TUSCALOOSA, Ala.— Key Alabama economic indicators are relatively weak at mid-2014. The state gained 5,200 nonfarm jobs from June 2013 to June 2014, an increase of just 0.3 percent. Over the same period, seasonally adjusted unemployment rose from 6.5 to 6.8 percent as total employment fell faster than the slight decline in the labor force. Moreover, tax revenues for the first nine months of FY2014 were up by only 0.4 percent compared to a 4.6 percent increase during the same period of FY2013.
The pace of Alabama’s economic growth is expected to gradually improve during the second half of this year, with help from a rebounding national economy. For 2014 as a whole, economists in the Center for Business and Economic Research (CBER) in UA’s Culverhouse College of Commerce are forecasting GDP growth of 1.5 percent—much better than the downwardly-revised 0.8 percent increase seen in 2013. Output gains could be above this average for manufacturers of motor vehicles and parts and of primary and fabricated metals. Professional and business services firms and the healthcare and social assistance sector are also expected to expand at a relatively faster pace.
Looking forward to the third quarter, Alabama business executives remain solidly optimistic about their prospects. CBER’s Alabama Business Confidence Index™ (ABCI) was steady at 55.5—above the reading of 52.9 a year ago. Panelists continue to be much more optimistic about the state than the national economy. The state economy index rose one point to 59.4. Job prospects could look up statewide in the second half of 2014. The hiring index climbed 3.8 points to 54.9, the strongest outlook of the past six years. Sales and profits should show at least moderate improvement, while capital investment is expected to post modest increases.
The state could add about 11,500 payroll jobs in 2014, an increase of 0.6 percent. That’s slightly above the 0.5 percent increase in nonfarm employment during 2013. Manufacturers could create about 3,000 jobs this year. However, most new jobs will be in services, where broad-based gains could total around 8,000 positions.
During the 12-month period from June 2013 to June 2014, Alabama manufacturers of durable goods added 3,200 workers, primarily in motor vehicle parts and primary and fabricated metals production. Firms producing nondurable goods gained 700 jobs, although textiles and apparel employment continued to decline. Services businesses created 4,900 jobs, with most at food services and drinking places and in administrative support and social assistance.
The 0.4 percent decline in state tax revenues for the first nine months of FY2014 is largely due to a 0.7 percent decline in individual income tax receipts, while corporate income taxes declined 5.0 percent. However, sales tax collections rose 2.0 percent, despite the slowdown in the overall economy. Appropriations to the Alabama Education Trust Fund increased 0.7 percent compared to the same period in FY2013, but appropriations to the General Fund were down 1.4 percent through June.
Alabama exports totaled $4.6 billion during the first three months of 2014, slightly below the same period of 2013. Canada retained its status as the state’s top export market, with China ranking second, followed by Mexico and Germany. Transportation equipment manufacturers continue to be the largest exporters, with first quarter exports totaling $1.86 billion.
The Alabama Business Confidence Index™ (ABCI) held steady on the third quarter 2014 survey, down just 0.1 points to 55.5. Sentiment improved from a year ago when the index stood at 52.9. While trends in the six components of the ABCI were mixed, all indexes show positive outlooks.
This is the 51st consecutive quarter that the Center for Business and Economic Research (CBER) in The University of Alabama’s Culverhouse College of Commerce has surveyed business confidence in the state. A total of 248 business executives from across Alabama participated in the current survey.
A much better hiring outlook is the important story of the third quarter survey. The hiring index is up 3.8 points to 54.9, its highest reading since it registered 57.6 eight years ago in 2006. Among this quarter’s panelists, 32.3 percent expect job growth in their industry to pick up this quarter, while 54.4 percent anticipate hiring at the same pace as in the second quarter. Only 13.3 percent forecast a reduction in hiring.
All industries except retail trade expect to increase hiring this quarter. Job prospects are positive for the Birmingham-Hoover, Huntsville, Mobile, and Montgomery metro areas and among small, midsize, and large firms. Weak job creation has restrained Alabama’s economic growth since the recession, so this forecast by the state’s business executives for stronger third quarter job gains is significant.
