AlabamaBusiness
Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
Volume 73, Number 4
Economic Outlook:
4th Quarter 2004
United States
Overview. During the first two quarters
of 2004, the U.S. economy grew at average annual rates of 4.5 and 3.3 percent,
respectively. The slower growth rate during the second quarter was mainly due to
deceleration in personal consumption
expenditures on durable goods, primarily
motor vehicles, and a decline in private
inventories. However, that slowdown on
the consumer side of the economy was
offset by a strong showing on the business side. Business spending on fixed
investments increased 4.5 percent in first
quarter 2004 and almost 14 percent in
the second quarter. Growth in spending
on equipment and software increased
from 8 percent to slightly over 14 percent, a sixth consecutive quarterly gain
after over two years of decline. Some
of the acceleration in business spending
may be due to upcoming expirations of
depreciation allowances at the end of the
year.
September 2004 marked the 35th month
of recovery in the U.S. economy. Dur-
Fourth Quarter 2004
ing the first 35 months
of all previous economic
recoveries, both employment and income growth
far exceeded the gains
made during this recovery. And we do not
expect employment to
rise sharply in the near
future. The high rate of
industrial productivity
that has kept labor costs
down is beginning to
ebb. As productivity
declines, unit labor costs
will rise. Higher labor
costs could hamper any
increase in payroll
employment during the second half of
this year and into next year.
One significant risk for today’s economy
is the price of oil. According to a study
produced by Global Insight Inc., a $10
increase in the price of oil per barrel subtracts approximately 0.3 percent from
GDP growth. The fact that oil is hovering above $50 a barrel could have a significant impact on both business and
consumer spending in the second half of
the year. Even at these levels, in current
dollar prices and adjusted for inflation,
the price of oil per barrel is still below
the memorably high 1981
and 1990 levels. Oil cost
around $79 per barrel in
1981 and $60 in 1990, if
adjusted to current price
levels. Both these historic
spikes in oil prices caused
the U.S. economy to dip
into a recession. However, chances of recession
are very slim this time
around, as energy consumption in the United
States as a share of total
gross domestic product
(GDP) continues to
decline.
Consumer Spending. Consumer spending accounts for almost two-thirds of
GDP, and in some recent years it has
accounted for almost 80 to 90 percent of
the growth in the economy. For the first
half of this year, consumer spending
increased at an average annualized rate
of 2.9 percent. Spending on durable
goods, which includes motor vehicles,
increased by less than 1 percent, while
spending on nondurable goods increased
by 3.4 percent. A decline in spending
on gasoline, fuel oil, and other energy
goods, together with a significant decline
in spending on motor vehicles, meant
growth in overall consumer expenditures
In this issue:
Economic Outlook:
4th Quarter 2004
1
Business Leaders
Confidence Index:
4th Quarter 2004
5
Selected Indicators
9
Redefining Alabama’s
Rural Landscape
10
2
Alabama Business
declined from 2.9 percent in first quarter
2004 to 1.1 percent in the second quarter. However, the slowdown in consumer spending is expected to be only
a temporary phenomenon, as the fundamentals in the economy still look strong.
There has been a significant increase in
housing market values, and low interest
rates have resulted in a boom in new and
existing home sales. New home sales
soared in August; the biggest gain experienced since the end of 2000. Total outstanding mortgage debt has increased
from $1.5 trillion in 1985 to approximately $7 trillion today. According to
a Federal Reserve Bank of New York
study, U.S. consumers have taken out
$662 billion in home equity loans and
refinancing since 2001. This refinancing
results in more disposable income for
consumers, and they have been very
aggressive spenders in recent years.
After a slight slowdown in the first half,
spending in this year’s second half is
strengthening. Computers, software,
home furnishings, and health care performed well in the third quarter of 2004.
Employment. Payroll employment has
been increasing, but not very rapidly.
Most of the jobs gained in September
were in the services producing sector,
with professional and business services
adding almost 34,000 jobs. Surprisingly,
retailing lost almost 15,000 jobs, mainly
due to weakness in consumer spending.
Despite slower new job creation, during
the first nine months of the year there
were almost 1.6 million new jobs added.
Some sectors of the economy are still lagging in
adding new jobs; manufacturing dropped almost
18,000 jobs in September.
After peaking in 1979,
manufacturing has since
lost more than five million jobs. This includes
almost three million over
the last 46 months.
Other than the 36,000
jobs added in May and
August 2004, manufacturing employment has
declined for almost four
years. Although the sector has been reducing its
payroll, according to the Institute of
Supply Management Index, manufacturing activity grew for the 15th consecutive
month in September. Thus far manufacturers have been able to increase production without adding more workers.
