AlabamaBusiness
Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
Volume 73, Number 3
Economic Outlook:
3rd Quarter 2004
United States
Overview. Despite a slight slowdown
in the first quarter, national economic
fundamentals remain on solid footing.
Increased business spending, together
with improving payroll employment, will
continue to drive the economic recovery.
Although a recovery in the industrial
sector still has a long way to go, services
are doing better. In spite of a decline
in June, the ISM (Institute for Supply
Management) nonmanufacturing index
is still indicating a strong expansion.
The orders and employment indexes
increased significantly and the employment index value is the highest it has
been since the survey began seven years
ago.
Increased energy prices will affect both
business costs and consumer spending.
But higher fuel prices do not necessarily
indicate a stalled economic recovery.
Economic fundamentals for the second
Third Quarter 2004
half of 2004 point toward
relatively strong growth,
even though in the first
half of the year there was
some weakness in payroll
employment and consumer spending. For the
second half of the year,
the economy is expected
to grow in the 4.5 to 5.0
percent range, higher than
the 3.9 percent experienced in the first half.
For the year as a whole,
the economy is expected
to grow at 4.6 percent,
which would be one of
the fastest rates of growth
experienced in nearly 20 years.
Consumer Spending. Retail sales
dropped by 1.1 percent in June, the
largest decline experienced since February 2003, primarily due to a decline
in automobile sales. Excluding autos,
overall sales remained about even. Auto
sales dropped from 17.8 million units in
May to 15.4 million units in June, one
of the slowest months since August
1998. Despite their recent reluctance to
buy cars and trucks, consumers continue
to spend, more on nondurable than
durable goods. Helped
by tax cuts, low interest
rates, and improving payroll employment, consumer spending is growing at a very strong pace.
However, the effects from
tax cuts are about to
wane.
Fundamentals for strong
consumer spending in the
second half still look
promising. The Conference Board’s consumer
confidence index rose in
June, giving the strongest
reading in nearly two years. The index
tracking expectations for the next six
months also increased in June. During
first quarter 2004, consumer spending,
which accounts for almost two-thirds of
the economy, increased by 3.8 percent,
compared to 3.2 percent in the fourth
quarter of 2003. Although higher energy
prices in both 2003 and this year have
cost consumers about 40 billion additional dollars, these prices have had only
a marginal effect on spending levels.
Consumer spending increased in the first
half of 2004 by about 3 percent, and as
payrolls and the economy continue to
In this issue:
Economic Outlook:
3rd Quarter 2004
1
Business Leaders
Confidence Index:
3rd Quarter 2004
5
Selected Indicators
9
Economic Well-Being of
Alabamians, 2000-2004
10
2
Alabama Business
which should bring the
unemployment rate
down to around 5.2 or
5.3 percent.
improve, spending in the second half is
forecasted to increase by 3.9 to 4.0 percent.
With improving employment conditions,
spending on durable goods is also
expected to accelerate in the second half,
increasing by almost 9 percent, compared to the decline we noticed in the
first half of 2004. The biggest risk to
consumer spending is a rapid increase
in interest rates. If interest rates on consumer installment credit rise relatively
rapidly, that additional burden would
affect spending. The portion of disposable income that is used to pay off debts
is at a record high. An increase in interest rates would further squeeze consumer
discretionary income.
Employment. After an increase in payroll employment of 248,000 in May, payrolls increased again in June by an unexpectedly lower 112,000. The economy
has added nearly 1.3 million jobs in the
first six months of 2004. That’s good
news, but the economy will have to gain
an additional 1.2 million jobs to offset
the number of jobs lost since the most
recent recession began in March 2001.
In June, employment in services increased by almost 122,000, following
an increase of 176,000 in May. However, payrolls in goods producing industries declined by about 10,000. Payroll
employment gains are expected to
remain solid for the remainder of the
year. By fourth quarter 2004, the economy is expected to add approximately 2.5
million new jobs over the previous year,
Manufacturing. After
peaking in 1979,
employment in manufacturing has been on
a long declining trend
and is currently at levels
approximately 5 to 6
million below the peak.
