Alabama
Business
CULVERHOUSE COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Fall 2000 / Volume 69, Number 4
In this issue:
Economic Outlook: November 2000
3
Alabama Exports Up First Quarter 2000
6
Where Are the Jobs for Young People?
8
Marking 70 Years of Research and Service
10
THE UNIVERSITY OF
ALABAMA
B U S I N E S S
This report is also available in PDF format on the
Internet at
http://cber.cba.ua.edu
The Center for Business and Economic Research has
available at this site downloadable data on various
topics including population, retail trade, and
employment. Research briefs are also available.
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Alabama Business
Associate Dean for Research
and Technology
Carl Ferguson
Associate Director
Samuel Addy
Assistant Directors
Deborah Hamilton
Annette Watters
Authors
Ahmad Ijaz
Annette Watters
Deborah Hamilton
Graphic Design
Sherry O’Brien
Addtional Contributor
Sunja Park
Alabama Business is a quarterly publication of
the Center for Business and Economic
Research, Culverhouse College of Commerce
and Business Administration, The University of
Alabama.
Articles reflect the opinions of the authors, but
not necessarily those of the staff of the Center,
the faculty of the Culverhouse College of
Commerce, or the administrative officials of
The University of Alabama.
All correspondence should be addressed to:
Editor, Alabama Business, Center for Business
and Economic Research, The University of
Alabama, Box 870221, Tuscaloosa, Alabama
35487-0221.
For information on the Center for Business and
Economic Research, the Culverhouse College
of Commerce and Business Administration or
The University of Alabama:
http://cber.cba.ua.edu
http://www.cba.ua.edu
http://www.ua.edu
CBER
Economic Outlook
October 2000
United States
The country’s economy is not growing as fast as it
had been; preliminary estimates of GDP show 2.7
percent growth for the third quarter of 2000. The
average annual rate of the previous three quarters had
been 6.2 percent. Consumer spending, which has
been an important engine for growth during last
couple of years, shows no signs of slowing down.
Despite high energy prices, high interest rates, and
high levels of consumer debt, consumers keep
spending. If consumer spending has not lessened,
what precipitated the slowdown in GDP growth
during the third quarter?
• Final sales dropped, and inventories increased
from $42 million to $1.3 billion.
• Residential investment declined sharply,
despite the fact that mortgage rate are edging
downwards.
• Government spending declined.
Gross State Product
Annual Percent Change
(1996 Dollars)
6
5
4
3
2
1
0
-1
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: U.S. Department of Commerce and Center for Business and Economic Research,
The University of Alabama.
Although consumer spending and employment don’t
show signs of slowing down, some parts of the
economy are weakening. Manufacturing has been hit
by higher energy and transportation costs, high value
of the U.S. dollar, global competition, overcapacity,
and layoffs in some firms. Even though consumers
are buying big ticket items, some retailers are seeing
lower earnings. Due to the competitive nature of
retailing, most retailers have been unable to pass
higher transportation costs along to consumers.
Consumer Debt
as Percent of Total Disposable Income
(Percent)
22
20
18
16
14
12
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: U.S. Department of Commerce.
The employment cost index, a major indicator for
wage inflation, is up by 4.3 percent this years versus
3.1 percent last year. Nevertheless, because of
increases in productivity, inflation does not seem to
be a threat. As long as productivity outpaces the
increases in wage costs, inflation does not have a
major effect on the economy.
The forecast for the fourth quarter calls for growth in
GDP of 3.8 percent, with final GDP growth of
around 4.3. That should be just slightly above the
GDP growth rate for 1999. The 2000 inflation rate is
expected to be around 3.4 percent, a significant
increase over last year’s 2.2 percent. Consumer
spending is expected to be slightly below last year’s
level.
The risks for an economic slowdown are higher
energy prices, high levels of consumer debt, and a
weakening manufacturing sector. Although a strong
U.S. dollar is a risk for exporters and manufacturing
firms, it does have the beneficial effect of keeping
prices of imported goods low. Cheap imported
goods keep domestic inflation levels low, but those
cheap imports also keep the U.S. trade deficit high.