Because that cannot continue forever, it
will be only a matter of time before we
see some gains in manufacturing
employment.
Health care related industries have seen
strong employment growth. The sector
added almost 97,000 jobs just in the
second quarter of 2004 and is estimated
to add another 80,000 jobs in the third
quarter. Business and professional services are also increasing employment.
After adding almost 215,000 jobs in the
second quarter, these services will add
another 115,000 jobs in the current
quarter.
Outlook. The outlook
for the remainder of the
year assumes that the
recent surge in oil
prices, which is the
biggest risk associated
with the forecast, is
only a temporary phenomenon and that oil
prices will begin to
decline toward $35 or
$40 per barrel sometime
in 2005. However, oil
prices are expected to
remain a drag on the
economy, perhaps for as
long as six months or
even a year. The forecast also assumes
that the Fed will continue to tighten
interest rates gradually, in which case
housing markets could remain strong for
another three to six months. Clean-up
and rebuilding after the four hurricanes
will also provide some boost to the economy.
The U.S. economy should have an average annual growth rate of 4.4 percent for
2004 as a whole and 3.4 percent in 2005.
Despite a run-up in oil prices, inflation is
forecasted to be only around 2.6 percent
in 2004, followed by 1.8 percent in 2005.
After increasing by 5.7 percent in the
first half of 2004, industrial production is
estimated to increase by 4.2 percent in
the second half of the year. Some of the
slowdown in the industrial sector will be
due to higher energy prices, which are
affecting industrial demand across the
world. Consumer expenditures are forecasted to remain strong, despite gradually
increasing interest rates and high energy
prices. If employment improves, consumer spending may increase by 3.5 percent in the second half of 2004, followed
by an increase of 3.0 percent in 2005.
For the year as a whole, payrolls are
expected to grow by 1.5 percent in 2004,
followed by a 1.7 percent increase in
2005. The sector that will record the
fastest growth in workers is services—
professional and business services and
educational and health services.
Temporary employment services will be
in strong demand, as firms find it advantageous to hire more employees on a
Alabama Business
temporary basis. Despite relatively
strong consumer spending, employment
in retailing will remain muted at least
through the rest of this year and well
into the first half of next year.
Alabama
Employment. From August 2003 to
August 2004, the state gained 7,800 new
nonagricultural jobs—6,400 in services
producing industries and 1,400 in goods
producing sectors. While payroll
employment in mining and natural
resources industries remained flat, construction added 2,900 new jobs.
Manufacturing lost 1,500 jobs. However,
within the manufacturing sector, some
industries gained employment while others lost. The durable goods sector added
2,800 net new jobs, 2,200 of which were
in transportation equipment manufacturing, including motor vehicle manufacturing (1,200). The automotive industry is
Alabama manufacturing’s bright spot.
The number of jobs being added in the
state’s automotive sector has helped mitigate payroll declines in other manufacturing industries.
Industries that lost jobs included steel
(1,000 jobs); computer and electronic
product manufacturing; and electrical
equipment, appliance and component
manufacturing (another 1,000 jobs). The
job losses in nondurable manufacturing
were even more noticeable. This sector
lost 4,300 jobs during the most recent
twelve-month period, of which 2,200
were in textiles and apparel.
Although labor markets seem to be
improving, most jobs being created are
in services, with relatively less pay and
3
benefits than are usually offered in manufacturing. Within the services producing sector, in the 12 months to August
2004, payroll employment increased by
0.4 percent, adding 6,400 new jobs.
Most of the jobs were in retailing (2,900),
professional and business services (2,300,
mostly in Huntsville), and educational
and health services (1,800). Huntsville,
Mobile, Montgomery, and Tuscaloosa
accounted for almost 97 percent of the
total retailing jobs added. Birmingham
lost 700 retailing jobs.
The information sector in the state lost
1,200 jobs and the financial activities
sector dropped 1,200 jobs, most of them
(1,100) among insurance carriers and
related activities. The information sector, which includes technology, is still
saddled with a great deal of excess capacity brought online in the late 1990s.