For the first time in 44
months, manufacturing
employment in May
did not experience a
decline. In fact, in May
manufacturing added 32,000 new jobs,
the biggest gain in six years. However,
the gains could not be sustained; manufacturing lost 11,000 jobs again in June.
Over the last 44 months, manufacturing
has lost almost 3 million jobs.
For the second half of the year, industrial
production will increase by 5 or 6 percent, and for all of 2004 industrial production is forecasted to rise by 5.5 percent, compared to 0.3 percent in 2003.
Although industrial production declined
in June after increasing in May, most of
that decline was due to a cutback in
automobile production. With high levels of inventory, automobile manufacturers decreased their production by 10.4
percent in the second quarter. Automobile manufacturers are currently utilizing only 77.6 percent of their capacity.
Outlook. Although the economy has
shown some signs of a
slowdown, it remains
fundamentally strong.
After a long run of bad
news, the manufacturing sector overall has
finally turned around
and continues to
improve, even though
not every manufacturing industry is doing
well. The second half
of the year is expected
to see increases in both
consumer spending and
payroll employment.
Business spending will
also be a key factor in coming months.
Pent up demand, inventory rebuilding,
and increased hiring should help business spending grow by over 15 percent
in the second half of 2004. Furthermore,
depreciation allowances expire at the end
of the year, and these expirations should
provide extra incentives for businesses to
increase their spending now.
The U.S. economy is expected to grow
by 4.6 percent in 2004, the fastest growth
experienced since 1984. For 2005 economic growth should be about 3.9 percent. The fixed 30-year mortgage rate is
expected to be slightly above 6 percent,
and could inch up to close to 7 percent
next year. The 10-year Treasury note
yield is expected to rise to around 4.6
percent this year and move close to 5.5
percent in 2005. After declining for
three straight years, payroll employment
is forecasted to increase by over 1 percent in 2004. The unemployment rate is
also expected to decline, falling to 5.3 or
5.4 percent by the year’s end. The federal funds rate is forecasted to reach 2.0
percent, stabilizing economic growth.
Alabama
Employment. In keeping with the
national trend, payroll layoffs in
Alabama have shown a significant slowdown in recent months. Contrary to
the national trend, automobile manufacturing in the state has performed exceptionally well, with the industry being the
only part of the manufacturing sector
Alabama Business
that has added any significant number
of jobs. Alabama’s strong automotive
sector has helped negate some of the
effects of layoffs in other manufacturing
industries.
During the 12-month period ending in
June 2004, the state gained almost 2,500
new jobs. The state’s manufacturing sector lost about 5,700 jobs in that same
period, but other sectors of the economy
took up the slack. While durable goods
manufacturers gained about 600 net
jobs, the nondurable sector lost 6,300
jobs. Net new jobs in durable goods
manufacturing bode well for state tax
revenues, since durable goods manufacturing includes many capital-intensive
industries with high productivity and
wages. Manufacturing industries that are
not increasing their payrolls are notable.
In the 12 months to June 2004, the
state’s steel industry lost almost 2,300
jobs; textile mills, textile products and
apparel lost 3,300; paper manufacturing
lost another 400; and electronic components and products manufacturing,
including computer and appliance manufacturers, lost 800 jobs. Information and
telecommunications industries continued
to shed jobs—1,200 in the 12 months to
June 2004.
The services sector gained 6,000 jobs
between June 2003 and June 2004.
Leisure and hospitality gained 1,200,
split between eating and drinking places
and accommodation and food services.
An increasing hospitality and tourism
component to Alabama’s economy is
welcome, although these jobs have generally lower wages compared to manufac-
3
turing. The retail sector, after losing a
significant number of jobs since 2001,
added almost 5,400. Most of the new
jobs have been in the major metropolitan areas of the state—1,000 were in the
Huntsville metropolitan area. Healthcare and social assistance services also
added 900 new jobs. Employment
has improved over the prior three-year
period, indicating that the Alabama
economy is indeed showing a sustained
recovery. However, really significant
additions to payrolls are not expected
until the second half of 2004 or maybe
even 2005.
