center for business and economic research, the university of alabama

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA

Alabama Economic Outlook

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 2

Personal consumption share at high levels Personal consumption share at high levels Personal consumption share at high levels Personal consumption share at high levels

Source: U.S. Department of Commerce, Bureau of Economic Analysis.

U.S. Consumption as Percent of GDP

Trend 68.2


. . . as government share declines. . . as government share declines. . . as government share declines. . . as government share declines



Government Expenditures as Percent of GDP



Consumers have been spending heavily Consumers have been spending heavily Consumers have been spending heavily Consumers have been spending heavily

Source: U.S. Department of Commerce.

Personal Savings as Percent of Disposable Personal Income


Strengths in the Alabama economy in 2009Strengths in the Alabama economy in 2009Strengths in the Alabama economy in 2009Strengths in the Alabama economy in 2009

Construction projects, including ThyssenKrupp, BRAC-related building, hospital facility expansions, education-related building

Growth in shipbuilding and steel; National Alabama plant start-up

BRAC, national defense, and aerospace projects bringing increasing contractor presence

Biotechnology and healthcare industry growth

Federal R&D contract spending--$9.95 billion in Alabama in FY2007, ranking the state 13th

New business at Alabama State Docks

Growing convention and tourism traffic

Population growth continuing

Economic development efforts at diversifying the economy and creating more and higher paying jobs



Automotive production scaled back in 2008Automotive production scaled back in 2008Automotive production scaled back in 2008Automotive production scaled back in 2008

From zero to three-quarters of a million in 10 years1998: 68,724 vehicles2007: 739,019 vehicles, a 975 percent jump2008: 670,000 (estimated capacity 760,000)

From 1998 to 2008, about 3.6 million cars, vans, and SUVs were produced in Alabama

In 2007 Alabama ranked 5th among auto producing states (behind Michigan, Ohio, Kentucky, and Missouri, in that order)

2008 production: Honda (282,560)Hyundai (237,042)Mercedes (n.a.)




Vehicle production adding to exportsVehicle production adding to exports



Germany, Canada major export destinationsGermany, Canada major export destinations

Alabama Exports by Destination


Exports up in 2008, but transportationExports up in 2008, but transportation equipment down equipment down

Exports up in 2008, but transportationExports up in 2008, but transportation equipment down equipment down

Alabama exports for the first nine months of 2008 rose 12 percent to $12.2 billion.

Transportation equipment exports, the lead export category, decreased by 3.0 percent to $4.4 billion compared to the same period in 2007.

Germany remained the state’s largest trading partner, followed by Canada, China, Mexico, the United Kingdom, and Japan.



Alabama still seeing strong population gainsAlabama still seeing strong population gainsAlabama still seeing strong population gainsAlabama still seeing strong population gains



State continues to grow from migrationState continues to grow from migrationState continues to grow from migrationState continues to grow from migration


Population Net NaturalEstimate Migration Change

4/1/2000 4,447,3557/1/2000 4,451,687 -204 4,4947/1/2001 4,462,832 -4,044 17,1957/1/2002 4,469,906 -4,745 13,7757/1/2003 4,486,598 6,901 12,6887/1/2004 4,506,574 9,606 12,6347/1/2005 4,537,299 19,806 13,5277/1/2006 4,587,564 37,231 14,3287/1/2007 4,626,595 21,862 16,5307/1/2008 4,661,900 18,578 15,883

Source: U.S. Census Bureau.

Components of Alabama Population Change


OUTIN

United Van Lines reported moving more people into the state than out in 2008: 58.1 percent vs. 41.9 percent.

Alabama ranked 4th and was the only southern state on the high-inbound list.

2008 is Alabama’s 6th consecutive year with more than 55 percent inbound moves.

Alabama attracting residents from other statesAlabama attracting residents from other states


Workforce Development Regions


State per capita income on upward trendState per capita income on upward trendState per capita income on upward trendState per capita income on upward trend



Alabama Per Capita Income as Percent of U.S.


