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CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA. 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. . . . as government share declines.

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CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA

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

  2. 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.

  3. . . . 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

  4. Consumers have been spending heavily Personal Savings as Percent of Disposable Personal Income Source: U.S. Department of Commerce.

  5. 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

  6. 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

  7. Vehicle production adding to exports CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 7

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

  9. 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

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

  11. State continues to grow from migration Components of Alabama Population Change Source: U.S. Census Bureau. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 11

  12. 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. 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. IN OUT Workforce Development Regions CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 12

  13. 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.

  14. 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

  15. 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). CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 15

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

  17. 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 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

  18. Most metros added jobs from January to November 2008 Source: Alabama Department of Industrial Relations. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 18

  19. Huntsville, Mobile, Montgomery increased share of Alabama GDP in 2006 Percent Change CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 19

  20. 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

  21. House prices holding up better across state than nation OFHEO House Price Index through Q3 2008 (Percent Change) 1-quarter1-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 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 21

  22. 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

  23. 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 CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 23

  24. 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

  25. 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

  26. 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 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

  27. 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

  28. Alabama outlook above U.S., but falling Source: BBVA Compass and Center for Business and Economic Research.

  29. Sales and profits continue decline in Q1 2009 Source: BBVA Compass and Center for Business and Economic Research.

  30. Job growth and capital spending drop sharply Source: BBVA Compass and Center for Business and Economic Research.

  31. 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

  32. 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

  33. Most firms spending the same or less on compensation in 2009 Source: BBVA Compass and Center for Business and Economic Research.

  34. Firms reducing employment and hours Source: BBVA Compass and Center for Business and Economic Research.

  35. 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

  36. 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 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. CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 36

  37. Alabama Nonagricultural EmploymentChange in Number of Jobs CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE UNIVERSITY OF ALABAMA 37

  38. Alabama Gross Domestic Product and Nonagricultural EmploymentAnnual 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

  39. Alabama Revenue ForecastsMillions of Current Dollars 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

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

  41. Alabama Education Trust Fund and General Fund Amount in Fund (Billions) Source: Alabama State Budget Office.

  42. In conclusion Many aspects of the state’s economy will be weak or declining in 2009: Forecast Range 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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