Tax revenues. After one of the worst fiscal years in decades, the first three quarters of the current fiscal year (FY2004)
recorded significant improvement. The
state tax structure faces long-term struc-
4
Alabama Business
Alabama Nonagricultural Employment
Change in Number of Jobs
June 2003 to
June 2004
Total Nonagricultural
Natural Resources and Mining
Construction
Manufacturing
Durable Goods Manufacturing
Wood Products Manufacturing
Primary Metal Manufacturing
Fabricated Metal Product Manufacturing
Machinery Manufacturing
Computers and Electronic Products Manufacturing
Electrical Equipment, Appliance and Component Mfg.
Transportation Equipment Manufacturing
Motor Vehicle Manufacturing
Furniture and Related Products
Nondurable Goods Manufacturing
Food Manufacturing
Textile Mills
Textile Product Mills
Apparel Manufacturing
Paper Manufacturing
Plastics and Rubber Product Manufacturing
Trade, Transportation and Utilities
Wholesale Trade
Retail Trade
Transportation, Warehousing and Utilities
Information
Telecommunications
Financial Activity
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
Federal Government
State Government
State Education
Local Government
2,500
-100
2,300
-5,700
600
500
-600
-1,700
400
-700
-100
2,400
1,100
400
-6,300
-300
-1,200
-200
-1,900
-400
100
5,500
100
5,400
0
-1,200
-400
-400
1,400
600
1,200
-1,300
200
-100
200
0
100
year, from $4.8 billion to over $5.2
billion. Individual
income tax receipts
are 9.5 percent higher, increasing from
$1.8 billion to
almost $2.1 billion.
Corporate income
tax revenues, at
$237.5 million, are
approximately 37
percent higher than
the previous fiscal
year’s $173.3 million. Sales tax collections totaled
almost $1.3 billion,
compared to
approximately $1.2
Source: Alabama Department of Industrial Relations.
billion collected
during the first
three quarters of the
tural problems, but revenues for the cur- previous fiscal year.
rent fiscal year will easily surpass the previous fiscal year’s, as business spending
For the first three quarters of FY2004,
and payrolls improve and consumer
the appropriations for the Alabama
spending remains strong. For the first
Education Trust Fund totaled approxithree quarters of the current fiscal year,
mately $3.4 billion, an increase of about
total tax receipts are up 8.5 percent over
$337.8 million over the previous fiscal
the same period of the previous fiscal
year. However, appropriations made to
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
the General Fund declined by almost
14.7 percent, or $141.5 million, to slightly more than $822 million.
Outlook. The rebound in the manufacturing sector and continued strength in
consumer spending will help the state
grow at an average annual rate of 3.5 to
4.0 percent in 2004 with payroll employment rising 0.3 to 0.5 percent, adding
6,500 to 8,000 net new jobs. Most of
these job gains will be in services and
residential construction. The automotive
industry in the state, including the suppliers associated with major manufacturers, will add a significant number of jobs
in both 2004 and 2005. The services and
retailing sectors of the economy are
expected to grow by slightly more than 4
percent in 2004, while financial activity
is forecasted to grow by approximately 4
percent or better. With interest rates
already increasing, refinancing activity in
the housing markets will slow down
soon. However, housing sales should
remain strong as consumers, in anticipation of rising interest rates, try to lock in
rates at their present levels.
Ahmad Ijaz
can be reached at [email protected]
Business and Economic Research, Box
870221, Tuscaloosa, Alabama 35487-0221.
Copies of this publication as well as other
socioeconomic data resources are available
on the Center website: http://cber.cba.ua.edu
®
Third Quarter 2004 • Volume 3 • Number 3
BLCI Barometer
50
42.2
40
Percent
Interest rates are foremost on the minds
of 42.2 percent of survey respondents.
Forecasters generally expect rates to rise
gradually until year-end. Inflationary
pressures bring the risk of more rapid
increases, however. About 70 percent of
panelists in finance, insurance, and real
estate; 59 percent in health care and
social services; and half of construction
panelists are most concerned about the
course of interest rates.