Until that excess capacity is worked out,
4
Alabama Business
Alabama Nonagricultural Employment
Change in Number of Jobs
August 2003 to
August 2004
Total Nonagricultural
7,800
Natural Resources and Mining
0
Construction
2,900
Manufacturing
-1,500
Durable Goods Manufacturing
2,800
Wood Products Manufacturing
900
Primary Metal Manufacturing
-100
Fabricated Metal Product Manufacturing
-900
Machinery Manufacturing
300
Computers and Electronic Products Manufacturing
-600
Electrical Equipment, Appliance and Component Mfg. -400
Transportation Equipment Manufacturing
2,200
Motor Vehicle Manufacturing
1,200
Furniture and Related Products
1,200
Nondurable Goods Manufacturing
-4,300
Food Manufacturing
-300
Textile Mills
-500
Textile Product Mills
-100
Apparel Manufacturing
-1,600
Paper Manufacturing
-300
Plastics and Rubber Product Manufacturing
300
Trade, Transportation and Utilities
3,800
Wholesale Trade
500
Retail Trade
2,900
Transportation, Warehousing and Utilities
400
Information
-1,200
Telecommunications
-600
Financial Activity
-1,200
Professional and Business Services
2,300
Educational and Health Services
1,800
Leisure and Hospitality
200
Other Services
-600
Government
1,300
Federal Government
-100
State Government
200
State Education
-100
Local Government
1,600
January 13, 2005—
a date to remember
The University of Alabama’s Center
for Business and Economic Research
will hold its annual Economic Outlook Conference
on January 13, 2005 in Montgomery, Alabama.
Space is limited, so reserve your spot today!
For more information:
Phone: 205.348.6191, Email: [email protected]
Source: Alabama Department of Industrial Relations.
any net job gains are unlikely. During
the twelve-month period between August
2003 and August 2004, every metro area
in the state lost jobs in information and
technology. The Birmingham metro area
lost almost 600 jobs, 400 of which were
in telecommunications.
Tax revenues. After one of the worst fiscal years in decades for almost every
state in the nation, fiscal year 2003-2004
(FY2004) saw a significant improvement
in state tax receipts. For FY2004, total
tax receipts increased by 8.2 percent over
the previous fiscal year, from $6.353 billion to $6.872 billion. Individual
income tax receipts were up by almost 8
percent, increasing from approximately
$2.5 billion to almost $2.7 billion.
Corporate income tax revenues totaled
$299.7 million, up by almost 25 percent
over the previous fiscal year. Because of
increased business spending, sales taxes
were up by slightly over 8 percent,
increasing from almost $1.6 billion in
FY2003 to over $1.7 billion. For FY2004
the appropriations for the Alabama
Education Trust Fund totaled approximately $4.45 billion, an increase of
about $206 million over the previous fiscal year. However, appropriations made
to the General Fund declined by almost
1.3 percent, or about $16.5 million.
Outlook. Even though energy prices are
acting as a drag, the state’s economy is in
a much better position in third quarter
2004 than it was in the first half of the
year. Both a decline in initial benefit
claims for unemployment and fewer
mass layoff announcements clearly show
an improving economy. For the year as
a whole, the state’s economy is estimated
to grow at an average annual rate of 3.7
percent, with employment increasing 0.3
percent, adding approximately 5,000 net
new jobs.
However, neither wage nor payroll
growth is yet strong enough to carry all
sectors of the economy. The fastest
growing sectors are expected to be professional and business services, health
care services, and in the industrial sector,
automotive related firms. Other industries expected to show a clear improvement will be rubber and plastics manufacturers, wood products related industries, machinery manufacturing, and construction related industries.
Direct investment in the industrial sector, primarily in the automotive industry,
is expected to stay robust during the
remainder of the year and well into
2005. Business spending, which has
improved significantly this year, is also
forecasted to continue strong for the
remainder of 2004, growing at an average
annual rate of close to 8 percent.
Ahmad Ijaz
®
Fourth Quarter 2004 • Volume 3 • Number 4
BLCI Barometer
ALABAMA
Poor sales were the most significant concern
of 22.2 percent of BLCI panelists, being
selected as most important among firms
surveyed in retail trade and second for
panelists in transportation, information,
and public utilities (TIPU); finance, insurance, and real estate (FIRE); wholesale
trade; professional, scientific, and technical
services; and manufacturing. Cost and
availability of insurance came in a close
third, ranking as the most important problem for 21.7 percent, including the largest
share of fourth quarter respondents in the
health care industry and in leisure, hospitality, and other services. Government
regulations posed the most significant problem for 17.7 percent of all panelists, and
ranked first in FIRE and TIPU and second
in the health care industry. Concerns about
taxes came in at the bottom of the list,
selected as the most important problem by
12.4 percent of Alabama business leaders.
30
25.9
25
22.2
20
15
12.4
10
5
0
Alabama Business Leaders Confidence Index
The BLCI was impacted by a much less
robust fourth quarter 2004 outlook among
firms in the transportation, information,
and public utilities industries, where expected growth in sales, profits, and hiring were
below average. Robust sales forecasts in
construction and health care and strong
expectations for profits, hiring, and capital
expenditures in Alabama’s manufacturing
sector bolstered the index. Capital spending should also be above average for all
service industries except health care.