Alabama
From August 1999 to August 2000, Alabama added
approximately 20,600 new nonagricultural jobs.
During this period, the fastest growing segment of
the state’s economy was the services sector, which
added 8,500 new jobs. Retail trade added 5,800 new
3
jobs, and wholesale trade gained 900, for a total gain
in trade-related jobs of 6,700. The number of new
retail jobs has been significantly below the number
added previously. This is a trend to watch because
most of Alabama’s current economic expansion has
been driven by consumer spending. In 1999, and
during the first quarter of 2000, almost 50 percent of
new jobs in Alabama were in retail trade. This
reliance on retail trade makes Alabama’s economy
very vulnerable to any slowdown in consumer
spending.
lost jobs in durable goods industries were in lumber
and wood products (-1,400 jobs) and primary metals
(-1,100 jobs). There are two factors working against
the manufacturing sector. The first is the high value
of the U.S. dollar, which makes imported goods very
inexpensive. Domestic producers find it hard to
compete on pricing. The other factor is overcapacity
in automobiles, steel, and other fabricated metals
products. Domestic overcapacity makes it difficult
for Alabama firms to raise prices and compete with
cheaper imports.
Alabama Total Nonagricultural Employment
Annual Change in Number of Jobs
(Thousands)
Alabama Manufacturing Employment
Annual Change in Number of Jobs
(Thousands)
50
6
4
40
2
0
30
-2
20
-4
-6
10
-8
-10
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: Alabama Department of Industrial Relations and Center for Business and
Economic Research, The University of Alabama.
Consumer spending is indeed slowing down, albeit at
a much slower pace than was expected. Consumers
are still optimistic about the economy, as consumer
confidence has dropped only slightly since its peak
around the first of the year. Other reasons for slower
consumer spending include higher energy prices,
high levels of consumer debt, and an increase in
layoffs, particularly in manufacturing.
High fuel prices result in high transportation costs
for goods that need to be shipped. Higher energy
prices have the same effect as a tax on consumers,
eroding their purchasing power. Nationally,
consumer debt is approximately 22 percent of
disposable personal income. High interest rates
further add to the cost of borrowing or financing
through consumer installment loans.
Between August 1999 and August 2000, Alabama’s
manufacturing sector lost approximately 4,600 jobs.
Although most of the job losses were concentrated in
nondurable goods producing industries, firms
producing durable goods also suffered. Most of the
4
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: Alabama Department of Industrial Relations and Center for Business and
Economic Research, The University of Alabama.
The strongest job growth in Alabama is in servicesrelated businesses. From August 1999 to August
2000, services-related industries added 8,500 jobs.
Most were in small business and technology related
services. Health care services actually lost 200 jobs
during this period.
During 2000, nonagricultural employment is
expected to increase by 1.1 percent, adding 27,000
new jobs. However, job growth could significantly
slow down next year. In 2001 the state is forecasted
to add not much more than 18,000 new jobs. Most
are expected to be in services, retail trade, and state
and local government. A significant slowdown is
expected in retail trade job growth next year.
Personal Income and Gross State Product.
Personal income growth in Alabama has not kept
pace with the United States or with other
southeastern states. From the fourth quarter 1999 to
the fourth quarter 2000, personal income in Alabama
will increase by 4.2 percent, compared to 6.6 percent
new jobs, a 3.2 percent increase over 1999. Job
growth in North Carolina will increase by 1.8
percent, adding approximately 70,500 new jobs.
South Carolina will add 30,000 and Tennessee
approximately 35,000 jobs, an annual increase of 1.6
percent and 1.3 percent respectively.
expected for the United States, and 5.9 percent for
southeastern states.
Alabama’s gross state product is expected to increase
by 3.4 percent in 2000, below the 4.3 percent
increase expected for the U.S. economy and the 4.1
percent for the southeastern economy as a whole.
