Alabama
Business
CULVERHOUSE COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Second Quarter 2003 / Volume 72, Number 2
In this issue:
Economic Outlook: 2nd Quarter 2003
3
Selected Economic Indicators
7
Educational Attainment in Alabama
8
Commuting Patterns In and Out of Alabama
10
Alabama Business Leaders
Confidence Index: 2nd Quarter 2003
12
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 Jones Watters
Authors
Carl Ferguson
Ahmad Ijaz
Carolyn Trent
Annette Jones Watters
Graphic Design
Sherry Lang
Addtional Contributors
Deborah Hamilton
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:
2nd Quarter 2003
United States
Overview. In the last two quarters, the economy has
weakened somewhat. The growth of real gross domestic
product (GDP) in the fourth quarter of 2002 was down
significantly from the previous quarter. Consumer spending on services and nondurable goods accounted for
almost 85 percent of what growth there was. Spending on
durable goods, or big-ticket items, actually declined by 8.2
percent, a sharp drop when compared to the almost 23
percent increase for the third quarter. A fall in exports
also contributed to the decline in GDP. The strong residential sector and federal government spending offset
some of the negative effects of these declines. For all of
2002, the U.S. economy grew 2.4 percent. Despite the
growth in output, employment fell 0.9 percent, a loss of
about 1.2 million jobs.
Lack of business investment spending has been a major
hurdle to the current economic recovery. However, after
eight straight quarters of cutting capital spending, businesses increased their spending by a modest 2.3 percent in
the fourth quarter, a good indication that the economy
could accelerate somewhat in 2003. For all of 2002, business spending on structures, equipment, and software
dropped by almost $72 billion.
Housing is one of the strongest sectors. Investment
spending on homes rose 9.4 percent in fourth quarter
2002. A record 5.7 million existing homes sold in 2002,
beating the 2001 record of 5.3 million. Construction of
new homes and apartments rose to a 16-year high in
January 2003. One major reason for the strong housing
sector is people’s perception of housing as a good investment alternative to stocks, especially given the recent significant losses in financial markets. Home values have
been steadily increasing in recent years and interest rates,
at around 5.61 percent, are at their lowest levels in nearly
41 years. Record low interest rates give consumers the
opportunity to either refinance their existing mortgages or
borrow against equity in their homes. This has raised disposable income and helps to explain the stable and high
consumer spending level throughout the current slow economic environment.
Supply Management’s (ISM) index fell from 50.5 in
February to 47.9. An index below 50.0 indicates contraction in industrial activity. War jitters may have contributed to the drop in the index; the cutoff date for the
survey is the 10th of the month but the war with Iraq did
not start until the 19th. The production component of
the index showed the sharpest decline, falling to 46.2 after
15 consecutive months of growth. Overcapacity and the
lack of demand continue to plague the sector. Right now,
manufacturing firms can add to capacity without adding
workers, reducing the chances of a strong revival in industrial capital spending. Capital spending is usually a
response to increases in demand, but demand remains
weak throughout the global economy.
Manufacturing has been hit hardest during the recent
downturn and is still struggling. Strong automobile sales
and defense-related capital spending helped some in 2002.
Manufacturing activity dropped in March after five consecutive months of improvement. The Institute for
Consumer spending continues to be strong despite the
weak economy, although spending on durable goods has
declined somewhat. Consumer spending increased by 1.8
percent in 2002. Real incomes are rising even though jobs
have been lost. Low inflationary conditions and cash-out
3
gled in the first quarter because of war-created uncertainty
and lack of job growth. However, we anticipate that consumer spending, and to some extent business spending,
will begin to revive in the second half of 2003 and into
2004. The economic recovery will gain some momentum
over the summer and fall. Overall, the economy is expected to grow about 2.7 percent in 2003, mainly fueled by
consumer and federal government spending. Overcapacity and employment cuts should keep inflation about
2 percent. The housing sector will remain strong as long
as the mortgage rates are low and financial markets stay
depressed. Business spending, which has declined for two
straight years, is forecasted to grow by 2.5 percent, particularly because of spending on equipment and software.
Spending on structures and industrial equipment is not
expected to increase significantly until 2004. Employment
is expected to increase by 0.3 percent.
home mortgage refinancing are providing some relief to
consumers. A Blue Chip Economic Indicators survey
expects consumers to tap into $88 billion worth of home
equity this year, compared to $170 billion in 2002. The
University of Michigan’s March consumer sentiment index
fell to the lowest level since August 1993, primarily due to
uncertainty about the war with Iraq, higher oil prices,
weak financial markets, and a lack of any significant job
growth. However, the index rose in April after the conclusion of the short war and the subsequent decline in oil
prices.