BLCI
100
80
Index
The Alabama Business Leaders Confidence
Index® (BLCI) slipped to 66 on the fourth
quarter 2004 survey, three points below last
quarter’s record-high 69, but still solidly in
positive territory. All six indicators that
make up the index declined, with the outlook for profits taking the largest dip, followed by expectations for growth in the
national economy. Even so, every component except the U.S. outlook remained
above year-ago levels, with the overall index
five points higher than the 61 registered in
the fourth quarter of 2003.
21.7
17.7
Percent
On a daily basis, Alabama firms face a variety of challenges. The BLCI Barometer
this quarter asked business leaders to select
the single most important problem facing
their business today from a list of five:
taxes, poor sales, government regulations,
quality of labor, and cost/availability of
insurance. Quality of labor ranked at the
top of the list, with 25.9 percent of panelists
citing this as their foremost concern. The
workforce is seen as the primary problem in
wholesale trade; professional, scientific, and
technical services; and manufacturing.
What is the single most
important problem facing
your business today?
It is tied with cost/availability of insurance
in the construction industry.
Ta
Po xes
G or s
o
re ver ales
gu n
m
Q
ua lati en
lit on t
Co y of s
la
s
of t/av bo
in ail r
su a b
ra ilt
nc y
e
Alabama’s economy continues to rebound,
with job creation beginning to support the
recovery. Manufacturing is becoming an
engine for growth as new and expanding
automotive manufacturers and suppliers
add to their workforces in the fourth quarter of 2004 in preparation for bringing production online in the first quarter of 2005.
Still, results are mixed across industries as
well as areas of the state.
60
61
67 67 69 66
40
20
0
Q4 Q1 Q2 Q3 Q4
2003
2004
Center for Business and Economic Research, The University of Alabama
The National Economy
National Economic Outlook
80
Q4 2004 compared to Q3 2004
65.5
60
Percent
Alabama business leaders expect the U.S. economy to continue to
expand in the fourth quarter of 2004. However, the 71.8 percent
forecasting an improved national outlook is the lowest reading since
third quarter 2003. It represents a drop of eight percentage points
from last quarter’s 79.9 percent and comes in slightly below 73.3
percent anticipating an increase a year ago. Strong consumer spending and increases in construction and business equipment spending
helped push third quarter GDP growth above 4.0 percent, up from
3.3 percent in the second quarter. However, high energy prices,
weak employment and wage gains, and the fading effects of tax cuts
and mortgage refinancing are expected to slow growth in consumer
spending in the fourth quarter. The share of panelists anticipating a
decline in economic activity during the quarter rose slightly to 9.0
percent, compared to 7.0 percent in the third quarter.
40
19.2
20
0
0.8
8.2
6.3
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
The Alabama Economy
Alabama Economic Outlook
80
Q4 2004 compared to Q3 2004
62.5
60
Percent
BLCI panelists remain upbeat about overall prospects for the
Alabama economy. The 68.8 percent of business leaders expecting
the outlook to improve in the fourth quarter is the third highest
reading in 12 quarters of survey history and contrasts with just 46.4
percent a year ago. New and expanding automotive and supplier
plants are bolstering the state’s manufacturing sector, while revenue
gains have ameliorated the state budget crisis that was a major concern in fourth quarter 2003. The Alabama outlook was down from
last quarter’s 74.3 percent forecasting increased activity, as job gains
remain weak and higher energy prices are impacting both businesses
and consumers. Few see a downside to the state’s economy in the
fourth quarter, however, with just 5.0 percent of Alabama business
leaders forecasting a moderate decrease.
40
26.1
20
0
0.0
6.3
5.0
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
Interest Rates
Interest Rates
80
Q4 2004 compared to Q3 2004
77.3
60
Percent
The Federal Reserve pushed the federal funds rate to 1.75 percent
on September 21, with a quarter-point increase adding to a comparable hike in August. Citing a diminished risk of inflation, the Fed
stated that “output growth appears to have regained some traction
and labor market conditions have improved modestly.” Most
Alabama business leaders (78.1 percent) expect the Federal Reserve
to raise rates again during the fourth quarter. Economic forecasters
generally expect the rate to go up another 25 basis points in
November and hold steady in December, ending 2004 at 2.0 percent.
Twenty percent of BLCI panelists expect interest rates to be
unchanged for the remainder of the year. The Federal Open Market
Committee meets November 10 and December 14.
