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CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA Alabama Economic Outlook Personal consumption share at high levels U.S. Consumption as Percent of GDP Trend 68.2 Source: U.S. Department of Commerce, Bureau of Economic Analysis. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 2 Alabama Economic Outlook . . . as government share declines Government Expenditures as Percent of GDP Source: U.S. Department of Commerce, Bureau of Economic Analysis. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 3 Alabama Economic Outlook Consumers have been spending heavily Personal Savings as Percent of Disposable Personal Income Source: U.S. Department of Commerce. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 4 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 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 Alabama Economic Outlook Vehicle production adding to exports CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 7 Alabama Economic Outlook Germany, Canada major export destinations Alabama Exports by Destination CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 8 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 2007. 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 Alabama Economic Outlook Alabama still seeing strong population gains CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 10 Alabama Economic Outlook State continues to grow from migration Components of Alabama Population Change Population Net Natural Estimate Migration Change 4/1/2000 4,447,355 7/1/2000 4,451,687 -204 4,494 7/1/2001 4,462,832 -4,044 17,195 7/1/2002 4,469,906 -4,745 13,775 7/1/2003 4,486,598 6,901 12,688 7/1/2004 4,506,574 9,606 12,634 7/1/2005 4,537,299 19,806 13,527 7/1/2006 4,587,564 37,231 14,328 7/1/2007 4,626,595 21,862 16,530 7/1/2008 4,661,900 18,578 15,883 Source: U.S. Census Bureau. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 11 Alabama Economic Outlook Alabama attracting residents from other states United Van Lines reported moving more people into the state than out in 2008: 58.1 percent vs. 41.9 percent. IN OUT 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. Workforce Development Regions CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 12 Alabama Economic Outlook State per capita income on upward trend Alabama Per Capita Income as Percent of U.S. Source: U.S. Department of Commerce, Bureau of Economic Analysis. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 13 Alabama Economic Outlook Personal income slumped in Q3 2008 after 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 14 Alabama Economic Outlook 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 Alabama 6.5 percent 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). CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 15 Alabama Economic Outlook Unemployment up, but below U.S. across metros CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 16 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 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 • Educational and health • Leisure and hospitality 6,000 3,600 3,500 Retail trade Nat res/mining/construction Manufacturing Government 2,900 1,000 -4,300 3,100 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 17 Alabama Economic Outlook Most metros added jobs from January to November 2008 November 2008 Alabama Anniston-Oxford Auburn-Opelika Birmingham-Hoover Decatur Dothan Florence-Muscle Shoals Gadsden Huntsville Mobile Montgomery Tuscaloosa 2,007,800 53,700 56,600 532,700 58,500 62,300 58,200 37,300 215,700 184,500 182,100 98,500 Change from January 2008 Number 10,300 800 1,500 4,900 -500 100 1,000 -400 5,100 3,100 2,700 600 Percent 0.5 1.1 2.7 0.9 -0.9 0.2 1.7 -1.1 2.4 1.7 1.5 0.6 Source: Alabama Department of Industrial Relations. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 18 Alabama Economic Outlook Huntsville, Mobile, Montgomery increased share of Alabama GDP in 2006 GDP by Metropolitan Area (Millions of Current Dollars) Percent Change 2006 2001 to 2006 2005 to 2006 Percent of State 2006 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 Alabama Source: Bureau of Economic Analysis, U.S. Department of Commerce. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 19 Alabama Economic Outlook Huntsville, Auburn-Opelika income above U.S. in FY2008 Source: U.S. Department of Housing and Urban Development, Office of Economic Affairs. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 20 Alabama Economic Outlook House prices holding up better across state than nation OFHEO House Price Index through Q3 2008 (Percent Change) 1-quarter United States -2.7 Alabama 0.4 Anniston-Oxford 1.6 Auburn-Opelika 1.4 Birmingham-Hoover -0.7 Decatur -0.5 Dothan 2.9 Florence-Muscle Shoals 4.6 Gadsden 3.9 Huntsville 0.5 Mobile 2.5 Montgomery -0.8 Tuscaloosa -0.1 1-year -4.0 2.8 2.4 2.4 2.0 4.2 3.0 8.9 3.7 4.1 5.0 -0.8 3.1 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 21 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 (Q1 2009 BLCI) Long-term workforce development CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 22 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 0-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ 2000 1,256,169 306,865 301,196 301,819 340,300 345,212 315,173 285,036 225,450 190,082 579,798 2006 1,272,373 330,297 301,464 298,334 310,248 342,637 352,504 327,413 291,983 232,022 624,090 2016 