High fuel prices are the most significant
concern of 20.8 percent of the state’s
business leaders. The intertwining of
world events and energy prices coupled
with their effect on inflation and consumer spending makes this an important
factor in the continuing state and national recoveries. About 40 percent of Alabama manufacturing and retail trade
respondents and 30 percent of wholesale
trade participants say fuel prices are their
most important concern. World events
could have the strongest influence on the
business decisions of 15 percent of BLCI
panelists, while 13.4 percent say the upcoming elections will most affect their
decisions. And stock market performance, a factor influenced by the other
four factors, is of primary importance to
8.6 percent of those completing the third
quarter survey.
30
13.4
Five of six indicators that comprise the
index rose in the third quarter. While
the share of panelists expecting sales to
increase dropped slightly, more that 79
percent anticipate improvements in sales
and in the national economy this quarter.
Forecasts for the Alabama economy and
for industry hiring are close to 10 per-
0
BLCI
100
80
60
Index
centage points above last
quarter. And the percentage of survey participants
expecting profits in their
industry to rise during the
quarter is at a record 69.8
percent. Capital spending
should also gain momentum. The state’s burgeoning auto industry will be
a major contributor to
economic growth, with
Hyundai test production
underway and Hyundai,
Mercedes, and Honda suppliers bringing new plants
and expansions online.
15.0
10 8.6
Alabama Business Leaders Confidence Index
The confidence of Alabama business
leaders continued the upward trend that
began a year ago. An improved outlook
for the state’s economy combined with
more solid hiring plans to raise the third
quarter index to 69. This represents a
gain of two points over the 67 reported
in the last two quarters. A year ago, the
BLCI registered 61.
20.8
20
M
a
El rke
e
t
W
c
t
or io
ld ns
Fu Eve
e n
In l Pr ts
te
re ices
st
Ra
te
s
The economic recovery continues to take
hold in Alabama. While jobs, income,
and state revenues are trending upward,
various economic and geopolitical factors
introduce uncertainties that will affect
business decisions. The third quarter
BLCI barometer asks Alabama business
leaders to choose the one factor out of a
list of five that will most influence their
decisions for the remainder of 2004.
Which of the following
factors will have the
greatest influence on
your business decisions
for the remainder of the
year?
St
oc
k
ALABAMA
61
61
67
67
69
40
20
0
Q3 Q4
2003
Q1 Q2 Q3
2004
Center for Business and Economic Research, The University of Alabama
The National Economy
National Economic Outlook
80
Q3 2004 compared to Q2 2004
63.8
60
Percent
BLCI panelists are confident that the U.S. economy will
continue to strengthen in the third quarter of 2004, with
79.9 percent forecasting an acceleration in growth. This
is up slightly from 78.3 percent last quarter and compares
to 71.5 percent a year ago. While a strong start in the
second quarter was softened by a slowdown in consumer
spending and weaker job growth in June, the economy is
expected to resume a faster pace of growth in the third
quarter. Stabilizing fuel prices, strong consumer confidence, continued job gains, and robust business investment in equipment and software are among the factors
favoring this forecast, while inflation remains a concern.
Seven percent of Alabama business leaders think growth
in the national economy could slow during the quarter.
40
20
6.4
0.6
16.1
13.0
0 Strong Moderate
No Moderate Strong
Decrease Decrease Change Increase Increase
The Alabama Economy
Alabama Economic Outlook
Q3 2004 compared to Q2 2004
80
Percent
Alabama business leaders are upbeat about prospects for
the state's economy in the third quarter. The 74.3 percent of panelists expecting improvement is substantially
above last quarter's 64.9 percent and contrasts with 50.7
percent a year ago. Over the last four quarters, the gap
between expectations for the national and state economies has steadily narrowed from a deficit of 27 percentage points to less than 6. Alabama is participating in the
U.S. recovery, adding 18,700 jobs between January and
May 2004. An 8.6 percent rise in state tax revenues for
the first eight months of FY 2004 compared to the same
period in FY 2003 has helped ease the budget pressures
the state faced a year ago when the governor’s tax and
accountability plan was defeated.
