel-good things,” Person said. “When people see all the bad news, it becomes easy to forget the good. It’s a privilege in my job to get to talk about all the good in Sidney.” Person said the city will have to be conservative with this upcoming year’s budget. It’s a sign that Sidney has not been spoiled by its success. Person said it’s easy for a community to get spoiled and forget where it came from, but Sidney will continue to push towards a greater economy. “We’re fortunate because we’re still seeing building activity,” Person said. In a time when contractors fear the price of materials, Sidney can consider itself fortunate that building continues. A prime example of the cost of materials skyrocketing is seen in the bids received by the city for the construction of a new wastewater facility. According to Person, the bids came in 44 percent higher than the estimated cost projected by the engineers. With bids stating costs at more than $5 million dollars, Person said it could really put a pinch on Sidney. “It’s definitely a challenging time,” he said. But the analysts predict Nebraska’s economy will continue to look bright in the wake of the failing U.S. economy. If unemployment statistics are a relevant indicator of the economy, Nebraska is a shining star in the United States. According to statistics compiled by the NDED, Nebraska unemployment numbers have been under the national average for well over a decade, with present data dating back to 1993. Since the turn of the century, Nebraska has remained in the 10 lowest unemployment percentage states. The data shows that in 2000, the U.S. unemployment rate was 4 percent. Nebraska ranked eighth on the list with an unemployment rate of 2.8 percent. In 2002, the U.S. unemployment rate jumped to 5.8 percent while Nebraska ranked third with 3.7 percent. U.S. unemployment rates reached a peak in 2003 at 6 percent. Nebraska ranked fourth with an unemployment rate of 4 percent. Nebraska ranked sixth in the nation with an unemployment rate of 3.9 percent in 2004. The U.S. unemployment rate for that year was 5.5 percent. Nebraska was ranked ninth in 2005 with 3.9 percent unemployment rate while the U.S. unemployment rate was 5.1 percent. In 2006, the U.S. unemployment rate was 4.6 percent. Nebraska ranked second with a rate of 3 percent. The numbers for both remained unchanged from 2006 to 2007, but Nebraska dropped to rank fourth in the nation. As of May 2008, the Nebraska unemployment rate was 3.1 percent. While Nebraska gained .1 percent unemployment, the national numbers jumped .9 percent to 5.5 percent so far this year. Cheyenne County unemployment rates remain under the state average at 2.9 percent this year. The Sun-Telegraph was unable to retrieve unemployment statistics for 2001. Person said Sidney can thank its strong economy on the employers in town. “Without them, you don’t have an economy,” he said.