The Conference Board’s current condition index, which
reflects consumers’ perception of their financial situation
and whether it is a good time to buy big-ticket items, fell
in February to the lowest level since October 1992. The
expectations index fell in February to the lowest reading
since September 1993.
The U.S. economy has lost almost two million jobs since
the recession began in March 2001. Manufacturing alone
has lost 2.1 million jobs since August 2000, the start of the
industrial sector downturn. Manufacturing job losses do
not seem to be abating, as 36,000 jobs were lost in March.
Also in March, the services sector lost 94,000 jobs, following a 256,000-job loss in February. Most cuts were in
retailing. Significant excess capacity will have to be used
up before manufacturing and retailing start hiring again;
short term prospects do not look bright. The government
sector also lost 40,000 jobs, mainly in local education due
to severe budget problems facing most states.
Outlook. Despite aggressive monetary and fiscal policies,
the U.S. economy has had a hard time rebounding. An
anemic global economy, declining profits, and poorly performing financial markets are affecting both consumer and
firm spending behavior and patterns. The economy strug-
4
Alabama
Overview. The state economy grew 1.6 percent in 2002.
Employment fell 0.9 percent (approximately 17,400 jobs);
the state unemployment rate equaled the nation’s at 5.7
percent. Services grew fastest, around 2 percent, while
manufacturing and retailing had the most job losses. The
telecommunications industry suffered losses in sales and
employment.
Employment. Of the 17,400 job losses statewide in 2002,
manufacturing accounted for 11,125 jobs. Transportation,
which includes both motor vehicle-related production and
certain defense-related industries, remains one of the
fastest growing segments of the state economy and was the
only industrial sector to add to its payroll, with almost
2,600 jobs gained. The steel industry lost approximately
2,300 jobs and industrial and other machinery manufacturers lost about 3,100 jobs. Job losses were even more
pronounced in nondurable goods producing industries;
apparel lost 3,300 and paper products and related industries shed 850.
The most recent data show that the jobs losses may be
abating somewhat. However, manufacturing industries,
mainly primary and fabricated metal, machinery manufacturing, and textiles and apparel continue employment
declines. A pleasant surprise is that apparel, which has
experienced the largest payroll losses among the state’s
industries in recent years, only lost 300 jobs from February
2002 to February 2003.
Tax Revenues. Most states are facing the biggest tax
shortfall in post-World War II history, with almost 36
states reporting severe budget shortfalls. Tax receipts are
falling short due to lack of business spending and sales,
which in some cases accounts for almost half of the states’
sales tax revenues. States are also facing sharply rising
Medicaid costs. Alabama’s situation is not as dire as many
states, particularly those that passed tax cuts during the
booming 1990s.
Over the first two quarters of the current fiscal year,
Alabama tax revenues are up by 5.6 percent (almost $157
million) to $2,961 million, compared to a decline of 0.4
percent during the same period in the last fiscal year.
Individual income tax receipts have increased approximately $78 million to $1,165 million, a 7.2 percent rise
and much better than the 2.5 percent decline recorded for
the same period last fiscal year. However, corporate
income tax collections have fallen 5.3 percent to $100 million. Sales tax collections, which depend on both consumer and business spending, are up by 2.3 percent to
$778 million, an approximately $17 million increase,
mainly due to consumer spending. Sales tax collections
were up 1.3 percent during first two quarters of the previous fiscal year.
Legislative appropriations made to the state’s General
Fund during the first two quarters of the current fiscal year
5
Alabama Nonagricultural Employment
Change in Number of Jobs
Feb. 2002 to
Feb. 2003
are up almost $108 million over the same period in the
previous fiscal year. Appropriations to the General Fund
totaled $627.8 million, an almost 21 percent increase.
State appropriations to the Education Trust Fund were up
3.2 percent ($64 million) over the first two quarters of the
previous fiscal year to a total of $2,023 million.
Outlook. The state economy is expected to grow about
2.5 percent in 2003, with an employment gain of 0.3 to
0.5 percent. That would be about 6,000 to slightly over
9,000 jobs. With many new automotive-related plants in
the pipeline associated with Hyundai and the expansion of
the Honda plant in Lincoln, the state could see a significant increase in automotive-related payrolls over the next
two or three years. No large increases in payrolls are
expected particularly for the steel, electrical and nonelectrical machinery, and telecommunications industries.