40
20.2
20
0
0.2
1.5
0.8
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
Industry Sales
Industry Sales
80
Q4 2004 compared to Q3 2004
62.5
60
Percent
Industry sales expectations continued to slide from their second quarter 2004 peak, although sales remain the strongest component for
growth. Seventy-two percent of panelists think sales in their industry
will rise during the fourth quarter, down from 79.4 percent last quarter, but above the 67 percent expecting an increase a year ago. Both
the University of Michigan’s Consumer Sentiment Index and the
Conference Board’s Consumer Confidence Index declined in September
as weak employment and wage gains and high energy prices
restrained consumer spending. Holiday retail sales are generally
expected to come in at or a little above last year’s 3.7 percent
increase. At 10.3 percent, the share of survey respondents anticipating a decrease in sales for the fourth quarter is almost double last
quarter’s 5.3 percent. The construction industry should see the most
widespread sales growth, with over 85 percent forecasting an increase.
This contrasts with just 50 percent of panelists in transportation,
information, and public utilities (TIPU) expecting fourth quarter sales
gains and 22.2 percent expecting a moderate decline.
40
20
0
0.6
17.7
9.7
9.5
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
Industry Profits
Industry Profits
80
Q4 2004 compared to Q3 2004
60
Percent
While the profit outlook remains positive, profit growth is expected to
slow in the fourth quarter of 2004. The 59.6 percent of Alabama business leaders expecting profits in their industry to increase during the
quarter represents a retrenchment of 10 percentage points from third
quarter’s survey-high reading of 69.8 percent. A number of factors are
expected to pull profit levels back toward the long-term average yearover growth rate of 7 percent, including the inability of firms to continue aggressive cost-cutting and a lack of pricing power that keeps
high raw material and energy costs from being passed on to the consumer. Among BLCI panelists, fourth quarter profit growth is expected to be strongest in manufacturing and leisure, hospitality, and other
services, with about 64 percent predicting higher profits. Expectations
are dampened by a more pessimistic outlook among panelists in TIPU,
with just 36.1 percent predicting rising profits and 27.8 percent a
decline. Overall for the fourth quarter, 13.6 percent of respondents
think profits will drop—the largest downside prediction in over a year.
49.9
40
26.7
20
0
12.8
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
Industry Hiring
(continued on next page)
Industry Hiring Plans
80
Q4 2004 compared to Q3 2004
60
Percent
The outlook for job creation in Alabama remains strong, with 55.2
percent of panelists expecting an increase in hiring in their industry
during the fourth quarter of 2004. While down slightly from third
quarter’s 59.5 percent, these two quarters represent the only period in
three years of the BLCI survey when over half of respondents predicted hiring gains. A year ago, just 35.8 percent forecasted job growth.
Alabama’s job picture is bolstered by the continued growth of its automotive industry. A robust 62.3 percent of manufacturing panelists
expect hiring in their industry to increase during the fourth quarter.
Expectations for job growth are below average in professional, scientific, and technical services, where 49.3 percent predict gains, and in
TIPU with just 44.4 percent anticipating increased hiring. A mixed
9.7
0.8
51.0
36.4
40
20
0
0.6
7.8
4.2
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)
performance among retailers is reflected in the dichotomy of
an above average share (57.6 percent) expecting to up hiring
and a share larger than the survey-average 8.4 percent planning to shed jobs (15.2 percent).
Industry Capital Expenditures
Industry Capital Expenditures
80
Q4 2004 compared to Q3 2004
60
Percent
Capital spending has been a key component of economic
growth in Alabama, with over 58 percent of panelists forecasting increased investment throughout 2004. At 59.8 percent,
the share of respondents expecting capital spending to grow in
the fourth quarter is off slightly from 62.7 percent last quarter.
Still, the 9.9 percent thinking the increase will be strong is a
survey-high share. Software and equipment spending could be
robust this quarter assuming the bonus depreciation expires as
scheduled at the end of the year. Alabama manufacturers
should be the strongest source of increased capital expenditures, with 68.1 percent expecting to increase investment and
just 2.9 percent forecasting a decline. Expectations are also
above average in professional, scientific, and technical services
and in leisure, hospitality, and other services. Growth in capital
spending may be weakest in wholesale trade where 48.7 percent
of industry panelists forecast a fourth quarter increase.
