1. Center for Business and Economic Research Serving Alabama Since 1930 Ahmad Ijaz Center for Business and Economic Research The University of Alabama Alabama Economics Club February 6, 2015

2. 2 Third quarter real GDP growth was revised up from 3.9 percent to 5.0 percent because of increase in business and consumer spending. Growth in fourth quarter was 2.6 percent. For the year, the rate of growth is estimated to be around 2.4 percent, followed by 3.1 percent in 2015. Stronger consumer spending driven by lower gasoline prices and generally better economic conditions is currently driving economic growth and is expected to remain strong at least during the first half of 2015. Slowest economic recovery since WWII. Economic growth in the next few quarters will depend on pace of improvement in labor markets and a relatively smooth transfer to a tighter monetary policy. Median family income flat for two years, in 2013 it was 8% below 2007. Weakness in wage gains and falling labor force participation rate will continue to keep consumers cautious about their spending (lowest participation rate since 1978).

3. 3 Despite a pickup in employment growth in the second half of 2014, there is still a considerable slack in the labor market, one factor hindering increase in wages. Most of the job growth in recent years (30- 40 percent) has been in low wages sectors of the economy or were part- time/temporary. Both consumers and businesses still continue to remain cautious about their spending. Business inventories added 1.4 percent to the growth (4.6 percent) in the 2 nd quarter, and third quarter growth was also influenced by a one time increase in defense spending. Facing lack of wage and income growth, consumers taking on more debt, household nonmortgage debt increasing from $3.1 trillion in 2013 to $3.4 trillion in 2014. Slow job growth and high level of college related student debt is also resulting in low household formation (only about 0.5 million in late 2013 and early 2014).

4. 4 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and IHS Global Insight.

5. 5 Source: Bureau of Economic Analysis and IHS Global Insight.

6. 6 Source: University of Michigan and IHS Global Insight.

7. 7 Source: Bureau of Labor Statistics and IHS Global Insight.

8. 8 Source: Bureau of Economic Analysis and IHS Global Insight. Nonresidential Residential

9. 9 Source: Bureau of Economic Analysis and IHS Global Insight. State and Local Federal

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17. (Percent change unless otherwise noted) 20122013201420152016 Real GDP2.32.22.43.12.7 Consumption1.82.42.53.43.0 Residential Investment13.511.91.611.111.3 Commercial, Healthcare Structures8.53.47.310.915.4 Nonresidential Fixed Investment7.23.06.2 5.5 Federal Government-1.8-5.7-2.0-0.3-0.4 State & Local Government-1.20.50.91.20.9 Exports3.33.03.23.93.3 Imports2.31.13.85.35.6 Payroll Employment1.7 1.82.01.8 Unemployment Rate8.17.46.25.55.3 CPI Inflation2.11.51.60.12.3 Light Vehicle Sales (Millions)14.4315.5216.4116.8917.24 4

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19. 19 Source: Bureau of Economic Analysis, Bureau of Labor Statistics.

20. 20 Not Seasonally Adjusted Seasonally Adjusted Civilian Labor Force2,098,5632,102,201 Percent Change from Year Ago Level-0.7%-0.6% Absolute Change from Year Ago Level-14,697-11,696 Employed1,986,9291,982,424 Percent Change from Year Ago Level-0.3%0.0% Absolute Change from Year Ago Level-6,109-1,840 Unemployed111,634119,777 Percent Change from Year Ago Level-7.1%-7.6% Absolute Change from Year Ago Level-8,588-9,856 Alabama Unemployment Rate5.3%5.7% Alabama Unemployment Rate (Dec. 2013)5.7%6.1% U.S. Unemployment Rate5.4%5.6% U.S. Unemployment Rate (Dec. 2013)6.5%6.7% Source: Alabama Department of Labor, Labor Market Information Division.