6
Total Nonagricultural
-1,100
Natural Resources and Mining
0
Construction
-200
Manufacturing
-9,700
Durable Goods Manufacturing
-5,900
Wood Products Manufacturing
700
Primary Metal Manufacturing
-400
Fabricated Metal Product Manufacturing
-2,500
Machinery Manufacturing
-1,000
Computers and Electronic Products Manufacturing
-900
Electrical Equipment, Appliance and Component Mfg. -500
Transportation Equipment Manufacturing
500
Motor Vehicle Manufacturing
700
Furniture and Related Products
-700
Nondurable Goods Manufacturing
-3,800
Food Manufacturing
-1,800
Textile Mills
-1,100
Textile Product Mills
200
Apparel Manufacturing
-300
Paper Manufacturing
-700
Chemical Manufacturing
-800
Plastics and Rubber Product Manufacturing
400
Trade, Transportation and Utilities
-2,000
Wholesale Trade
-1,900
Retail Trade
-800
Transportation, Warehousing and Utilities
700
Information
-900
Telecommunications
-1,400
Financial Activity
100
Professional and Business Services
2,700
Educational and Health Services
3,600
Leisure and Hospitality
3,000
Other Services
-800
Government
3,100
Federal Government
-400
State Government
1,400
State Education
1,100
Local Government
1,800
Source: Alabama Department of Industrial Relations.
Most job growth this year will be in services-related businesses. The state unemployment rate is expected to
remain around 5.7 to 5.8 percent through year.
Ahmad Ijaz
Selected Economic Indicators
United States
Gross Domestic Product (billions)
Percent Change
30-Year Treasury Bond Rate
3-Month Treasury Bill Rate
Consumer Price Index
Inflation Rate
Housing Starts (millions)
Percent Change
Total Employment (millions)
Percent Change
Unemployment Rate
Industrial Production Index
Percent Change
Alabama
Total Nonagricultural
Employment (thousands)
Percent Change
Total Manufacturing
Employment (thousands)
Percent Change
Durable Goods Manufacturing
Employment (thousands)
Percent Change
Nondurable Goods Manufacturing
Employment (thousands)
Percent Change
Total Wholesale and Retail Trade
Employment (thousands)
Percent Change
Total Services Employment (thousands)
Percent Change
Alabama Unemployment Rate
Initial Benefit Claims (thousands)
Manufacturing Weekly Hours
Total Tax Revenues (millions)
Percent Change
Total Income Tax Revenues (millions)
Percent Change
Total Sales Tax Revenues (millions)
Percent Change
2001/Q4
2002/Q1
2002/Q2
2002/Q3
2002/Q4
2003/Q1
9,248.8
0.1
5.3
1.9
177.4
1.8
1.6
1.9
135.8
-1.1
5.4
137.2
-1.7
9,363.2
1.4
5.6
1.7
178.0
1.2
1.7
7.1
136.2
-0.4
5.8
138.1
0.7
9,392.4
2.2
5.8
1.7
179.5
1.3
1.7
2.6
136.3
-0.2
6.0
139.5
1.0
9,485.6
3.3
5.2
1.6
180.5
1.6
1.7
5.9
136.8
0.3
6.0
140.0
0.4
9,519.5
2.9
5.1
1.4
181.4
2.2
1.8
11.7
136.9
0.8
5.8
140.7
0.5
9,575.8
2.3
5.0
1.2
182.7
2.7
1.8
2.8
137.4
0.9
5.6
142.2
1.1
2001/Q4
2002/Q1
2002/Q2
2002/Q3
2002/Q4
2003/Q1
1,917.9
-1.2
1,891.7
-0.8
1,900.2
-1.0
1,889.8
-1.0
1,903.0
-0.8
1,948.4
0.3
334.8
-10.7
330.9
-4.5
329.5
-3.4
327.5
-2.9
327.2
-2.3
322.9
-2.4
180.2
-5.5
179.9
-3.3
179.7
-2.0
178.3
-1.3
178.5
-1.0
176.8
-1.7
154.5
-5.9
151.0
-6.0
149.7
-5.0
149.2
-4.6
148.7
-3.8
146.0
-3.3
441.8
-1.7
483.0
6.2
5.9
31.5
40.9
1,323.4
-2.1
522.4
-3.6
389.7
2.2
430.5
-1.1
477.2
0.9
5.5
33.9
40.8
1,480.9
0.7
670.4
7.9
371.4
0.3
436.0
-1.3
482.7
0.2
5.5
23.8
40.8
1,716.7
-0.8
833.7
0.2
394.1
3.4
435.1
-1.2
484.0
-0.2
5.9
23.8
40.8
1,542.1
6.2
678.0
8.9
395.0
3.9
437.1
-1.1
483.1
0.0
5.7
27.8
40.5
1,387.0
4.8
573.8
9.8
385.1
-1.2
426.6
-0.9
487.2
2.1
5.7
53.0
41.4
1,036.0
-30.0
459.3
-31.5
270.1
-27.3
Note: All percent changes indicate change over same period of the previous year.