49.9
33.7
40
20
0
0.8
5.7
9.9
Strong Moderate No
Moderate Strong
Decrease Decrease Change Increase Increase
BLCI Panelists
The fourth quarter 2004 BLCI survey saw strong participation among Alabama panelists. Just under 500 completed
the online survey during September, slightly below last quarter’s record response. Respondents reported their views on
the probable course of the national and Alabama economies
and interest rates as well as sales, profits, hiring, and capital
expenditures in their industry. All of these variables except
interest rates (which is omitted) are weighted equally in the
BLCI Index. Business leaders responding to the survey represent small, midsize, and large companies in Alabama’s 11
The BLCI is a
Compass on Business
initiative created in
collaboration with:
metropolitan areas and over 40 nonmetro communities. On
the fourth quarter survey, 31.8 percent of participating firms
reported annual sales under $5 million, while 39.2 percent
had sales between $5 and $50 million, and 24.2 percent tallied sales of over $50 million annually. Broken down by
number of employees, 31.8 percent of fourth quarter panelists were from firms with fewer than 20 employees, while
30.1 percent employed 20 to 99, and 38.1 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.blci.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
10,184.4
1.9
3.9
1.2
1.831
2.9
1.9
-1.2
130.0
-0.3
5.8
10,287.4
2.3
3.6
1.0
1.834
2.2
1.9
0.6
129.9
-0.4
6.1
10,472.8
3.5
4.2
0.9
1.845
2.2
2.0
8.1
129.8
-0.4
6.1
10,580.7
4.4
4.3
0.9
1.848
1.9
2.2
14.9
130.0
-0.2
5.9
2003/Q1
2003/Q2
2003/Q3
2003/Q4
1,878.9
-0.5
295.9
-4.4
1,870.8
-0.5
291.1
-5.0
1,884.5
-0.5
289.5
-4.9
1,869.2
0.2
288.7
-3.2
1,882.3
0.2
289.0
-2.3
1,872.5
0.1
289.1
-0.7
165.6
-4.5
163.5
-4.5
164.1
-3.7
165.0
-1.0
165.6
0.0
165.8
1.4
130.3
-4.2
127.6
-5.7
125.4
-6.4
123.7
-5.9
123.4
-5.3
123.3
-3.4
76.6
-2.0
227.2
0.8
5.9
27.1
41.4
1,664.7
-3.0
791.4
-5.1
404.2
2.6
76.9
-1.5
229.7
2.5
5.8
25.7
40.8
1,495.4
-3.0
641.0
-5.5
394.2
-0.2
77.2
-0.8
235.1
1.8
5.8
24.6
41.0
1,516.3
9.3
643.1
12.1
424.9
10.4
76.7
0.3
230.7
3.2
5.7
25.9
40.4
1,755.9
11.5
720.4
4.1
413.4
5.1
77.0
0.5
232.3
2.2
5.6
19.7
41.2
1,892.3
13.7
935.9
18.3
436.9
8.1
77.3
0.5
233.1
1.5
5.8
27.1
40.1
1,617.0
8.1
653.1
1.9
428.0
8.6
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
2004/Q1 2004/Q2 2004/Q3
10,697.5
5.0
4.0
0.9
1.864
1.8
2.1
9.9
130.4
0.2
5.6
10,771.4
4.7
4.6
1.1
1.886
2.8
2.1
9.3
131.1
1.0
5.6
10,862.3
3.7
4.4
1.5
1.895
2.7
2.1
3.1
131.5
1.3
5.4
2004/Q1 2004/Q2 2004/Q3
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.
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, 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
9
10
Alabama Business
Redefining Alabama’s
Rural Landscape:
The New Micropolitan Areas
Categorization of an area as urban or
rural can be an important concern with
respect to perceptions of economic vitality and development potential. Census
Bureau definitions of urban and rural,
officially made at the block level based
on population density, are generally
overlooked as too complex. A more useful measure from a statistical standpoint
is identification at the county level as a
member of a metropolitan area or not as
a proxy for urban and rural. But this distinction has been blurred by the addition
of some very “rural” counties to metropolitan areas in the post 2000 Census
redefinition that dropped the requirement of “metropolitan character.” In
any case, the large group of nonmetropolitan counties exhibit a very diverse set
of characteristics and assets.
The new micropolitan designation recognizes nonmetro (rural) diversity by introducing an intermediate level of urbanization. Both metro and micro areas are
built around the concept of a core city,
but while metro area cores must have at
least 50,000 residents, core cities of
micro areas range in size from 10,000 to
49,999 people. Despite their smaller
size, the core cities of micropolitan areas
serve many of the same functions as
their metropolitan counterparts, providing jobs, retail, and services for an area
which may extend outside their county.
All metro and micro areas are based on
county geographies for simplicity and
statistical reasons. Functional relationships are defined solely by commuting
patterns—if 25 percent or more of the
residents of an adjoining county travel
into a core county to work, that county
is included in the metro or micro area.
Metro area designations, of course, take
precedence over micros.