Personal income slumped in Q3 2008Personal income slumped in Q3 2008 after strong gainafter strong gain

Personal income slumped in Q3 2008Personal income slumped in Q3 2008 after strong gainafter strong gain

Alabama saw above-average gains in total personal income over the last year.

From Q3 2007 to Q3 2008 Alabama personal income rose 4.2 percent compared to 3.7 percent for the nation.

The increase of 3.0 percent in the second quarter of 2008 was fourth highest among the states. U.S. personal income rose 1.6 percent.

However, job losses and reductions in hours hit the state hard in the third quarter. Personal income declined 0.9 percent for the quarter versus a 0.05 percent U.S. increase. Alabama was one of 23 states to post a decline in Q3 2008.



Alabama unemployment rate below U.S.Alabama unemployment rate below U.S.Alabama unemployment rate below U.S.Alabama unemployment rate below U.S.

Alabama unemployment has remained below the U.S. rate since 2002. November 2008 nonseasonally adjusted rates were:

United States 6.5 percent Alabama 5.9 percent

The state’s labor force contracted 0.4 percent (8,200 workers) in November. Total employment decreased by 18,100.

Unemployment in every metro area was below the U.S. average in November 2008.

Ten counties saw unemployment above 10 percent in November. These include five historically high-unemployment counties (Bullock, Dallas, Lowndes, Perry, and Wilcox) and five counties that have been impacted by plant closings in industries including textiles and apparel, wood products, and manufactured housing (Chambers, Marion, Randolph, Winston, and Coosa).




Unemployment up, but below U.S. across metrosUnemployment up, but below U.S. across metros


Alabama’s metro economies fared better Alabama’s metro economies fared better than nonmetro counties in 2008than nonmetro counties in 2008

Alabama’s metro economies fared better Alabama’s metro economies fared better than nonmetro counties in 2008than nonmetro counties in 2008

Alabama saw 10,300 new jobs created during the first 11 months of 2008. The state’s 28 metro area counties gained 18,550 jobs; the 39 nonmetro counties lost 8,250 during this period.

Every metro shed manufacturing jobs; only Gadsden lost jobs in services. (Retail trade gains are due to seasonal hiring.)

Change in metro area jobs by industry:

Services 13,100• Professional and business 6,000• Educational and health 3,600• Leisure and hospitality 3,500

Retail trade 2,900

Nat res/mining/construction 1,000

Manufacturing -4,300

Government 3,100



Most metros added jobs from January Most metros added jobs from January to November 2008to November 2008

Most metros added jobs from January Most metros added jobs from January to November 2008to November 2008

Alabama 2,007,800 10,300 0.5Anniston-Oxford 53,700 800 1.1Auburn-Opelika 56,600 1,500 2.7Birmingham-Hoover 532,700 4,900 0.9Decatur 58,500 -500 -0.9Dothan 62,300 100 0.2Florence-Muscle Shoals 58,200 1,000 1.7Gadsden 37,300 -400 -1.1Huntsville 215,700 5,100 2.4Mobile 184,500 3,100 1.7Montgomery 182,100 2,700 1.5Tuscaloosa 98,500 600 0.6

Source: Alabama Department of Industrial Relations.

2008 Number Percent

November Change from January 2008



Huntsville, Mobile, Montgomery increased Huntsville, Mobile, Montgomery increased share of Alabama GDP in 2006share of Alabama GDP in 2006

Huntsville, Mobile, Montgomery increased Huntsville, Mobile, Montgomery increased share of Alabama GDP in 2006share of Alabama GDP in 2006

GDP by Metropolitan Area(Millions of Current Dollars)

2006

2001 to2006

2005 to2006

Percent of State

2006

Alabama 158,566 33.6 5.4 100.0

Birmingham-Hoover 51,535 28.6 4.9 32.5

Huntsville 17,115 45.5 6.8 10.8

Mobile 13,892 32.4 9.3 8.8

Montgomery 13,859 32.5 6.2 8.7

Source: Bureau of Economic Analysis, U.S. Department of Commerce.

Percent Change




Source: U.S. Department of Housing and Urban Development, Office of Economic Affairs.