The U.S. economy is expected to expand at a slightly slower pace than last quarter, with the index down 1.1 points to 51.4. Confidence in Alabama’s economy rose 1.0 point to a 59.4; almost half of panelists have a better state outlook this quarter. The gap between the Alabama and U.S. outlooks widened to 8.0 points.
Echoing positive consumer sentiment, sales forecasts continue to be optimistic. The sales index remains strongly positive at 59.7, although it slipped 1.9 points from last quarter. Panelists in every industry anticipate sales growth in the third quarter. The profits outlook is positive, but less optimistic than the sales forecast. At 54.9, the profits index is 1.6 points below its second quarter value.
Most firms expect capital spending to be about the same as last quarter. The index declined 1.1 points to 52.6, reflecting the dip in the forecast for profits. Among metro areas, investment growth could be strongest in Montgomery. Huntsville businesses remain cautious as indicated by a capital expenditures index of 48.4.
Businesses in construction; manufacturing; and the transportation, information, and utilities sector have the strongest third quarter outlooks. The outlook for professional and technical services turned positive this quarter. Sentiment is better, but still weak, in retail trade and healthcare.
Montgomery is the most optimistic metro for a second quarter with an ABCI of 59.0. Birmingham-Hoover confidence held steady at 56.9, while Mobile’s ABCI slipped 2.8 points to 55.5. Huntsville sentiment is the most improved, climbing 2.7 points to 53.4.The state’s large firms continue to be the most optimistic this quarter. The ABCI among firms with 100 or more employees edged up 0.8 points to 57.9. Confidence declined 1.2 points to 52.8 for midsize firms, employing 20 to 99, and slipped 0.6 points to 54.8 among small businesses with fewer than 20 employees.
Alabama's economy is expected to pick up the pace of growth as we move through 2014. Forecasted output growth of 2.4 percent would be a nice acceleration from last year's 1.9 percent. About 25,000 payroll jobs could be added during the year, an increase of 1.3 percent. That's the outlook in the second quarter 2014 forecast update from the Center for Business and Economic Research (CBER) in The University of Alabama's Culverhouse College of Commerce.
Economic growth of 2.4 percent in 2014 would boost Alabama GDP to around $163 billion. Some manufacturing industries, including motor vehicles and parts, primary and fabricated metals, wood products, and electrical equipment and appliances, should see stronger output gains. Firms in professional and business services and healthcare and social assistance could also experience above-average growth.
Nonfarm employment is forecasted to rise by 1.3 percent during the year, with motor vehicles and parts and other transportation equipment manufacturers seeing the largest percentage increases. But, the majority of hiring will be in services, where broad-based gains could total around 18,000, including over 3,500 retailing jobs. While most job growth is expected to be in the private sector, state government-related entities are forecasted to add a modest number of workers.
Alabama's seasonally-adjusted unemployment rate was 6.4 percent in February 2014, down from 6.6 percent a year ago. Stronger job growth forecasted for 2014 may not reduce the unemployment rate, however. An accelerating economy is likely to bring more currently-discouraged workers back into the labor market, keeping the state's unemployment rate at or above its present level.
A total of 16,300 nonfarm jobs were added during the 12 months ending in February 2014, a gain of 0.9 percent. Manufacturing industries created 3,700 jobs, while the service providing sector added 13,700. Still, progress in regaining the jobs lost in the recession continues to be slow. February's nonfarm employment was 129,000 jobs, or 6.4 percent, below the total at the start of the recession.
For the first six months of FY2014, Alabama's total tax revenue was up by 1.7 percent compared to the same period in FY2013. Appropriations to the Alabama Education Trust Fund increased 2.3 percent, but the General Fund received 2.4 percent less. The state's total tax revenue is forecasted to increase 3.5 to 4.0 percent for all of FY2014. Individual income tax receipts could rise 5.5 percent, while sales tax collections increase 1.5 percent. Appropriations to the Education Trust Fund are expected to increase 2.5 percent, while appropriations to the General Fund could be about 0.5 percent higher than in FY2013.