Counties which are neither metropolitan
nor micropolitan can be designated nonmetro noncore. The Economic Research
Service of the U.S. Department of
Agriculture further divides nonmetro
noncore counties by whether they are
adjacent to a metro or micro area, as this
is likely a positive indicator of development potential. Lacking a sizeable
city and convenient access to jobs,
deeply rural nonmetro noncore nonadjacent counties more often face
population out-migration and economic distress.
Alabama’s New Patchwork
Thirteen micropolitan areas encompassing 15 Alabama counties have
been designated by the U.S. Office of
Management and Budget as of
February 2004. These areas were
home to almost 822,500 Alabamians
on July 1, 2003, or 18.3 percent of
the state’s population. Alabama’s
metropolitan areas were also redefined. While the state kept the same
11 metro areas, the composition of
five changed: Baldwin County was
removed from the Mobile MSA to its
own micro status;
Lowndes County was
Alabama Micropolitan Area Population, 2000 to 2003
added to Montgom2000
2003
Change 2000-2003
ery; Greene and Hale
Micropolitan Area Census
Estimate
Number
Percent
were added to the
Tuscaloosa MSA;
Albertville
82,231
83,698
1,467
1.8%
Alexander City
53,675
52,264
-1,411
-2.6%
Walker, Chilton, and
Cullman
77,483
78,270
787
1.0%
Bibb joined the
Daphne-Fairhope
140,415
151,831
11,416
8.1%
Birmingham metro
92,744
93,923
1,179
1.3%
area; and the Dothan Enterprise-Ozark
Eufaula, AL-GA
29,038
28,816
-222
-0.8%
MSA was redrawn to
Fort Payne
64,452
66,469
2,017
3.1%
include Henry and
Scottsboro
53,926
53,801
-125
-0.2%
Geneva counties,
Selma
46,365
44,977
-1,388
-3.0%
while losing Dale to
Talladega-Sylacauga
80,321
79,928
-393
-0.5%
the Enterprise-Ozark
Troy
29,605
29,276
-329
-1.1%
Tuskegee
24,105
23,449
-656
-2.7%
micro area.
Valley
36,583
35,751
-832
-2.3%
Since 1970, the major- Source: U.S. Census Bureau and Center for Business and Economic Research,
The University of Alabama.
ity of Alabama’s population has resided in Note: Census population is as of April 1 while estimates are as of July 1.
the metro areas.
Alabama Population by Type of Area, 2000 to 2003
Increases in the
number of metro
Percent
Share of
area counties as
2000
2003
Change
State
well as patterns of
Type of Area
Census
Estimate
2000-2003
2003
population growth
Metropolitan
3,083,497
3,134,128
1.6%
69.6%
have pushed the
Micropolitan
810,943
822,453
1.4%
18.3%
share of total popNoncore
552,660
544,171
-1.5%
12.1%
ulation residing in
4,447,100
4,500,752
1.2%
100.0%
a metropolitan area Total
from 52.3 percent
Source: U.S. Census Bureau and Center for Business and Economic Research,
in 1970 to 69.6
The University of Alabama.
Note: Census population is as of April 1 while estimates are as of July 1.
percent in 2003.
Adding the 18.3
percent of population in the newly-desig- percent of Alabamians residing in a rural
nated micropolitan areas leaves just 12.1
area as defined by the nonmetro noncore
Alabama Business
concept. This was the only segment of
the state to lose population between
Census 2000 and July 1, 2003.
Alabama Micros: A Diverse Group
Alabama’s micropolitan areas comprise a
diverse group of counties largely in the
central to eastern half of the state. All
15 counties adjoin at least one metropolitan county. Yet these counties have
attained micro status by creating their
own economies in the shadows of their
larger neighbors. The micro areas vary
greatly in population size. DaphneFairhope is by far the largest—its 2003
population of 151,831 ranks it ahead of
six of Alabama’s metros in population.
In fact, of 573 micro areas nationwide,
this Baldwin County micro ranks as the
ninth largest based on 2000 population.
With just 23,449 residents in 2003,
Tuskegee is the state’s smallest micro.
While the micropolitan counties do not
offer quite as many nonagricultural jobs
as the number of employed residents,
most of them come close. And many
are benefiting from the state’s growing
automotive manufacturing and supplier
industries. The Talladega-Sylacauga
micro is home to the Honda vehicle
assembly plant, while 10 of the 15
micros counted at least one Tier One to
Tier Four supplier, for a total of 44 supplier plants, in 2003. This number is
growing as new Hyundai suppliers in the
micropolitan counties bring their plants
to completion.