68.9
60
40
22.0
20
0
0.4
5.4
3.3
Strong Moderate
No Moderate Strong
Decrease Decrease Change Increase Increase
Interest Rates
Interest Rates
80
Q3 2004 compared to Q2 2004
80.2
60
Percent
The Federal Open Market Committee (FOMC) raised
the federal funds rate a quarter of a point to 1.25 percent on June 30, after leaving the rate at 1.0 percent for
a year. Seeing upside and downside risks to both sustainable growth and inflation as “roughly equal,” the committee indicated that rate hikes could proceed at a
“measured” pace. Weaker employment numbers in June
give credence to this approach. Eighty percent of BLCI
panelists anticipate further moderate increases in interest
rates during the third quarter, while 16.3 percent think
rates will hold at current levels. The FOMC meets on
August 10 and September 21.
40
16.3
20
0
0.0
1.0
2.5
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
C e n t e r f o r B u s i n e s s a n d E c o n o m i c R e s e a rc h
Industry Sales
Industry Sales
Q3 2004 compared to Q2 2004
80
68.9
60
Percent
Alabama business leaders continue to be most positive
about prospects for sales, with 79.4 percent predicting sales
increases in their industry during the third quarter. Just
5.3 percent see a possible downside to sales—the lowest
since the BLCI’s inception in 2002. Consumer spending
growth is expected to rebound from a dip in the second
quarter as energy prices stabilize and job gains continue.
With the residential housing market still strong and nonresidential construction beginning to pick up, 88 percent
of panelists in finance, insurance, and real estate (FIRE)
and 81.6 percent in construction anticipate stronger sales.
Forecasts are also above average in wholesale trade and in
transportation, information, and public utilities (TIPU).
Survey participants in health care and social services are
least optimistic, with just 59.3 percent expecting sales gains
and about 11 percent forecasting a decline.
40
15.4
20
0
10.5
5.1
0.2
Strong Moderate
No Moderate Strong
Decrease Decrease Change Increase Increase
Industry Profits
Industry Profits
80
Q3 2004 compared to Q2 2004
59.7
60
Percent
Corporate profits should continue to build during the third
quarter of 2004. In the most optimistic forecast yet, 69.8
percent of Alabama business leaders foresee profits in their
industry increasing (including 10.1 percent expecting a
strong increase), while a record low 8.2 percent think profits could decline during the quarter. Productivity increases,
weak wage gains, and strengthening demand have been
contributing to near-record profit levels thus far in 2004.
Expectations are particularly high in FIRE, where 79.4 percent of panelists anticipate third quarter profit growth, and
in TIPU, with 76.9 percent forecasting gains. The third
quarter profit outlook is weakest in health care and social
services, where just 51.8 percent expect an increase and
18.5 percent a decrease. Almost 14 percent of panelists in
manufacturing and in professional, scientific, and technical
services think third quarter profits could weaken, while 65.2
and 62.5 percent, respectively, anticipate higher profits.
40
22.0
20
0
10.1
7.6
0.6
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
Industry Hiring
(continued on next page)
Industry Hiring Plans
80
Q3 2004 compared to Q2 2004
60
Percent
The job creation component of the current economic
expansion should continue to strengthen in Alabama during the third quarter. A healthy 59.5 percent of business
leaders expect their industry to add jobs during the quarter,
over 10 percentage points above the second quarter reading. And 6.8 percent of panelists think the job growth will
be strong. Only 3.5 percent expect their industry to shed
jobs—a contrast to third quarter 2003 when 11 percent
anticipated a decline in hiring and just 33.6 percent expected to add jobs. Expectations for job creation are highest in
construction, with 68.4 percent forecasting increases; followed by FIRE at 66.3 percent and professional, scientific,
and technical services where 65 percent foresee job gains.
52.7
37.0
40
20
0
0.4
3.1
6.8
Strong Moderate
No Moderate Strong
Decrease Decrease Change Increase Increase
C e n t e r f o r B u s i n e s s a n d E c o n o m i c R e s e a rc h
(continued from previous page)
Manufacturing should be back on the growth track in
Alabama with 59.1 percent of industry panelists anticipating increased hiring in the third quarter, up from
45.4 percent last quarter. Most panelists in health
care and social services and in retail trade expect no
change in hiring.