The biggest risks to the state economy during the
fourth quarter and next year include high energy
prices, a significant slowdown in consumer spending,
high levels of consumer debt, and weakness in the
manufacturing sector.
Selected Southeastern States
States in the southeastern region, in this case
Alabama, Florida, Georgia, North Carolina, South
Carolina, and Tennessee, together are expected to
add approximately 622,100 new jobs in 2000, an
increase of 2.9 percent over 1999. The combined
states’ gross state product is expected to increase by
4.1 percent. For 2000, Georgia’s GSP is expected to
be the fastest growing, increasing almost 5 percent,
followed by Florida at 4.7 percent and North
Carolina at 4.5 percent. South Carolina and
Tennessee are expected to grow at 3.7 percent and
3.5 percent respectively.
Exports account for almost 9 percent of the
economies of South and North Carolina and
Tennessee. Their exporting makes them more
vulnerable than Georgia and Alabama to the
downside of international markets. If the U.S. dollar
remains strong, that strength could have a negative
effect on Florida’s economy because Florida relies
heavily on international tourism. A strong dollar
makes it more expensive for international tourists to
visit the United States.
Ahmad Ijaz
Tennessee
North Carolina
South Carolina
Alabama
Georgia
Florida
Almost 37 percent, or 232,000, of new jobs being
added in these six states by year-end 2000 are
expected to be in Florida. Manufacturing accounts
for only a small portion of Florida’s economy,
approximately 8 percent. Most of Florida’s new jobs
will be in the financial sector, tourism and other
services, construction, or retail trade. Florida’s
services sector accounts for almost 32 percent of the
total jobs to be added in all southeastern states
combined. Georgia is expected to add about 127,000
5
Alabama Exports Up
First Quarter 2000
During the first quarter of 2000, Alabama exports
rose nearly 13.5 percent over the same period in
1999. Most of these were exports to Canada,
Mexico, and Austria, with increases of 18.8, 19.4,
and 763.9 percent respectively. Transportation
equipment, chemical products, paper products,
industrial and electrical machinery, and electronics
accounted for almost 60 percent of total exports
during the first quarter of 2000.
Alabama’s export statistics for 1999 could have been
much lower if not for a 437.2 percent increase in
exports to Austria. Since 1998, when Mercedes-Benz
decided to assemble the M-class vehicle at their plant
in Graz, Austria as well as at the Vance, Alabama
plant, there has been a phenomenal increase in
exports from Alabama to Austria.
From 1997 to 1998, Alabama exports to Austria
increased from $3.8 million to $51 million, an
increase of 1243.38 percent. Between 1998 and
1999, these exports increased another 437.16
percent, reaching $273.8 million. As of 1999,
Mercedes-Benz is now the state’s largest exporter,
sending almost $700 million in vehicles to 135
countries around the world.
Another of Alabama’s largest and most consistent
trading partners has been Mexico. Like many states,
Alabama saw a significant increase in trade with
Mexico immediately after the implementation of
NAFTA (North American Free Trade Agreement).
That country quickly became Alabama’s third largest
exports market, growing by nearly 500 percent in just
3 years. By 1997 exports had risen to over $1
billion. Since then, exports to Mexico have declined
to about half that amount. Despite this drop,
Mexico is expected to be the state’s second largest
export market after Canada in 2000. Japan will drop
out of second place due to that country’s
recession-type economic environment.