21. 21 Source: Alabama Department of Labor, Labor Market Information Division. December 2012 to December 2013 December 2013 to December 2014 Total Nonagricultural 16,70031,800 Natural Resources and Mining-600100 Construction-2,4007,200 Manufacturing3,0007,100 Durable Goods Manufacturing2,4006,700 Nondurable Goods Manufacturing600400 Trade, Transportation and Utilities5,400-2,600 Wholesale Trade1,100-200 Retail Trade2,300-2,500 Transportation, Warehousing and Utilities2,000100 Information0-400 Financial Activities1,500-1,200 Professional and Business Services1,5007,000 Educational and Health Services3,3002,100 Leisure and Hospitality7,9008,800 Other Services-4001,100 Government-2,5002,600 Federal Government-2,1000 State Government1,7002,300 Local Government-2,100300

22. 22 Employment (Thousands), Unemployment Rate (Percent), 1990-2014 Source: Alabama Department of Labor. Nonfarm Employment Unemployment Rate Employment Unemployment Rate

23. 23 Number of months

24. 24 Source: Bureau of Labor Statistics.

25. 25 4 th in U.S. in vehicle exports 4 OEMs in the state (Original Equipment Manufacturers) 5 th in U.S. in vehicles manufactured Alabama’s three assembly plants produced 918,172 vehicles in 2013 and the number is expected to climb in the coming years $6.5 billion in vehicles shipped to 99 countries in 2013 Since 2011, Alabama has attracted more than 200 auto- related projects involving $4 billion in investment and 17,000 new jobs Source: Economic Development Partnership of Alabama (EDPA) and Alabama Department of Commerce.

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29. 29 Percent Change From Year Ago Change in Revenue from Year Ago Level TaxTotal Collection Total$3,221,137,1425.7%$174,981,887 Income (Individual)$1,069,145,4934.4% $45,019,105 Sales$721,659,2813.7%$25,728,195 Source: Alabama Department of Revenue.

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32. 32 This Alabama GDP and employment forecast summary is the CBER January 2014 forecast Probability: Forecast (60 Percent) and Range (90 percent) (Percent change) 2012201320142015 Real GDP2.32.0 2.4 range1.0 to 2.52.0 to 3.5 Employment0.81.00.71.7 range0.3 to 1.70.8 to 2.0 Total Tax Receipts, FY3.84.01.32.5 range1.5 to 4.0

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37. 37 68.7 31.5

38. 38 Source: Alabama Department of Labor and U.S. Bureau for Economic Analysis. GDP Employment

39. All Industry Total (Millions of chained 2009 dollars) Percent Change 2004 to2012 to 201320132013 Alabama180,7277.50.8 Anniston-Oxford3,518-3.1-3.0 Auburn-Opelika4,29328.93.4 Birmingham-Hoover55,9133.0-0.8 Daphne-Fairhope-Foley5,90923.34.1 Decatur5,0630.50.6 Dothan4,583-1.41.7 Florence-Muscle Shoals4,25512.13.9 Gadsden2,518-5.0-3.1 Huntsville21,64521.90.6 Mobile17,08518.22.9 Montgomery15,4891.20.3 Tuscaloosa9,43720.50.4 Source: U.S. Bureau of Economic Analysis. 39

40. Total Merchandise Metro Area Exports Alabama$19.3 billion Anniston-Oxford$192.7 million Auburn-Opelika$395.4 million Birmingham-Hoover$1.9 billion Daphne-Fairhope-Foley$515.3 million Decatur$673.1 million Dothan$374.7 million Florence-Muscle Shoals$229.7 million Gadsden$54.6 million Huntsville$1.5 billion Mobile$1.5 billion Montgomery$1.7 billion TuscaloosaNA Source: International Trade Administration, U.S. Department of Commerce. 40

41. 41 20132012 Alabama100.0100.0 Anniston-Oxford1.11.2 Auburn-Opelika2.42.6 Birmingham-Hoover11.111.4 Daphne-Fairhope-Foley3.1NA Decatur4.03.8 Dothan2.21.6 Florence-Muscle Shoals1.40.8 Gadsden0.30.2 Huntsville9.08.8 Mobile9.211.2 Montgomery9.910.4 TuscaloosaNANA Source: International Trade Administration, U.S. Department of Commerce.