Industry Capital Expenditures
Industry Capital Expenditures
80
Q3 2004 compared to Q2 2004
60
Percent
Capital spending should continue to gain momentum as
62.7 percent of Alabama business leaders anticipate
increased investment in their industry during third quarter 2004. This is up from 59.8 percent last quarter and
compares to 46.5 percent a year ago. Expiration of the
bonus depreciation tax bills at the end of 2004 gives
firms an incentive to accelerate purchases of software and
equipment, while global competition pressures them to
make capital investments to enhance productivity.
Prospects for stepped up investment are strongest in
retail trade, with 78.6 percent of industry panelists forecasting increases and in TIPU and FIRE, where about 72
percent anticipate higher spending. And no panelists in
these three industry groups see any downside to capital
spending this quarter. Given recent capital investment
by Alabama manufacturers, particularly in the automotive sector, prospects for capital spending growth in the
industry are expected to slow, with 57.6 percent forecasting an increase compared to 60.6 percent last quarter.
54.5
40
33.3
20
0
0.4
3.7
8.2
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
BLCI Panelists
Participation in the BLCI survey continues to grow,
with over 500 Alabama panelists completing the third
quarter BLCI survey online during June. Respondents
reported their views on the probable course of the
national and Alabama economies as well as sales, profits, hiring, and capital expenditures in their industry.
Business leaders responding to the survey represent
small, midsize, and large companies in Alabama’s 11
metropolitan areas and over 40 nonmetro communi-
The BLCI is a
Compass on Business
initiative created in
collaboration with:
ties across the state. On the third quarter survey, 38.1
percent of participating firms reported annual sales
under $5 million, while 34 percent had sales in the $5
to $50 million range, and 23 percent tallied sales of
over $50 million. Grouped by number of employees,
one third of third quarter panelists were from firms
with fewer than 20 employees, while 29.6 percent
employed 20 to 99, and 37.2 percent had at least 100
employees.
THE UNIVERSITY OF
ALABAMA
CENTER FOR BUSINESS &
ECONOMIC RESEARCH
For more details on the Alabama Business Leaders Confidence Index, visit www.blcindex.com/alabama/.
For more details on the Center for Business and Economic Research, visit cber.cba.ua.edu.
Alabama Business
Selected Economic Indicators
United States
Gross Domestic Product (billions)
Percent Change
10-Year Treasury Bond Rate
3-Month Treasury Bill Rate
Consumer Price Index
Inflation Rate
Housing Starts (millions)
Percent Change
Nonfarm Payrolls (millions)
Percent Change
Unemployment Rate
Alabama
2003/Q1
2003/Q2
2003/Q3
2003/Q4
2004/Q1
2004/Q2
10,210.4
2.1
3.9
1.2
1.831
2.9
1.9
-1.2
130.0
-0.3
5.8
10,288.3
2.4
3.6
1.0
1.834
2.2
1.9
0.6
129.9
-0.4
6.1
10,493.1
3.6
4.2
0.9
1.845
2.2
2.0
8.1
129.8
-0.4
6.1
10,600.1
4.3
4.3
0.9
1.848
1.9
2.2
14.9
130.0
-0.2
5.9
10,702.1
4.8
4.0
0.9
1.864
1.8
2.1
9.9
130.4
0.2
5.6
10,803.0
5.0
4.6
1.1
1.885
2.8
2.1
12.7
131.1
1.0
5.6
2003/Q1
2003/Q2
2003/Q3
2003/Q4
2004/Q1
2004/Q2
1,878.9
-0.5
295.9
-4.4
1,870.8
-0.5
291.1
-0.5
1,884.5
-0.5
289.5
-4.9
1,869.2
0.2
288.7
-3.2
1,883.5
0.2
288.9
-2.4
165.6
-4.5
163.5
-4.5
164.1
-3.7
165.0
-1.0
165.2
-0.3
130.3
-4.2
127.6
-5.7
125.4
-6.4
123.7
-5.9
123.7
-5.1
76.6
-2.0
76.9
-1.5
77.2
-0.8
76.7
0.3
77.1
0.6
227.2
0.8
5.9
27.1
41.4
1,664.7
-3.0
791.4
-5.1
404.2
2.6
229.7
2.5
5.8
25.7
40.8
1,495.4
-3.0
641.0
-5.5
394.2
-0.2
235.1
1.8
5.8
24.6
41.0
1,516.3
9.3
643.1
12.1
424.9
10.4
230.7
3.2
5.7
25.9
40.4
1,755.9
11.5
720.4
4.1
413.4
5.1
231.6
1.9
5.4
19.7
40.9
1,892.3
13.7
935.9
18.3
436.9
8.1
Total Nonagricultural