Ahmad Ijaz
Table 1
Total Value of Alabama Exports by Top Ten Countries of Destination
(Millions of Dollars)
1997
1998
1999
Percent Change
1997 to 1998
Percent Change
1998 to 1999
Canada
Japan
Mexico
Germany
United Kingdom
Austria
Netherlands
France
Korea, Republic of
China (Taiwan)
$1,463.2
683.0
1,012.5
183.2
396.9
3.8
275.9
163.3
257.9
82.9
$1,607.6
703.8
622.9
524.7
357.2
51.0
286.2
282.2
90.0
54.7
$1,688.3
684.9
550.7
503.0
387.8
273.8
264.2
261.3
152.8
138.8
9.9
3.1
-38.5
186.3
-1
1243.8
-2.8
72.6
-65.1
-34.0
5.0
-2.7
-12.0
-4.2
9.0
437.2
-1.5
-7.4
70.0
153.9
Total for All Countries
$6,702.4
$7,036.5
$6,851.5
5.0
-2.6
Country
Sources: Massachusetts Institute for Social and Economic Research (MISER) and State of Alabama Foreign Trade Relations
Commission.
6
Table 2
Total Value of Alabama Exports by Top Five Industry Sectors
(Millions of Dollars)
1997
1998
1999
Percent Change
1997 to 1998
Percent Change
1998 to 1999
$1,463.2
683.0
1,012.5
$1,607.6
703.8
622.9
$1,688.3
684.9
550.7
261.6
8.7
-13.7
14.9
-5.7
-13.0
183.2
524.7
503.0
-13.4
-4.1
396.9
357.2
387.8
-51.3
-19.7
6,702.4
$7,036.5
$6,851.5
5.0
-2.6
Industry
Transportation Equipment
Chemicals and Allied Products
Paper and Allied Products
Industrial Machinery and
Computer Equipment
Electronic and Electrical
Equipment
Total for All Industries
Sources: Massachusetts Institute for Social and Economic Research (MISER) and State of Alabama Foreign Trade Relations
Commission.
Table 3
Total Value of Alabama Exports by Top Five Industry Sectors and Top Five Countries
Millions of Dollars, First Quarter 1999 to First Quarter 2000
Quarter 1
1999
Quarter 1
2000
Percent Change
99Q1 to 00Q1
Canada
Japan
Mexico
Austria
United Kingdom
$ 418.8
185.2
139.2
15.3
103.0
$ 497.5
181.6
166.1
132.7
87.7
18.8
-2.0
19.4
763.9
-14.9
Total for All Countries
$1,674.5
$1,899.9
13.5
Transportation Equipment
Chemicals and Allied Products
Paper and Allied Products
Industrial Machinery and
Computer Equipment
Electronic and Electrical
Equipment
$ 379.6
223.3
141.1
$ 348.4
278.0
188.9
-8.2
24.5
33.9
150.7
187.3
24.2
106.9
148.5
38.8
Total for All Industries
$1,674.5
$1,899.9
13.5
Country
Industry
Sources: Massachusetts Institute for Social and Economic Research (MISER) and State of Alabama Foreign Trade Relations
Commission.
7
Where Are the Jobs for
Young People?
Summer is over. Students are back in school.
Vacations are fading memories. Teen-agers’
participation in the labor force crests and recedes
with the seasons, but teen-agers are always part of the
Alabama work scene.
The youth labor market has recently captured the
public’s attention for several reasons. Governments
and businesses are interested in the transition from
school to work. Teachers and counselors study the
“job shopping” process through which youths settle
into stable career employment. Labor market
analysts are interested in the consequences of youth
unemployment and racial differences in youth
unemployment. Economists have analyzed the
implications of statutory minimum wages. What are
some of the findings from these studies?
High School Students. High school students tend
to work more hours the older they are. That is, an
18-year-old student with a job might work close to 22
hours a week, whereas a 16-year-old might work only
about 16 hours a week. This rise with age occurs
among both males and females.
The seasonal variation in high school student
employment within the calendar year is even more
dramatic than the between-age-group trend.
Employment activity rises sharply during the
summer months and drops off during the school
year. This within-year rise in employment during the
summer weeks occurs at all ages for both males and
females, although male students are more likely to be
employed and to work more hours per week when
they are employed.
