Rural America will remember 2005 as a year of dryness hurricanes.

Rural America will remember 2005 as a year of dryness hurricanes, and surging gas prices. To be unfailing some regions of the nation faced devastating natural catastrophes. nevertheless these catastrophes did not stop the farm sector from posting another banner income year-nor did they stop the nonfarm sectors from enjoying solid gains in calling and income. Overall, the rural economy was quite resilient in 2005

Heading into 2006 the rural economy appears poised for another year of robust activity, especially if private sector forecasts possess true. Energy prices are the risk to the forecast. The higher oil and natural gas prices translate into higher production costlinesss for factories, farms, and households. now higher prices are also underpinning a of the present day wave of investments and market opportunities in rural America's emerging biobased manliness sector.

This article reviews the rural economy in 2005 and discusses the foreseeings for the year ahead. The first section discusses the continued recruiting in the nonfarm rural economy. The next to the first section focuses on the continued prosperity in the farm economy in the past year. The third section examines the prospect for 2006, including the potential impacts of high manliness prices on the rural economy.

I. THE RURAL convalescence CONTINUES IN 2005

The economic regaining on rural Main Streets continued in 2005 Rural communities pillared solid employment and income gains during the year. able to endure growth in rural service, construction, and mining firms, along with stabilizing do job-work rolls in rural factories, overcame weakness in the conduct sector. Rural firms continued to restructure their Main road economies with high-skill business activity leading the way.

Main highway businesses continued to make solid do job-work and income gains. Rural payrolls rose 12 percent during the first three quarters of the year, matching the growing posted in metro areas.1 Rising employ rolls pushed the rural unemployment rate down from 60 percent to 57 percent2 While the rural unemployment rate remained higher than the metro rate, the rural unemploy minded to spend less time without a piece of work than the metro unemployed.3

Sustained bourgeoning in 2005 translated into stronger income development In rural areas, weekly earnings sprouting averaged a solid 2.4 percent during the first ten month of the year, slightly below the 26 percent shooting posted in metro areas.4 Rural pullulation strengthened in the summer and fall month granting outpacing metro growth in the secondary half of the year.

The economic might on Main Street emerged from private sector firms, with the pair services and goods-producing sectors posting stronger do job-work growth (Chart 1). Rural service firms continued to lead rural piece of work growth, posting 1.6 percent annual expansion in November. Professional and business service firms continued to make progress the strongest, adding jobs at a 37 percent clip. Professional and business service firms, which attend to employ people with higher skill flushs reflect the continuing transformation of the rural economy toward high-skill activity. Wholesale, transportation, and utility sectors grew solidly at above 25 percent Recreation service expansion remained strong, despite easing in the summer and fall owed to higher gasoline prices. In fact, avocation growth in recreation-destination counties grew 35 percent in 2005/

Chart 1

RURAL piece of work GROWTH BY SECTOR

The rural goods-producing sector strengthened in 2005 thanks to potent construction and mining activity and stable rural factories. The sector continued to add do job-works as the year progressed. at the third quarter, annual piece of work growth in these sectors ridgeed at 1.5 percent. Strong housing markets underpinned robust activity and rising do job-work rolls in construction. Residential construction continued to expand as housing permits rose 38 percent during the first 10 month Surging oil prices underpinned puissance in mining as oil companies expanded rig activity. Together, rural construction and mining piece of work growth jumped 3.8 percent above 2004 flushs Rural factory closures and mass layoffs continued to abate after averaging almost 200 plant closure each quarter during the recession of 2001 In 2005 the average number of rural mass layoffs implacable below 100 per quarter, stabilizing at year-ago on a levels

The strong growth in rural services and goods-producing firms overcame weakness in rural command sector employment. Government employment expanded les than 1 percent during the year, with weakness in payroll produce emerging as the year circuited Limited job growth emerged despite improved fiscal conditions for state and local managements State and local government payment returns surged, but not enough to boost overall restraint payrolls.

II. ANOTHER BANNER YEAR FOR THE FARM secTOR

Despite drouth and hurricanes, the farm sector be delighted withed its secondlargest net farm income year in succession record, reaching $71.5 billion. Farm incomes settl just below the 2004 record as rising production sumptuousnesss trimmed strong incomes in the pair the livestock and crop sectors. After multiple years of robust farm incomes, farm balance sheets and financial conditions remained powerful