Source: U.S. Bureau of Labor Statistics, U.S. Department of Commerce, Alabama Department of Industrial Relations,
Alabama Department of Revenue, and Center for Business and Economic Research, The University of Alabama.
7
Educational
Attainment in
Alabama
Educational Attainment by Race and Sex, 2002
Persons Age 25 Years and Over (Percent)
High School Graduate
or More
All Adults 25 and Over
By Sex:
Men
Women
By Race:
White
Black
Alabama U.S.
78.9
84.1
Bachelor’s Degree
or More
Alabama
22.7
U.S.
26.7
79.0
78.7
83.8
84.4
22.9
22.6
28.5
25.1
80.3
73.9
84.8
78.7
25.8
12.2
27.2
17.0
Source: U.S. Census Bureau, Current Population Survey, March 2002.
Alabama’s education levels edged up on the March 2002
Current Population Survey conducted by the U.S. Census
Bureau. The percent of Alabamians aged 25 and over with
at least a high school diploma (or G.E.D.) stood at 78.9 in
2002, up from 77.5 on the April 2000 Census. And 22.7
percent of adults 25 and over had completed college in
2002—a significant increase over the 20.4 percent reported
in 2000. Women made substantial strides in improving
their education levels, almost catching up with men on
high school and college graduation rates. Education levels
of white Alabamians also showed sizeable increases.
U.S.
Still, Alabama needs to do better. The 78.9 percent of residents 25 and over who had completed high school in
2002 was well below the national 84.1 percent share.
Among states, Alabama ranks 47th—only Louisiana, Texas,
and West Virginia had fewer adults with at least a high
school education. Further, the 22.7 percent of Alabamians
with a bachelor’s degree or more was four percentage
points lower than the U.S. figure in 2002. Our ranking on
this measure of educational attainment was much higher,
though—Alabama came in 38th among the 50 states.
Of course, each new generation of Alabamians is more
educated than the previous one. Among residents aged
25 to 34, 82.2 percent had completed high school or
more and 21.8 percent college or more in 2000, up from
80.2 percent and 18.6 percent, respectively, for the 25
to 34 age group in 1990.
Comparing 1990 and
2000 numbers also proAverage Annual Earnings by Educational Attainment, 2001
vides evidence for an
Full-Time, Year-Round Workers Age 18 and Over
influx of college graduates
as opposed to a “brain
drain.” The 25 to 34 age
cohort from 1990 moved
into the 35 to 44 age
bracket in 2000. The
share of college graduates
in this group rose from
18.6 percent in 1990 to
20.9 percent in 2000.
Source: U.S. Census Bureau, Current Population Survey, March 2002.
8
Educational attainment is
certainly a significant factor in an individual’s earnings potential. The March
2002 Current Population
Survey provides estimates
for the U.S. of average
Sadly, many Alabamians will spend their working lives at
the lowest rung of the income ladder. In 2000, 20.3 percent of residents aged 18 to 44 had less than a high school
education, compared to 17.8 percent for the U.S. While
some at the lower end of this age range will complete their
high school degree or G.E.D., most probably never will.
It is telling to economic developers that only 13 of
Alabama’s 67 counties show high school completion rates
better than the state average. And it is a particular handicap for the nine rural counties where at least 30 percent of
residents in the 18 to 44 age group have less than a high
school education.
annual earnings in 2001 for full-time, yearround workers aged 18 and over by level of
education. On average, a worker who had finished high school earned 30 percent more
than one who had not. The largest percentage
increase in wages went to those adding a professional degree to their bachelor’s—earning a
J.D., M.D., D.D.S., or D.V.M. netted an average of $53,248 (88 percent) over the $60,660
earned by holders of a bachelor’s degree only.