8
The academic calendar is not the only factor driving
summer employment by high schoolers. Seasonal
shifts in labor demand also contribute. High school
students tend to work at occupations and in
industries that have busy summer seasons. Fully
one-fifth of employed high school students work in
food service, usually as servers, buspersons,
dishwashers, cooks, and so on. The other leading
occupations employing high school students include
stock handlers (primarily in grocery stores), sales
clerks, and recreation and amusement workers. Most
high school students working in private households
appear to be babysitters.
High School Dropouts. In sharp contrast to the
pattern for high school students, the employment
activity of young high school dropouts exhibits little
seasonal variation. The large summer increase in
high school student employment does not make
much difference in the employment of high school
dropouts.
There is, however, a very large difference in
employment rates between male and female high
school dropouts. In a typical week, roughly
two-thirds of male dropouts are employed while only
about one-third of female dropouts have a job.
Moreover, employed male dropouts work three to
seven hours more per week than employed female
dropouts. The employment difference between male
and female dropouts is much greater than the
male-female difference between students. In fact,
female dropouts are even less likely to be working
than female students. Among those who are
working, however, female dropouts work more hours
per week than do female students.
Are dropouts working in the same jobs as
similarly-aged students? By far the most common
occupation for dropouts is food service worker—the
same as for high school students. But there are also
differences between the two groups. Dropouts don’t
concentrate their jobs as intensely in a few sectors of
the economy as do students. For example, there is a
bigger percentage of dropouts than students working
as cleaning service workers and a much smaller
percentage working in private households.
Implications for Alabama Business. The Alabama
Commerce Commission recently reported that the
tourism industry provides the State of Alabama with
one of its best returns on investment and
recommended pursuing additional major attractions
within the state. Youth workers will provide an
important source of labor supply for an enhanced
tourism industry. Young people have a history of
success at jobs in entertainment, recreation services,
eating places, and retail establishments.
Mark Your Calendars!
JANUARY 2001
The retail sector of Alabama’s economy has been a
growth engine in recent years. If retailing continues
to prosper, it will continue to rely on young workers
to be sales workers, cashiers, and stock persons.
Young workers don’t always have a long
employment tenure with their employers. They
move on to other stages of their lives. The hope is
that the work experiences they have as teen-agers will
contribute positively to their futures. An entry-level
job can instill a strong work ethic, give a young
person a career direction, and teach many lessons
not gained in the classroom. Alabama needs its
youth workers, and young people need Alabama
businesses.
Annette Jones Watters
Excerpted in part from Gerald S. Oettinger, “Seasonal and
Sectoral Patterns in Youth Employment,” Monthly Labor Review,
p. 6-11, U. S. Department of Labor, Bureau of Labor Statistics.
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The University of Alabama’s
Center for Business and Economic
Research will hold its 2001
Economic Outlook Conference on
January 23, 2001 in Montgomery.
To receive a conference brochure,
call (205) 348-6191 or email
[email protected].
The Alabama Economic Outlook 2001 will examine current economic
conditions and trends and their likely effects on the national and Alabama
economies in the coming year.
The Alabama forecast focuses on the short term outlook for output and
employment and looks at state revenues.
The Outlook will be available on January 23, 2001. Put in your order now
by contacting:
Center for Business and Economic Research
The University of Alabama
Box 870221
Tuscaloosa, Alabama 35487-0221
or call: (205) 348-6191
You can also visit our web site for addional information at:
http://cber.cba.ua.edu
9
Marking 70 years
of research
and service . . .
The Center for Business and Economic
Research (CBER) turns 70 this year.
Since its organization by the School of
Business at The University of
Alabama in November 1930, CBER
has focused on collecting, analyzing,
and disseminating socioeconomic
and demographic data. Today’s
mission still involves these activities
but the methods of fulfilling this
mission have definitely changed.
The Center established an early
presence on the Internet. Our site,
cber.cba.ua.edu, averages around
11,500 hits a month. We post
news and announcements as well as
articles that present and interpret
socioeconomic data. From the
E-Data section of the site, users can
read, print, or download current
and historical data on Alabama’s
population, employment, income,
retail sales, and other economic
indicators. We also offer an
E-News service to notify our users
when the site has been updated.