Employment (thousands)
1,865.3
Percent Change
-0.3
Manufacturing Employment (thousands) 298.2
Percent Change
-3.5
Durable Goods Manufacturing
Employment (thousands)
166.7
Percent Change
-3.5
Nondurable Goods Manufacturing
Employment (thousands)
131.5
Percent Change
-3.5
Wholesale Trade
Employment (thousands)
76.4
Percent Change
-3.5
Retail Trade Employment
(thousands)
223.5
Percent Change
-1.2
Alabama Unemployment Rate
5.7
Initial Benefit Claims (thousands)
32.6
Manufacturing Weekly Hours
41.5
Total Tax Revenues (millions)
1,574.4
Percent Change
6.3
Total Income Tax Revenues (millions)
691.9
Percent Change
3.2
Total Sales Tax Revenues (millions)
393.2
Percent Change
5.9
Note: All percent changes indicate change over the 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.
9
10
Alabama Business
Economic
Well-Being of
Alabamians,
2000 to 2004
Employment
The first three years of the 21st century
were hard on Alabama workers. Between
2000 and 2003, the state lost about
56,400 nonagricultural wage and salary
jobs, a sharp contrast to the 295,400 jobs
added during 10 consecutive years of
gains between 1990 and 2000. While
2004 presents a glimmer of improvement, jobs are returning more slowly
than they left. Employment is up 400
on average for the first six months of
2004 compared to 2003; however, jobs
fell by 22,450 from 2000 to 2001. The
June 2003 to June 2004 period shows a
slightly larger gain of 2,500 jobs.
Job gains and losses in Alabama over the
last five years were not evenly distributed
among major industry groups. Manufacturing continues to fall into the negative column, although annual losses have
slowly moderated since the June 2000 to
June 2001 period when the state saw a
net loss of 29,900 manufacturing jobs.
Just think how Alabama’s manufacturing
picture would look without the continuing addition of jobs in the state’s auto
industry and in other transportation
equipment. Employment in the trans-
portation equipment manufacturing category increased by 4,700 between June
2000 and June 2004. According to a
study done for the Alabama Automotive
Manufacturing Association, direct jobs
in the state’s automotive industry (which
includes suppliers) rose almost 4,300
from 2001 to 2003 to total 31,197,
despite the loss of 2,000 jobs at seven
plants that closed in 2003 alone. Many
more automotive industry jobs are on
the horizon as Honda and Mercedes
expand production and Hyundai production gets underway early in 2005.
Other traditional manufacturing sectors
continue to struggle, however. Employment at textile mills and apparel manufacturers slid from 49,900 in June 2000
to just 27,800 in June 2004, a loss of
Alabama Nonagricultural Employment
Change from Previous Year
Total
Manufacturing
Trade
Services
June 2000
16,100
-5,400
2,300
16,500
800
June 2001
-22,400
-29,900
-4,800
8,800
100
June 2002
-32,500
-17,000
-9,700
5,200
2,800
June 2003
-10,400
-14,400
1,600
5,100
3,100
2,500
-5,700
5,500
1,900
200
June 2004 (p)
Source: Alabama Department of Industrial Relations.
Government
22,100 jobs. Primary and fabricated metals industries saw jobs in the state drop
from 54,500 in 2000 to 44,000 in June
2004, a decline of 10,500 workers.
Computer and electronic product manufacturing was hit by the high tech slide,
costing the state 3,600 jobs between June
2000 and June 2004.
Services and government have been the
stalwarts of Alabama’s economy since
2000. Overall jobs in services rose
21,000 between June 2000 and June
2004, with about half the gain in educational and health services. Government
employment has also trended up during
this period, with state and local governments responsible for an increase of
6,200 jobs. Wholesale and retail trade
lost 14,500 jobs between June 2000 and
June 2002, but have since added 7,100
jobs.