Alabama business executives are solidly optimistic about their prospects in the second quarter of 2014. CBER's Alabama Business Confidence Index™ (ABCI) moved up 4.4 points to 55.6, its highest level of the last two years. Statewide outlooks for the U.S. and Alabama economies and for industry sales, profits, hiring, and capital spending all improved this quarter.
Alabama is expected to see stronger growth in both economic output (GDP) and employment during 2014, according to the forecast from UA's Center for Business and Economic Research (CBER). Dr. Sam Addy, CBER Director and Associate Dean for Research and Outreach in the Culverhouse College of Commerce, presented an encouraging outlook for the state in 2014 at CBER's 26th annual Economic Outlook Conference. Around 150 attended the meeting, held January 15th in Montgomery.
After expanding by 1.9 percent in 2013, Alabama's economy could grow at a stronger 2.4 percent pace during 2014, with GDP reaching around $163 billion. Manufacturing will be an important contributor to output gains; manufacturers of motor vehicles and parts and other transportation equipment, as well as nonmetallic mineral products, computer and electronic products, fabricated metals, and machinery should also post above-average increases in output. Professional and business services and firms engaged in financial activities are also expected to make significant contributions to the rise in Alabama GDP.
Employment growth is forecasted at around 1.3 percent, with about 25,000 jobs added during 2014. That's a sizeable improvement compared to a gain of around 0.3 percent in 2013 and builds on the 59,400 jobs created from January 2011 through November 2013. Expansions and new additions in the state's motor vehicle and other transportation equipment manufacturing industries will help boost employment. Transportation, warehousing, and utilities and leisure and hospitality are among other sectors where above-average employment growth is anticipated.
Total state tax revenues are expected to rise 4.1 percent in FY2014, slightly above the 4.0 percent rate of increase seen in FY2013. With household incomes improving, individual income tax receipts should see the largest increase. Appropriations to the Alabama Education Trust Fund are forecasted to be 3.7 percent higher than in FY2013, while General Fund appropriations could increase 1.3 percent, a stronger outlook than gains of 0.2 and 0.4 percent, respectively, seen in FY2013.
Dr. Addy discussed the importance of education as the basis of building a better future for all Alabamians. Equating economic development to creating a higher or better quality of life, he noted that improved education is fundamental to human capital development—one of the three pillars of economic development, along with institutional and physical capital. Given labor force participation well below the U.S. average and an above-average median age, the state can leverage education to bring more residents into the workforce to address expected labor shortfalls. Although education levels have been improving, recent data indicate that they still constrain per capita income.
Looking at prospects for the U.S. economy, Dr. David Altig, Executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta, expressed optimism that the U.S. economy can continue to build on the strength seen in the second half of 2013. Although growth will slow modestly early in 2014, it is expected to average around 3.0 percent for the year. A number of factors play into this good news—global growth is expected to pick up to around 3.6 percent in 2014, with strong improvement among our major export markets; negative fiscal policy impacts are not anticipated; and household net worth is improving. Still, a shrinking labor force, which is a major factor in falling unemployment rates, is cause for concern; lower labor force participation is due in part to large increases in the numbers of individuals who are disabled or in school. Federal Reserve policy is expected to remain accommodative.
ServisFirst Bank President and CEO, Mr. Tom Broughton, examined the health and outlook for Alabama's commercial banks. Looking at the steep trend in consolidation in the banking industry between 1990 and 2012 versus sizeable growth in the number of branch offices, he noted that the East Coast, including the Southeast, is currently the most overbanked region. Alabama banks weathered the impact of the recession relatively well—of the 501 bank failures nationwide from 2007 to 2013, only 7 were in Alabama. This can at least partially be attributed to the state's 20 percent limit on the amount of a bank's capital that any single entity can borrow. Financial statement indicators for the state's banking industry are generally stronger than for the region and the nation. However, a return on average equity below the U.S. average and lower ratios of assets and loans to average employees do not bode well for employment trends for Alabama banks.