Our publication program has gone
high tech as well. Alabama Business,
which has been ongoing since 1930,
is available online in .pdf format in
addition to its traditional printed
version. This year Alabama Business
changed from a monthly to a larger,
quarterly newsletter in an effort to
better serve our readers with regular
features and detailed analyses of
relevant topics.
Earlier this year we produced the
2000 edition of the Economic
Abstract of Alabama, our
10
CBER then
and now.
comprehensive 500-page reference
book. This publication has been
produced every two to three years
since 1947. In addition to the
printed version, this edition was
formatted in Excel worksheets and
made available on CD-ROM.
The Center has continued its
tradition of handling information
requests. In looking back through
our files, there are carbon copies
(remember carbon paper) of
typewriter-generated responses to
data requests. Last year we
handled about 2,000 requests;
most by phone, fax, or email.
(None were answered using
typewriters or carbon paper!)
The Center’s data resources are
enhanced by its participation as
Alabama’s lead agency in the U.S. Bureau of the
Census State Data Center Program, a role it has filled
since 1978, and in the Federal-State Cooperative for
Population Estimates and Projections. CBER is also
a member of the U.S. Bureau of Economic Analysis’
State User Group.
CBER Clientele
by County, 1999
Another product that has made it 70 years is our
retail sales data series. The current series covers
taxable retail sales for Alabama, its counties, and
MSAs, reported as total sales and ten component
categories. Current data are posted on our web site.
Historical sales are available in the Economic Abstract
and on diskette.
In the late 1970s, the Center developed an
econometric model for Alabama and in 1980
published its first Alabama Economic Outlook, a
publication that continues to date. The Outlook
contains short-term forecasts of output and
employment in Alabama. Forecasts are updated
quarterly and a summary is published in Alabama
Business and placed on our web site. In 1989 our
forecasting program expanded to include an annual
economic outlook conference. This year CBER
formed a partnership with Compass Bank to present
four additional outlook seminars around the state.
In 1999 CBER answered 1,490
request calls in Alabama.
Over the years we have developed skills in a number
of areas. We have focused on conducting economic
impact studies, identifying socioeconomic
characteristics of an area, analyzing and forecasting
the course of the Alabama economy, and developing
specialized population projections.
While we are proud of what we have been, we are
focusing on what we will become. We are looking
at new products, new services, and new methods of
delivery. And we are always interested in your
thoughts. You may send us email at
[email protected] or mail at CBER, Box 870221,
Tuscaloosa, AL 35487. We would love to hear from
you.
Deborah Hamilton
11
Annual Change In Number of Jobs, 1990 to 2000
Total Nonagricultural, Manufacturing, Services, Trade, and Government
(Thousands)
Total
Nonagricultural
Manufacturing
Services
Trade
Government
1990
3.492
-0.867
1.842
0.258
1.433
1991
-0.433
-0.850
0.867
-0.567
1.092
1992
4.442
-0.017
1.983
1.158
1.125
1993
4.350
0.825
1.742
1.358
-0.008
1994
3.075
0.383
0.392
1.275
0.075
1995
3.283
0.292
1.975
1.175
-0.767
1996
3.825
-0.383
1.683
1.250
0.017
1997
3.450
0.017
1.583
1.017
0.500
1998
3.625
0.425
1.742
0.358
0.067
1999
5.233
0.367
2.250
0.775
0.458
2000
3.240
0.502
1.083
0.187
0.728
Source: Estimates based on Alabama Department of Industrial Relations data. Figures for year 2000
are based on first six months average.
The University of Alabama
Center for Business and Economic Research
Box 870221
Tusscaloosa, Alabama 35487-0221
Address correction requested.
Nonprofit Organization
U.S. Postage Paid
Permit Number 16
Tuscaloosa, AL 35401