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

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Presentation on theme: "CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA."— Presentation transcript:

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

3 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 2 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

4 Alabama Economic Outlook... as government share declines CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 3 Source: U.S. Department of Commerce, Bureau of Economic Analysis. Government Expenditures as Percent of GDP

5 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 4 Consumers have been spending heavily Source: U.S. Department of Commerce. Personal Savings as Percent of Disposable Personal Income

6 Alabama Economic Outlook Strengths 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 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 5

7 Alabama Economic Outlook Automotive production scaled back in 2008 From zero to three-quarters of a million in 10 years 1998: 68,724 vehicles 2007: 739,019 vehicles, a 975 percent jump 2008: 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.) CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 6

8 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 7 Vehicle production adding to exports

9 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 8 Germany, Canada major export destinations Alabama Exports by Destination

10 Alabama Economic Outlook Exports up in 2008, but transportation 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 Germany remained the state’s largest trading partner, followed by Canada, China, Mexico, the United Kingdom, and Japan. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 9

11 Alabama Economic Outlook Alabama still seeing strong population gains CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 10

12 Alabama Economic Outlook State continues to grow from migration CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 11 PopulationNetNatural EstimateMigrationChange 4/1/20004,447,355 7/1/20004,451, ,494 7/1/20014,462,832-4,04417,195 7/1/20024,469,906-4,74513,775 7/1/20034,486,5986,90112,688 7/1/20044,506,5749,60612,634 7/1/20054,537,29919,80613,527 7/1/20064,587,56437,23114,328 7/1/20074,626,59521,86216,530 7/1/20084,661,90018,57815,883 Source: U.S. Census Bureau. Components of Alabama Population Change

13 Alabama Economic Outlook OUT IN United Van Lines reported moving more people into the state than out in 2008: 58.1 percent vs percent. Alabama ranked 4th and was the only southern state on the high-inbound list is Alabama’s 6th consecutive year with more than 55 percent inbound moves. Alabama attracting residents from other states CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 12 Workforce Development Regions

14 Alabama Economic Outlook State per capita income on upward trend CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 13 Source: U.S. Department of Commerce, Bureau of Economic Analysis. Alabama Per Capita Income as Percent of U.S.

15 Alabama Economic Outlook Personal income slumped in Q after strong gain after strong gain Personal income slumped in Q after strong gain after strong gain Alabama saw above-average gains in total personal income over the last year. From Q to Q 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 Q CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 14

16 Alabama Economic Outlook Alabama unemployment rate below U.S. Alabama unemployment has remained below the U.S. rate since 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 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). CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 15

17 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 16 Unemployment up, but below U.S. across metros

18 Alabama Economic Outlook Alabama’s metro economies fared better than nonmetro counties in 2008 Alabama saw 10,300 new jobs created during the first 11 months of 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: Services13,100 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 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 17

19 Alabama Economic Outlook Most metros added jobs from January to November 2008 Alabama2,007,80010, Anniston-Oxford53, Auburn-Opelika56,6001, Birmingham-Hoover532,7004, Decatur58, Dothan62, Florence-Muscle Shoals58,2001, Gadsden37, Huntsville215,7005, Mobile184,5003, Montgomery182,1002, Tuscaloosa98, Source: Alabama Department of Industrial Relations Number Percent November Change from January 2008 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 18

20 Alabama Economic Outlook Huntsville, Mobile, Montgomery increased share of Alabama GDP in 2006 GDP by Metropolitan Area (Millions of Current Dollars) to to 2006 Percent of State 2006 Alabama158, Birmingham-Hoover51, Huntsville17, Mobile13, Montgomery13, Source: Bureau of Economic Analysis, U.S. Department of Commerce. Percent Change CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 19

21 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 20 Source: U.S. Department of Housing and Urban Development, Office of Economic Affairs. Huntsville, Auburn-Opelika income above U.S. in FY2008

22 Alabama Economic Outlook House prices holding up better across state than nation OFHEO House Price Index through Q (Percent Change) 1-quarter 1-year United States Alabama Anniston-Oxford Auburn-Opelika Birmingham-Hoover Decatur Dothan Florence-Muscle Shoals Gadsden Huntsville Mobile Montgomery Tuscaloosa CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 21

23 Alabama Economic Outlook Challenges facing the Alabama economy in 2009 More job losses in the manufacturing sector 10,800 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 (Q BLCI) Long-term workforce development CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 22

24 Alabama Economic Outlook 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 ,256,1691,272,3731,285,4641,333, ,865330,297344,663339, ,196301,464331,350321, ,819298,334319,074338, ,300310,248308,313336, ,212342,637314,626333, ,173352,504323,752317, ,036327,413354,425326, ,450291,983358,609330, ,082232,022321,697355, ,798624,090802,7091,053, Total2,611,1332,786,9022,976,5092,999,839 Total Population4,447,1004,683,3655,064,6825,385,997 Change from Total Population CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 23