The 2014 Economic Outlook Conference was sponsored by the Alabama Department of Economic and Community Affairs, Alabama International Trade Center, Alabama Power, Alabama SBDC Network, Alagasco, BlueCross BlueShield of Alabama, Boeing, Hyundai Motor Manufacturing Alabama, Lockheed Martin Space Systems, PowerSouth Energy Cooperative, ServisFirst Bank, Sterne Agee, and Vulcan Materials.
View presentations from the 2014 Economic Outlook Conference:
David Altig's presentation: The Economy—A View from the Fed
Sam Addy's presentation: The Alabama Outlook
Tom Broughton's presentation: Alabama Commercial Bank Performance
Each quarter business executives across Alabama take the online Alabama Business Confidence Index™ (ABCI) survey, a project of the Center for Business and Economic Research (CBER) in UA's Culverhouse College of Commerce. The recent Q4 2013 survey marked 48 consecutive quarters of ABCI results. Using these survey results, CBER has completed a Validation Analysis comparing statewide trends in the ABCI and its six component indexes against selected national and Alabama economic indicators. The performance analysis also extends to the four metro area ABCIs.
This analysis validates the forecasts by ABCI panelists for an upcoming quarter against the trends documented by relevant historical economic data. Graphs in the ABCI Validation Analysis newsletter show that Alabama business executives have been right on target with their expectations—making the survey results a useful predictor of economic trends in the quarter ahead!
The ABCI panel is open to business executives across the state. Registration and current and historical results are available on the ABCI website. Results newsletters are provided for Alabama and for the Birmingham-Hoover, Huntsville, Mobile, and Montgomery metro areas. Panelists can take the Q1 2014 survey December 1-15.
After a strong boost in confidence last quarter, Alabama business expectations settled down going into the fourth quarter of 2013. The Alabama Business Confidence Index™ (ABCI) slipped one point to 51.9, staying positive despite the economic uncertainties that loomed as the 248 panelists completed the online survey during the first two weeks of September. At this level, Alabama business expectations are 3.6 points above the reading of 48.3 a year ago. However, the fourth quarter 2013 ABCI lags the long-term average of 53.5 calculated over the 48 quarters that UA's Center for Business and Economic Research (CBER) has surveyed business confidence across Alabama.
The state's business executives expect U.S. economic growth in the fourth quarter to be only slightly better than last quarter. The U.S. economy index slipped 0.2 points to 50.4, with 44.4 percent forecasting no change and a net 5.6 percent expecting improvement. Panelists are considerably more optimistic about Alabama's economic outlook. An index of 56.0 indicates moderate economic expansion. That's a much better reading than the value of 49.7 seen a year ago in the fourth quarter of 2012. The state economy index has been above the national outlook for 34 consecutive quarters.
Among industry indicators, only hiring plans improved this quarter. A slight increase in Alabama job growth is indicated, with the hiring index at 50.8. The strongest job gains could come from manufacturers. Most industries expect at least a slight increase in hiring, with the exceptions of trade and healthcare where prospects are negative.
Sales statewide should increase moderately in the fourth quarter, despite weakening expectations. The sales index of 54.3 was down 3.5 points from its third quarter reading. Holiday spending could be stronger this year than last; the fourth quarter 2012 sales index was lower at 51.1. Overall prospects for profits are not as positive as last quarter, with the index down 1.7 points to 51.5. Expectations for sales and profits growth are highest in financial activities. Manufacturers should also see strong sales gains this quarter.
A difficult environment for long-range planning could be weighing on the willingness of Alabama businesses to commit more funds to capital investment. The capital expenditures index fell 2.3 points to 48.4. While just over half of panelists expect to maintain current spending levels, a net 2.4 percent plan to cut back.
Huntsville business confidence edged up 0.1 points to 45.8, stable but still indicating moderate contraction. In the other large metro areas tracked by the ABCI survey, the business community is optimistic about fourth quarter prospects despite modest declines in confidence. ABCI Mobile is on top at 58.0, followed by Montgomery with 54.3, and Birmingham-Hoover at 53.3.