Huntsville, Auburn-Opelika income above U.S. Huntsville, Auburn-Opelika income above U.S. in FY2008in FY2008


House prices holding up betterHouse prices holding up better across state than nation across state than nation

House prices holding up betterHouse prices holding up better across state than nation across state than nation

OFHEO House Price Index through Q3 2008 (Percent Change)

1-quarter 1-year United States -2.7 -4.0 Alabama 0.4 2.8 Anniston-Oxford 1.6 2.4 Auburn-Opelika 1.4 2.4 Birmingham-Hoover -0.7 2.0 Decatur -0.5 4.2 Dothan 2.9 3.0 Florence-Muscle Shoals 4.6 8.9 Gadsden 3.9 3.7 Huntsville 0.5 4.1 Mobile 2.5 5.0 Montgomery -0.8 -0.8 Tuscaloosa -0.1 3.1



Challenges facing the Alabama Challenges facing the Alabama economy in 2009economy in 2009

Challenges facing the Alabama Challenges facing the Alabama economy in 2009economy in 2009

More job losses in the manufacturing sector10,800 jobs were lost between January and November 2008

Job losses at auto manufacturers and suppliers are increasing in 2009

Slow growth or decline in consumer spending and income

Sales tax receipts were down 10.6 percent for the first quarter of FY2009 compared to first quarter FY2008

Individual income tax collections were 2.2 percent lower for the same period

Declining revenue to fund public education

Cutbacks in federal government spending for some programs

Continuing trouble in the state’s banking and real estate sectors

Plummeting business optimism (Q1 2009 BLCI)

Long-term workforce development



Alabama Workforce Report III: Population Projections (Supply)Alabama Workforce Report III: Population Projections (Supply)Alabama Workforce Report III: Population Projections (Supply)Alabama Workforce Report III: Population Projections (Supply)

Prime working age group (20-64) will grow slower than general population. Older worker participation will become important and necessary.

Alabama Population by Age Group, Census 2000 and Projections

Age Group 2000 2006 2016 20250-19 1,256,169 1,272,373 1,285,464 1,333,075

20-24 306,865 330,297 344,663 339,59925-29 301,196 301,464 331,350 321,99930-34 301,819 298,334 319,074 338,21335-39 340,300 310,248 308,313 336,34140-44 345,212 342,637 314,626 333,61345-49 315,173 352,504 323,752 317,38250-54 285,036 327,413 354,425 326,66155-59 225,450 291,983 358,609 330,32960-64 190,082 232,022 321,697 355,702

65+ 579,798 624,090 802,709 1,053,083

20-64 Total 2,611,133 2,786,902 2,976,509 2,999,839

Total Population 4,447,100 4,683,365 5,064,682 5,385,997

Change from 2006 0-19 1.0 4.8

20-64 6.8 7.6Total Population 8.1 15.0



Job growth will exceed population and labor force growth through 2025.Strategies to increase the labor force participation rate and encourage in-migration will be needed to address potential shortfalls of about 140,000 to 170,000 workers in 2016 and nearly 406,000 in 2025.

Alabama Workforce Report III: Alabama Workforce Report III: Implications and RecommendationsImplications and Recommendations






Efforts to address the need for higher labor force participation or faster labor force growth or both to meet workforce demand must include:

Improving education and its fundingFocusing on hard-to-serve populations (e.g. out-of-school & at-risk

youth)

Programs to assess, retrain, and place dislocated workers—especially those affected by outsourcing—should be continued and enhanced because they can improve the labor force participation rate

Recruiting: Using economic opportunities to attract new residents

Facilitating in-commuting

Encouraging older worker participation



State’s housing market continues to slideState’s housing market continues to slideState’s housing market continues to slideState’s housing market continues to slide

A total of 9,902 building permits were issued for single-family homes in Alabama during the first 11 months of 2008. This was down 38.5 percent from the 16,813 issued during the same period in 2007.

Multi-family units permitted through November 2008 totaled 3,605, down 25.4 percent from 2007.