25 Alabama Economic Outlook Job growth will exceed population and labor force growth through 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 Alabama Workforce Report III: Implications and Recommendations CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 24

26 Alabama Economic Outlook Alabama Workforce Report III: Implications 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 funding Focusing 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 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 25

27 Alabama Economic Outlook State’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 This was down 38.5 percent from the 16,813 issued during the same period in Multi-family units permitted through November 2008 totaled 3,605, down 25.4 percent from Through November a total of 40,954 homes were sold, 23.3 percent below the same period in Prices were down just 1.0 percent, although average days on the market were up by 13. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 26

28 Alabama Economic Outlook Q 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 27

29 Alabama Economic Outlook Alabama outlook above U.S., but falling CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 28 Source: BBVA Compass and Center for Business and Economic Research.

30 Alabama Economic Outlook Sales and profits continue decline in Q CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 29 Source: BBVA Compass and Center for Business and Economic Research.

31 Alabama Economic Outlook Job growth and capital spending drop sharply CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 30 Source: BBVA Compass and Center for Business and Economic Research.

32 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 31 Confidence weak across metros Source: BBVA Compass and Center for Business and Economic Research.

33 Alabama Economic Outlook BLCI Q Topical Questions: Alabama 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 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 percent of workers could receive bonuses of 9 percent or more. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 32

34 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 33 Most firms spending the same or less on compensation in 2009 Source: BBVA Compass and Center for Business and Economic Research.

35 Alabama Economic Outlook CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 34 Firms reducing employment and hours Source: BBVA Compass and Center for Business and Economic Research.

36 Alabama Economic Outlook Your participation can help make the BLCI 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 Q survey will be open March 1 through March 15 at Thanks for your new or continuing participation! CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 35

37 Alabama Economic Outlook The 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 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 Alabama’s unemployment rate increased from 3.7 percent in November 2007 to 6.1 percent in November CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 36

38 Alabama Economic Outlook Alabama Nonagricultural Employment Alabama Nonagricultural Employment Change in Number of Jobs CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 37 Nov Nov Nov Nov Total Nonagricultural-15,40024,900 Natural Resources and Mining Construction-3,1002,900 Manufacturing-12,300-2,200 Durable Goods Manufacturing-5, Nondurable Goods Manufacturing-6,400-2,600 Trade, Transportation and Utilities-4,1006,100 Retail Trade-4,1003,300 Information Financial Activities-4000 Professional and Business Services1,9006,000 Educational and Health Services-2003,300 Leisure and Hospitality1002,900 Other Services Government3,2005,200 Federal Government300 State Government1, Local Government1,6004,400 Source: Alabama Department of Industrial Relations.

39 Alabama Economic Outlook Alabama Gross Domestic Product and Nonagricultural Employment Alabama Gross Domestic Product and Nonagricultural Employment Annual Percent Change CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 38 Source: U.S. Department of Commerce, Alabama Department of Industrial Relations, and Center for Business and Economic Research, The University of Alabama.

40 Alabama Economic Outlook Alabama Revenue Forecasts Alabama Revenue Forecasts Millions of Current Dollars CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 39 Forecasts FY2004FY2005FY2006FY2007FY2008 FY2009FY2010 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 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 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 Corporate Income Tax Revenues$299.7$427.9$528.4$509.9$554.5 $548.3$553.4 Percent Change 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 Alabama Education Trust Fund$4,454.0$4,968.2$ $5,853.50$5,942.3 $5,962.5$6,078.3 Percent Change , 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 Source: Alabama Department of Revenue and Center for Business and Economic Research, The University of Alabama, November 2008.

41 Alabama Economic Outlook Total Alabama Tax Collections Total Alabama Tax Collections Millions of Dollars CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 40 Source: Alabama Department of Revenue. Annual Percent Change Tax Collections Annual Percent Change

42 Alabama Economic Outlook Alabama Education Trust Fund and General Fund CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 41 Source: Alabama State Budget Office. Amount in Fund (Billions)

43 Alabama Economic Outlook In conclusion Many aspects of the state’s economy will be weak or declining in 2009: ForecastRange Alabama GDP 0.3 percent -1.5 to 0.7 percent Alabama employment-0.9 percent -1.9 to 0.3 percent Total tax collections 1.1 percent -0.7 to 1.8 percent Education and diversification must be priorities Workforce and economic development funding challenges remain Focus on optimality and sustainability Tax policy (education, infrastructure, health and safety, …) Business and consumer behavior CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 42


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