Second to a professional degree, obtaining
that bachelor’s pays off well—average earnings
of full-time workers with a bachelor’s degree
were $26,439, or 77 percent, above the
$34,221 earned on average by a high school
graduate.
Carolyn Trent
Percent Ages 18 to 44
Not Completing High School, 2000
United States 17.8%
Alabama 20.3%
Over a working lifetime, even the smaller
increases in earnings for higher levels of education add up to substantial differences.
Recent synthetic work-life earnings estimates
were calculated by the Census Bureau using
Current Population Survey data for 1997
through 1999. The resulting totals represent
what full-time, year-round workers with the
same educational level could expect to earn in
1999 dollars, on average, over a 40-year working life, defined as the period from age 25
through age 64. While a high school dropout
will earn about $1.0 million during this working lifetime, adding a high school diploma or
G.E.D. will increase earnings by over a quarter
of a million dollars. Individuals with a bachelor’s degree can earn upwards of $2.1 million
during their working life. Adding a master’s
degree nets about $400,000 more, on average,
in earnings over the 40 years. Doctoral and
professional degree holders do even better,
with lifetime earnings averaging $3.4 and $4.4
million, respectively.
Source: U.S. Census Bureau.
9
Commuting Patterns
In and Out of
Alabama
industry, airports and car rental agencies, and some retail
stores. Business travelers buy things. If, on any give
week, there are several hundred of these short-term workers in your area, perhaps they are a good target market for
your business.
People are always intensely interested in the commuting
patterns of the place they live. Commuting patterns tell
us things about the economy, the way we spend our time,
and give us glimpses of social conditions at work around
us. The only regular source of commuting data we have is
the long form of the decennial census of population.
Every 10 years a sample of people who answer the census
get a long form to fill out. Two of the questions are
“Where do you live?” and “Where did you work last
week?” From those questions, the Census Bureau estimates commuting patterns.
In 2000, 98 percent of all persons working in Alabama
were residents of Alabama. Two percent of all persons
working in Alabama, 41,494 workers, resided in other
states. Not surprisingly, 35,067 of these workers—or 85
percent—were residents of our surrounding states.
The results of the Census Bureau’s tabulations can be
both revealing and confusing. We can see immediately
from the map illustrations here that more than 5,000 people in each of Lee and Russell Counties work across the
border in Georgia. It is not surprising then that Russell
County, Alabama is part of the Columbus, Georgia metro
area. But we also see on the map that hundreds of people
in Tuscaloosa County seem to work in Georgia. That is
surely too far to commute. What’s going on?
The answer lies in the way the census questions are asked.
The question “Where do you live?” refers to your usual
place of residence. The question “Where did you work
last week?” refers to where you were working last week,
not necessarily your usual place of work. Traveling salesmen, airline pilots and flight attendants, and workers
attending an out-of-state conference might give answers
about where they worked last week, compared to where
they live, that on the surface seem to be wild and crazy.
Jefferson County, Alabama shows up in every map illustration as a significant supplier of workers to all Alabama’s
contiguous states. Jefferson County contains Alabama’s
biggest metro area, Birmingham, and Birmingham is economically linked to important cities in many other states.
On any given week, many Birmingham workers will be
visiting a branch office, making sales calls, attending or
conducting training sessions, or delivering an installation
in another state, particularly our contiguous sister states.
Louisiana is the next most important state for having
Alabama workers contribute to its economy, drawing
largely from Mobile.
Analysts like to look at the numbers from the other direction as well. How many out-of-state workers are coming
to Alabama, and what is their destination? These workers
can be a significant source of income for the hospitality
10
Alabama Workers by Place of Residence
Persons Working in Alabama
by Place of Residence
State
Alabama
Georgia
Florida
Tennessee
Mississippi
Number of Workers
1,821,992
10,051
9,460
8,565
6,991
Texas, Louisiana, and North Carolina brought the number
to 37,460, accounting for 90 percent of all persons working in Alabama. The balance of Alabama workers come
from the all of the remaining states except one—Idaho.
Alabama Residents by Place of Work
While 98 percent of all persons working in Alabama also
lived in Alabama, only 96 percent of all Alabama residents
worked in Alabama, making Alabama a net exporter of
workers. Specifically, 41,494 persons working in Alabama
lived out-of-state while 77,215 Alabama residents worked
out-of-state. By far the largest percentage of the Alabama
residents who worked out-of-state commuted to Georgia—
39,667 or 51 percent. This number is primarily the result
of Russell County being part of the Columbus, GA MSA.