Through November a total of 40,954 homes were sold, 23.3 percent below the same period in 2007.

Prices were down just 1.0 percent, although average days on the market were up by 13.



Q1 2009 BLCI shows steep drop in confidenceQ1 2009 BLCI shows steep drop in confidenceQ1 2009 BLCI shows steep drop in confidenceQ1 2009 BLCI shows steep drop in confidence

The business environment is expected to be much worse in the first quarter.

The BLCI first dropped below 50 in first quarter 2008, coinciding with the first full quarter in recession. An index below 50 indicates contraction.

The U.S. economy indicator is the weakest; Alabama’s economy is also in decline.

Hiring and capital spending component indexes saw steep declines and will be very weak this quarter; the outlook for sales and profits is just slightly better.



Alabama outlook above U.S., but fallingAlabama outlook above U.S., but fallingAlabama outlook above U.S., but fallingAlabama outlook above U.S., but falling


Source: BBVA Compass and Center for Business and Economic Research.


Sales and profits continue decline in Q1 2009Sales and profits continue decline in Q1 2009Sales and profits continue decline in Q1 2009Sales and profits continue decline in Q1 2009




Job growth and capital spending drop sharplyJob growth and capital spending drop sharplyJob growth and capital spending drop sharplyJob growth and capital spending drop sharply





Confidence weak across metrosConfidence weak across metrosConfidence weak across metrosConfidence weak across metros



BLCI Q1 2009 Topical Questions:BLCI Q1 2009 Topical Questions:Alabama Compensation IssuesAlabama Compensation Issues

BLCI Q1 2009 Topical Questions:BLCI Q1 2009 Topical Questions:Alabama Compensation IssuesAlabama Compensation Issues

The outlook for compensation increases in 2009 is much worse than in the three previous years.

About 53 percent of panelists expect compensation to be flat or decline in 2009; this contrasts to about 22 percent in 2008.

For employees who see an increase in non-benefit compensation, it will generally be less than 3 percent.

Merit/performance increases will account for 42.2 percent of raises, while cost of living adjustments should make up about 41 percent.

Year-end 2008 bonuses could contribute 10.5 percent, down from 12.9 percent a year ago. Bonuses will generally be smaller than in prior years, with about half amounting to less than 3 percent of employee wages. 16.4 percent of workers could receive bonuses of 9 percent or more.




Most firms spending the same or less on compensation in 2009

Most firms spending the same or less on compensation in 2009




Firms reducing employment and hoursFirms reducing employment and hoursFirms reducing employment and hoursFirms reducing employment and hours



Your participation can help make the BLCIYour participation can help make the BLCI a reliable indicator of state and local trends a reliable indicator of state and local trends

Your participation can help make the BLCIYour participation can help make the BLCI a reliable indicator of state and local trends a reliable indicator of state and local trends

The BLCI is a quarterly online survey.

Responses to the topical questions are optional.

An average of 310 panelists completed the 2008 surveys.

Surveys are open for the first two weeks of the month preceding an upcoming quarter.

The Q2 2009 survey will be open March 1 through March 15 at www.blci.com.

Thanks for your new or continuing participation!



The job picture is much worse in 2008The job picture is much worse in 2008The job picture is much worse in 2008The job picture is much worse in 2008

From November 2007 to November 2008, the state lost 15,400 jobs. This compares to a gain of 24,900 between November 2006 and November 2007.

During the 12-month period ending in November 2007, manufacturing lost 2,200 workers. From November 2007 to November 2008, the sector lost 12,300 jobs.

From November 2007 to November 2008, retailers lost 4,100 jobs, versus a gain of 3,300 jobs during the 12-month period ending in November 2007.

Alabama’s unemployment rate increased from 3.7 percent in November 2007 to 6.1 percent in November 2008.