Alabama businesses employing 100 or more remained the most optimistic, although their ABCI slipped 0.7 points to 53.6. These larger firms are the most likely to increase hiring in the fourth quarter. Sentiment among businesses employing 20 to 99 edged up 0.1 points to 50.7, a mildly positive reading despite negative outlooks for the U.S. economy and capital spending. The ABCI for small businesses employing fewer than 20 fell 2.2 points to a still-positive 51.0. Hiring and investment are likely to slow for these firms.
The momentum in Alabama’s economy during the second half of 2012 should continue into 2013, according to the forecast from UA’s Center for Business and Economic Research (CBER). Dr. Sam Addy, CBER Director and Associate Dean for Research and Outreach in the Culverhouse College of Commerce, discussed developments in the state during 2012 and prospects for 2013 at the Center’s 25th annual Economic Outlook Conference. Around 160 attended the meeting, held January 16th in Montgomery.
Real GDP growth of 1.7 to 1.9 percent is forecasted for 2013, with employment gains of almost 1.1 percent, or around 18,500 net new jobs, during the year. Growth could be stronger if uncertainty is reduced concerning fiscal policy at the national level. Total state tax revenues are expected to rise around 3.5 percent in FY2013, slightly below the 3.8 percent rate of increase seen in FY2012.
Strong gains in Alabama’s automotive manufacturing industry, increasing exports, and an improving housing market will add to the momentum this year. Rising wages and income across the state indicate that consumer spending will be a positive for growth going forward. Firms in industries including professional and business services, healthcare, tourism, and retail trade will also contribute to employment gains during 2013.
Dr. Addy discussed the importance of addressing how we could apply resources to ensure continuing improvement in the state’s economy. Enhancing education and workforce development programs are key to providing workers with the skills needed by new and expanding businesses. Alabama currently has an available labor pool of around 650,000 residents who are either unemployed or underemployed (employed but looking for better jobs). But the demographics of an aging population together with slow population growth mean that the state will have to look to both domestic and international in-migrants and to increased labor force participation, training, and productivity to keep economic growth strong in the longer term.
Looking at prospects for the U.S. economy, Dr. David Altig, executive Vice President and Director of Research at the Federal Reserve Bank of Atlanta, expects GDP growth in the 2.3 to 3.0 percent range during 2013 as the nation continues to climb out of a deep hole. The Federal Reserve will exercise its tools of very low interest rates and quantitative easing until the economy improves significantly. Resolving federal fiscal policy uncertainty is critical to unleashing stronger potential for growth.
Retirement Systems of Alabama CEO, Dr. David Bronner, took a look at past and future economic concerns. At the national level, investing in infrastructure and improving access to education are essential to ensuring future competitiveness. Resolving the gridlock in Washington will encourage business investment. Alabama has made a lot of progress over the last 15 years in areas including tourism, the auto industry, and aerospace. But, as Dr. Bronner noted, education is the key ingredient in a better future for all our citizens.
The 2013 Economic Outlook Conference was sponsored by the Alabama Department of Economic and Community Affairs, Alabama International Trade Center, Alabama Power, Alabama SBDC Network, BlueCross BlueShield of Alabama, Boeing, Hyundai Motor Manufacturing Alabama, Lockheed Martin Space Systems, PowerSouth Energy Cooperative, ServisFirst Bank, Sterne Agee, and Vulcan Materials.
View presentations from the 2013 Economic Outlook Conference
Dr. David Altig’s presentation: The Economy—A View from the Fed
Dr. Sam Addy’s presentation: The Alabama Outlook
Check out press coverage of the 2013 Economic Outlook Conference
al.com (Birmingham News, Huntsville Times, Mobile Press Register)
The Anniston Star
The Gadsden Times
The Montgomery Advertiser
The Tuscaloosa News
The Center for Business and Economic Research is now making its detailed forecast tables of Alabama output and employment by sector available quarterly. Table releases in January, April, July, and October are generated by the Center’s Alabama Econometric Model based on current economic conditions and expectations.
To order the current quarter's forecast tables and pay by credit card, please go to the CBER Store, or send a check for $30 payable to The University of Alabama to: Center for Business and Economic Research, Box 870221, Tuscaloosa, AL 35487-0221.
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