1,285,464 344,663 331,350 319,074 308,313 314,626 323,752 354,425 358,609 321,697 802,709 2025 1,333,075 339,599 321,999 338,213 336,341 333,613 317,382 326,661 330,329 355,702 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 1.0 6.8 8.1 4.8 7.6 15.0 Change from 2006 0-19 20-64 Total Population CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 23 Alabama Economic Outlook Alabama Workforce Report III: Implications and Recommendations 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 24 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 Alabama Economic Outlook State’s housing market continues to slide A total of 9,902 building permits were issued for singlefamily 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 26 Alabama Economic Outlook Q1 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 27 Alabama Economic Outlook Alabama outlook above U.S., but falling Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 28 Alabama Economic Outlook Sales and profits continue decline in Q1 2009 Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 29 Alabama Economic Outlook Job growth and capital spending drop sharply Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 30 Alabama Economic Outlook Confidence weak across metros Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 31 Alabama Economic Outlook BLCI Q1 2009 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 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 32 Alabama Economic Outlook Most firms spending the same or less on compensation in 2009 Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 33 Alabama Economic Outlook Firms reducing employment and hours Source: BBVA Compass and Center for Business and Economic Research. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 34 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 Q2 2009 survey will be open March 1 through March 15 at www.blci.com. Thanks for your new or continuing participation! CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 35 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 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 12month period ending in November 2007. Alabama’s unemployment rate increased from 3.7 percent in November 2007 to 6.1 percent in November 2008. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 36 Alabama Economic Outlook Alabama Nonagricultural Employment Change in Number of Jobs Total Nonagricultural Natural Resources and Mining Construction Manufacturing Durable Goods Manufacturing Nondurable Goods Manufacturing Trade, Transportation and Utilities Retail Trade Information Financial Activities Professional and Business Services Educational and Health Services Leisure and Hospitality Other Services Government Federal Government State Government Local Government Nov. 2007-Nov. 2008 Nov. 2006-Nov. 2007 -15,400 100 -3,100 -12,300 -5,900 -6,400 -4,100 -4,100 -200 -400 1,900 -200 100 -400 3,200 300 1,300 1,600 24,900 -300 2,900 -2,200 400 -2,600 6,100 3,300 800 0 6,000 3,300 2,900 200 5,200 300 500 4,400 Source: Alabama Department of Industrial Relations. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 37 Alabama Economic Outlook Alabama Gross Domestic Product and Nonagricultural Employment Annual Percent Change Source: U.S. Department of Commerce, Alabama Department of Industrial Relations, and Center for Business and Economic Research, The University of Alabama. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 38 Alabama Economic Outlook Alabama Revenue Forecasts Millions of Current Dollars Forecasts FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 Total Tax Revenues Percent Change $6,872.6 8.2 $7,621.9 10.9 $8,371.4 9.8 $8,724.90 4.2 $8,962.3 2.7 $9,060.4 1.1 $9,288.5 2.5 Sales Tax Revenues Percent Change $1,703.2 8.0 $1,806.8 6.1 $1,968.7 9.0 $2,017.70 2.5 $2,029.0 0.6 $1,997.5 -1.6 $2,014.5 0.9 Individual Income Tax Revenues Percent Change $2,652.6 8.0 $2,954.5 11.4 $3,219.5 11.3 $3,511.8 9.1 $3,608.5 2.8 $3,663.0 1.5 $3,748.5 2.3 Corporate Income Tax Revenues Percent Change $299.7 24.8 $427.9 42.8 $528.4 37.7 $509.9 -3.5 $554.5 8.8 $548.3 -1.1 $553.4 0.9 All Other Tax Revenues Percent Change $2,217.1 20.1 $2,432.7 9.7 $2,654.8 9.1 $2,685.5 1.2 $2,770.4 3.2 $2,851.6 2.9 $2,972.1 4.2 Alabama Education Trust Fund Percent Change $4,454.0 9.5 $4,968.2 11.5 $5495..5 10.6 $5,853.50 6,5 $5,942.3 1.5 $5,962.5 0.3 $6,078.3 1.9 Alabama General Fund Percent Change $1,285.1 -0.2 $1,407.3 9.5 $1,600.0 13.7 $1,603.10 0.2 $1,790.3 11.7 $1,794.0 0.2 $1,820.3 1.5 Source: Alabama Department of Revenue and Center for Business and Economic Research, The University of Alabama, November 2008. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 39 Alabama Economic Outlook Total Alabama Tax Collections Tax Collections Annual Percent Change Annual Percent Change Tax Collections Millions of Dollars Source: Alabama Department of Revenue. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 40 Alabama Economic Outlook Amount in Fund (Billions) Alabama Education Trust Fund and General Fund Source: Alabama State Budget Office. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 41 Alabama Economic Outlook In conclusion Many aspects of the state’s economy will be weak or declining in 2009: Alabama GDP Alabama employment Total tax collections Forecast 0.3 percent -0.9 percent 1.1 percent Range -1.5 to 0.7 percent -1.9 to 0.3 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