Alabama Nonagricultural EmploymentAlabama Nonagricultural EmploymentChange in Number of Jobs

Alabama Nonagricultural EmploymentAlabama Nonagricultural EmploymentChange in Number of Jobs


Nov. 2007-Nov. 2008 Nov. 2006-Nov. 2007

Total Nonagricultural -15,400 24,900 Natural Resources and Mining 100 -300 Construction -3,100 2,900 Manufacturing -12,300 -2,200 Durable Goods Manufacturing -5,900 400 Nondurable Goods Manufacturing -6,400 -2,600 Trade, Transportation and Utilities -4,100 6,100 Retail Trade -4,100 3,300 Information -200 800 Financial Activities -400 0 Professional and Business Services 1,900 6,000 Educational and Health Services -200 3,300 Leisure and Hospitality 100 2,900 Other Services -400 200 Government 3,200 5,200 Federal Government 300 300 State Government 1,300 500 Local Government 1,600 4,400

Source: Alabama Department of Industrial Relations.


Alabama Gross Domestic Product and Alabama Gross Domestic Product and Nonagricultural EmploymentNonagricultural Employment

Annual Percent Change

Alabama Gross Domestic Product and Alabama Gross Domestic Product and Nonagricultural EmploymentNonagricultural Employment



Source: U.S. Department of Commerce, Alabama Department of Industrial Relations, and Center for Business and Economic Research, The University of Alabama.


Alabama Revenue ForecastsAlabama Revenue ForecastsMillions of Current Dollars

Alabama Revenue ForecastsAlabama Revenue ForecastsMillions of Current Dollars


Forecasts

FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010

Total Tax Revenues $6,872.6 $7,621.9 $8,371.4 $8,724.90 $8,962.3 $9,060.4 $9,288.5 Percent Change 8.2 10.9 9.8 4.2 2.7 1.1 2.5 Sales Tax Revenues $1,703.2 $1,806.8 $1,968.7 $2,017.70 $2,029.0 $1,997.5 $2,014.5 Percent Change 8.0 6.1 9.0 2.5 0.6 -1.6 0.9 Individual Income Tax Revenues $2,652.6 $2,954.5 $3,219.5 $3,511.8 $3,608.5 $3,663.0 $3,748.5 Percent Change 8.0 11.4 11.3 9.1 2.8 1.5 2.3 Corporate Income Tax Revenues $299.7 $427.9 $528.4 $509.9 $554.5 $548.3 $553.4 Percent Change 24.8 42.8 37.7 -3.5 8.8 -1.1 0.9 All Other Tax Revenues $2,217.1 $2,432.7 $2,654.8 $2,685.5 $2,770.4 $2,851.6 $2,972.1 Percent Change 20.1 9.7 9.1 1.2 3.2 2.9 4.2

Alabama Education Trust Fund $4,454.0 $4,968.2 $5495..5 $5,853.50 $5,942.3 $5,962.5 $6,078.3 Percent Change 9.5 11.5 10.6 6,5 1.5 0.3 1.9 Alabama General Fund $1,285.1 $1,407.3 $1,600.0 $1,603.10 $1,790.3 $1,794.0 $1,820.3 Percent Change -0.2 9.5 13.7 0.2 11.7 0.2 1.5

Source: Alabama Department of Revenue and Center for Business and Economic Research, The University of Alabama, November 2008.


Total Alabama Tax CollectionsTotal Alabama Tax CollectionsMillions of Dollars

Total Alabama Tax CollectionsTotal Alabama Tax CollectionsMillions of Dollars


Source: Alabama Department of Revenue.

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Alabama Education Trust Fund and General FundAlabama Education Trust Fund and General FundAlabama Education Trust Fund and General FundAlabama Education Trust Fund and General Fund


Source: Alabama State Budget Office.

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In conclusionIn conclusionIn conclusionIn conclusion

Many aspects of the state’s economy will be weak or declining in 2009:

Forecast RangeAlabama GDP 0.3 percent -1.5 to 0.7 percentAlabama employment -0.9 percent -1.9 to 0.3 percentTotal tax collections 1.1 percent -0.7 to 1.8 percent

Education and diversification must be prioritiesWorkforce and economic development funding challenges remain

Focus on optimality and sustainabilityTax policy (education, infrastructure, health and safety, …)Business and consumer behavior


center for business and economic research, the university of alabama

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