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44. 44 7/1/2010 to 7/1/2013 NumberPercent 7/1/2013ChangeChange Alabama4,833,722 48,1521.0 Anniston-Oxford116,736 -1,712-1.4 Auburn-Opelika150,933 10,0837.2 Birmingham-Hoover1,140,300 11,2041.0 Daphne-Fairhope-Foley195,54012,3176.7 Decatur153,374 -488-0.3 Dothan147,691 1,8151.2 Florence-Muscle Shoals147,317 880.1 Gadsden103,931 -567-0.5 Huntsville435,737 16,3063.9 Mobile414,079 7890.2 Montgomery373,510 -1,698-0.5 Tuscaloosa235,628 5,1542.2 Source: U.S. Census Bureau.

45. 45 * Gadsden, Huntsville and Mobile employment peaked in 2008; all others saw peaks in 2007. Note: Nonfarm employment (jobs) is by place of work. Source: Alabama Department of Labor and U.S. Bureau of Labor Statistics. 2007 or 2008 Job Loss to 2014 Nonfarm EmploymentPeak YearNumberPercent Alabama 2,005,70054,0002.69% Anniston-Oxford 53,4008,10015.17% Auburn-Opelika 54,800-6,300-11.50% Birmingham-Hoover 533,40013,5002.53% Decatur 58,6004,4007.51% Dothan 63,1005,3008.40% Florence-Muscle Shoals 57,30000.00% Gadsden* 38,0009002.37% Huntsville* 214,300-2,700-1.26% Mobile* 184,60011,6006.28% Montgomery 178,0007,5004.21% Tuscaloosa 98,500-3,300-3.35% Net Jobs in Metropolitan Areas 39,000 Net Jobs in Nonmetro Counties 15,000

46. 46 Source: Alabama Department of Labor, Labor Market Information Division. December 2012 to December 2013 December 2013 to December 2014 Total Nonfarm 7,9005,000 Natural Resources and Mining-2000 Construction-300600 Manufacturing1,3001,900 Durable Goods Manufacturing1,1001,700 Nondurable Goods Manufacturing200 Trade, Transportation and Utilities3,100-1,900 Wholesale Trade500-600 Retail Trade1,500-1,600 Transportation, Warehousing and Utilities1,100300 Information-1000 Financial Activities1,100700 Professional and Business Services-6003,500 Educational and Health Services1,0001,200 Leisure and Hospitality3,400-200 Other Services500100 Government-1,300-900 Federal Government-200600 State Government300-1,200 Local Government-1,400-300

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50. 51 National Economic Outlook Alabama Economic Outlook

51. 52 Sales Profits

52. 53 Hiring Plans Capital Expenditures

53. Nonfarm EmploymentReal GDPForecast, Percent Anniston-Oxford0.31.3 Auburn-Opelika2.53.7 Birmingham-Hoover1.01.5 Daphne-Fairhope-Foley1.23.0 Decatur0.41.0 Dothan1.41.8 Florence-Muscle Shoals1.03.5 Gadsden1.11.4 Huntsville2.03.8 Mobile1.23.2 Montgomery0.91.4 Tuscaloosa2.23.8 Source: U.S. Department of Commerce, Alabama Department of Labor, and Center for Business and Economic Research, The University of Alabama, December 2014. 53

54. 1Education/Training(Quality of education; workforce development) 2Government (Federal, state & local government; tax reform; prison reform; state constitution) 3/4Economy/Businesses(Economic & business growth; small businesses) 3/4Jobs(Job growth; better paying jobs) 5Healthcare (Healthcare cost; Affordable Healthcare Act; Medicaid, Medicare) 6Infrastructure(Infrastructure; roads and bridges) 54 Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov. 2014.

55. 55 1 Company Finances & Development (Profitability; business costs; availability of credit; business growth; competition; concern about customers) 2Government (Federal, state & local government; taxation; regulations; uncertainty) 3Workforce(Lack of skilled workers; retaining qualified employees) 4Economy(Economic recovery & growth; consumer spending) 5Healthcare(Healthcare cost; Affordable Healthcare Act) Note: Companies facing no issues was mentioned by 1.0% of respondents. Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov. 2014.

56. 56 Center for Business and Economic Research Culverhouse College of Commerce The University of Alabama Box 870221 Tuscaloosa, Alabama 35487-0221 205.348.6191 http://cber.cba.ua.edu Serving Alabama Since 1930