Despite job losses, Alabama’s labor force
grew by 19,700 between June 2000 and
June 2004, contributing to an increase of
21,400 in the number of unemployed
Alabamians. Total employment of the
state’s workers fell by just 1,700, however, well below the 62,800 jobs lost during
this time. This discrepancy can be
accounted for by an increased number of
residents finding jobs out of state and by
a rise in the number of workers who are
self-employed or employed by a family
member.
Alabama Business
Southeastern Nonagricultural
Employment
Percent Change, 2000 to 2003
United States
Alabama
Florida
Georgia
Mississippi
North Carolina
South Carolina
Tennessee
-1.4%
-2.9%
2.9%
-2.3%
-3.2%
-3.3%
-2.5%
-2.2%
Source: U.S. Bureau of Labor Statistics.
Looking at a comparative group of
southeastern states, Alabama’s job loss
of 2.9 percent between 2000 and 2003
was less than the 3.2 and 3.3 percent of
nonagricultural jobs lost in Mississippi
and North Carolina, respectively. Except
for Florida which posted a 2.9 percent
gain, all of these states fared worse than
the United States over the three year
period.
Income
Alabama’s changing job mix is boosting
the per capita income of the state’s residents at a rate faster than the nation’s.
From 2000 to 2003, per capita income in
Alabama rose 10.8 percent, well above
the U.S. average of 6.0 percent and faster
than all other comparative southeastern
states except Mississippi. Personal
income includes before tax net earnings
by place of residence; rents, dividends,
and interest; and personal current trans-
Southeastern Per Capita
Personal Income
Percent Change, 2000 to 2003
United States
Alabama
Florida
Georgia
Mississippi
North Carolina
South Carolina
Tennessee
6.0%
10.8%
6.8%
5.2%
11.6%
4.3%
7.0%
9.0%
Source: U.S. Bureau of Economic
Analysis.
fer receipts. The state’s per capita disposable personal income, which is
income minus personal current taxes,
was also up 10.8 percent from 2000 to
2003. With the increase in the cost of
living (CPI-U) at 6.8 percent for the
same period, the average Alabamian had
more money to spend in real terms in
2003 than in 2000.
Data for the first quarter of 2004 indicate that income growth continues to be
above average in the current year. Alabama’s total personal income is up 1.6
percent from fourth quarter 2003, which
compares to a 1.4 percent gain for the
U.S. to rank the state 14th on first quarter income growth. Income from earnings rose 1.7 percent for the quarter,
while transfer receipts were up 1.9 percent. Rents, dividends, and interest
increased at the U.S. average of 0.8 percent.
Earnings by industry for first quarter
2004 show the positive effects of ongoing growth in Alabama’s transportation
equipment manufacturing sector. Durable goods manufacturing earnings rose
4.0 percent compared to 2.1 percent for
the nation, while earnings in the construction industry were up 4.4 percent,
well above the U.S. increase of 2.2 percent. At 2.3 percent, earnings in Alabama’s trade sector were also significantly higher than the U.S. gain of 1.5 per-
11
cent. However, first quarter earnings in
professional and business services were
well below average (0.4 versus 1.6 percent), while statewide earnings in the
information sector dropped 0.2 percent
compared to a nationwide increase of 1.3
percent.
Looking historically at personal income
for the current quarter compared to the
same quarter a year ago, growth in
Alabama’s quarterly personal income was
close to or above the nation’s from first
quarter 1990 through first quarter 1995.
However, Alabama began to lose ground
in the second quarter of 1995, with
income gains well below the U.S. for the
ensuing six years. Increases strengthened
in second quarter 2001 and have since
continued on a higher trajectory. This
pattern is reflected in the state’s per capita income, which slid from a peak of
84.2 percent of the U.S. average in 1995
to just 79.6 percent in 2000. Recent
stronger income gains have the wellbeing of Alabama’s residents improving,
although with per capita income at 83.3
percent of the national average in 2003,
there is plenty of room for continued
growth.
Carolyn Trent
12
Alabama Business
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