Alabama Residents Commuting Out-of-State
by Place of Work
State
Georgia
Mississippi
Tennessee
Florida
Number of Workers
39,667
12,416
8,662
6,234
Not unexpectedly, our neighboring states provided the
overwhelming majority of out-of-state jobs for Alabama
residents—87 percent. Louisiana was the next largest
source of employment for Alabamians, providing jobs for
2,095 Alabama residents. Texas provided 1,356 jobs for
Alabamians, bringing the cumulative percentage to 91 per-
cent. The balance of jobs were found in all the remaining
states except for Montana, South Dakota, and Wyoming.
Trends over the Decade 1990 versus 2000
In 2000, a greater number of persons working in Alabama
lived out-of-state than in 1990. In 1990, 33,746 persons
working in Alabama lived outside of Alabama or 1.98 percent. By 2000, this number had risen to 41,494 or 2.23
percent.
Alabama Workers by Place of Residence
State
Georgia
Florida
Tennessee
Mississippi
1990
6,781
7,633
7,818
6,761
2000
10,051
9,460
8,565
6,991
Increase
3,270
1,827
747
230
Likewise, in the year 2000, a greater number of persons living in Alabama commuted out-of-state to work than in
1990—77,215 compared to 61,314. As a percentage, 3.5
percent of Alabama residents found work out-of-state in
1990. In 2000, that percentage rose slightly to 4.0 percent.
As would be expected, the greatest increases in out-of-state
employment occurred with our neighboring states.
Alabama Workers by Place of Employment
State
Georgia
Florida
Tennessee
Mississippi
1990
30,700
6,423
5,950
9,562
2000
39,667
6,234
8,662
12,416
Increase
8,967
-189
2,712
2,854
Carl Ferguson
Annette Jones Watters
11
BLCI
Current Quarter vs. Previous Quarter
100
80
Index
Alabama
Business
Leaders
Confidence
Index:
60
63
60
56
58
56
40
2nd Quarter 2003
20
Alabama business leaders completed
the second quarter 2003 survey in
0
the shadow of war with Iraq, with
Q2 Q3
the war’s duration and outcome
2002
unknown when the survey closed at
the end of March. Geopolitical uncertainties combined
with general economic weakness to depress expectations
for near-term improvement in the economy. The confidence index registered 56 for the quarter, indicating modest overall improvement, but at a slower pace than expected in the first quarter when the reading was 58.
Expectations for the course of the U.S. economy dipped—
51.3 percent of panelists anticipate improvement in the
national economy in the second quarter compared to
almost 60 percent last quarter. And, the 22.4 percent of
respondents forecasting a downturn is the highest negative
of the past year. Faced with the state’s current fiscal crisis
and expected budget shortfall, business leaders are also less
positive about the direction of the Alabama economy in
second quarter 2003. Just 43 percent forecast improvement, down from 49 percent last quarter, for the lowest
expectation of the past year. And 30 percent think the
The University of Alabama
Center for Business and Economic Research
Box 870221
Tuscaloosa, Alabama 35487-0221
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Q4 Q1 Q2
2003
shortfall will significantly impact their
industry.
Increased sales and an improved job
outlook are expected to be the
strongest contributors to growth in
the Alabama economy in the second
quarter. About 59 percent of panelists expect sales in their industry to
increase during the quarter, up from
55.4 percent on the first quarter survey. Sales growth should be strongest
in construction and manufacturing.
The 30.7 percent of respondents forecasting increased hiring during the
quarter provides the most optimistic
jobs outlook of the past year.
Construction, manufacturing, and
FIRE are expected to be the strongest
sectors for job growth.
On the negative side, forecasts for profits and capital
expenditures both fell in the second quarter. Just 46.6 percent of Alabama business leaders expect profits in their
industry to rise, down from 51.3 percent last quarter.
Profit outlooks are most positive in construction and
TCPU. And capital spending is not likely to rebound during the second quarter, as only 37.5 percent of panelists
expect expenditures in their industry to increase—a significant drop from 44.2 percent last quarter. Still, about 50
percent of respondents in construction and FIRE foresee
increases.
Carolyn Trent
The BLCI is developed in partnership between
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Economic Research. Complete results can be found
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