Unemployment
across the micro areas
was mixed in August
2004. Seven fell at or
below the state’s 6.0
percent average. But
three micros—Selma,
Tuskegee, and Valley—
faced double-digit
unemployment. The
Selma micropolitan
area should see
improvement in their
job picture as several
Hyundai suppliers
complete plants in
the area. But other
micro areas face the
uncertain future
engendered by an economy still dominated by textiles and/or apparel—this is
particularly true of Valley, Alexander
City, Fort Payne, and Scottsboro. The
poultry industry figures prominently in
the economies of the Albertville,
Enterprise-Ozark, Eufaula, and Fort
Payne micropolitan areas. But in many
of Alabama’s 13 micros, health services
and education are also prominent economic components.
11
using data on population growth, high
school and college graduates, median
household income, poverty, unemployment, and job growth. Five of the counties that make up Alabama’s micropolitan areas ranked in the top third of the
state’s 67 counties on the composite
index, including Baldwin (2), Coffee
(13), Cullman (14), Marshall (15), and
Dale (22). Jackson, DeKalb, and Tallapoosa counties ranked in the mid-20s,
while Talladega, Barbour, and Pike also
fell in the middle third. But Coosa,
Macon, Chambers, and Dallas counties
placed in the lowest third on economic
vitality in 2003 on the basis of factors
including population losses and weak job
growth.
Implications of Micropolitan
Area Status
Beginning in 2005, information will begin to be tabulated for the new micropolitan areas. Statistics available will
include data on personal and per capita
income from the Bureau of Economic
Analysis (BEA), the Department of
Housing and Urban Development
(HUD)’s median family income, and
employment and unemployment data
from the Bureau of Labor
Micropolitan Area
Statistics (BLS), to cite a few
Per Capita Income, 2002
examples. And while the
Office of Management and
Albertville
$24,172
Budget (OMB) cautions that
Alexander City
$21,996
metro and micro areas are
Cullman
$23,262
not intended as a framework
Daphne-Fairhope
$27,224
Enterprise-Ozark
$23,852
for nonstatistical activities
Eufaula
$20,608
such as program funding,
Fort Payne
$22,068
the micropolitan designation
Scottsboro
$21,802
should allow these areas to
Selma
$20,589
apply for some metropoliTalladega-Sylacauga
$22,134
tan-based federal and state
Troy
$23,662
aid.
Tuskegee
$16,728
Some of Alabama’s
micros are vibrant,
growing economies.
For the first half of
2004, six micros had
at least four new and
expanding industry
announcements.
These include Albertville, Cullman,
Daphne-Fairhope,
Fort Payne, Scottsboro, and TalladegaSylacauga. And
Valley
$22,141
Alexander City,
Implications for the new
Alabama
$25,548
Enterprise-Ozark,
micropolitan areas go far
Source: U.S. Bureau of Economic
and Selma each rebeyond the convenience of
Analysis.
ported one or two
statistical data and access to
industry locations or
government funding, however. The 15
expansions. However, income has gencounties that comprise Alabama’s 13
erally lagged, with just the Daphnemicropolitan areas have been elevated
Fairhope micro exceeding the state’s per
from a background status of generic noncapita personal income of $25,548 in
metropolitan to the quasi-metro fore2002.
ground. Their visible recognition as centers of local economic activity can serve
The Economic Development Institute at
as a useful tool for further economic
Auburn University recently ranked Aladevelopment.
bama counties on economic vitality
Carolyn Trent
AlabamaBusiness
Perspective is everything.
The Center for Business
and Economic Research
gratefully acknowledges
the financial support of
Compass Bank.
The Alabama Business Leaders Confidence Index® (BLCI)
is an excellent way to help business leaders like you stay
ahead of the curve and make informed decisions. The BLCI
is compiled from a quarterly online survey completed by
panelists across Alabama, enabling you to tap into a valuable
resource of emerging business trends.
Please log on at www.blci.com/alabama/ and register to
become a BLCI panelist. It only takes a few minutes and
you’ll be notified by email when the next survey opens on
December 1st.
With increased participation from business leaders across
the state, the BLCI will become a more valuable planning
tool for the Alabama business community. Plus, when you
participate, you receive an exclusive preview of survey results
before they are released to the general public. Join today!
The University of Alabama
Center for Business and Economic Research
Box 870221
Tuscaloosa, Alabama 35487-0221
Nonprofit Organization
U.S. Postage Paid
Tuscaloosa, AL 35401
Permit No. 16
Address service requested.
THE UNIVERSITY OF
Alabama Business is sponsored in part by
Compass On Business, a partnership between
Compass Bank and The University of Alabama.
ALABAMA
CENTER FOR BUSINESS &
ECONOMIC RESEARCH