AlabamaBusiness
Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
Volume 74, Number 1
Economic Outlook:
1st Quarter 2005
United States
Overview. Following a mild recession in
2001, the economic recovery that began
in December 2001 is now in its fourth
year. However, it is sometimes difficult
to recognize this recovery when so many
businesses continue to be skittish about
adding to their payrolls, particularly in
the manufacturing sector where employment is expected to remain sluggish
throughout 2005.
In the third quarter of 2004, gross
domestic product (GDP) increased by
4.0 percent. It is expected that the 2004
numbers will show an annual growth rate
of 4.4 percent, the best since 1999.
Major contributors to 2004 growth were
personal spending on durable goods such
as home appliances, automobiles, and
housing; business spending on equipment and software, including information processing equipment; government
spending on defense; and exports.
Consumer spending jumped 5.1 percent
in the third quarter, with spending on
First Quarter 2005
durable goods increasing
by a surprising 17.2 percent. Business spending
on equipment and software rose 17.5 percent in
the third quarter. One
would expect a hefty rise
in exports since there has
been a substantial fall in
the value of the U.S. dollar in recent months, but
exports in the third quarter increased only 6.3
percent, just slightly
above the 6.0 percent
increase seen in imports.
Another major factor
contributing to economic
growth in the third quarter was a 9.8 percent increase in national
defense expenditures.
As of this writing, data for the fourth
quarter of 2004 have not yet been
released. Consumer spending is expected to have grown some in the fourth
quarter, while business spending on
equipment and software is expected to
have increased approximately 10 percent.
Business spending on computers and
peripherals is likely to have grown very
sharply in the fourth quarter, primarily
because accelerated depreciation
allowances ended in
December 2004.
The Conference Board’s
consumer confidence
index jumped sharply in
December, mainly due to
improving labor markets.
Housing markets also
chalked up another
record year in 2004.
Nationwide, housing
starts increased 10.9 percent in December, the
biggest jump in almost
seven years. Although
the Federal Reserve has
been gradually increasing short-term
rates, mortgage rates have remained low
and continue to fuel housing markets.
The sales of both existing and new
homes remain strong. Refinancing of
existing mortgages, although down from
previous years, has promoted consumer
spending by providing additional disposable income.
Employment. December marked the
sixteenth consecutive month of increased
payroll employment. Each month in
2004 added an average of 186,000 jobs,
In this issue:
Economic Outlook:
1st Quarter 2005
1
Business Leaders
Confidence Index:
1st Quarter 2005
5
Selected Indicators
9
Alabama Metro Areas:
Looking Back at 2004
10
Redefining Alabama’s
Metropolitan Areas
11
2
Alabama Business
steady. Since industrials
are expected to continue
to grow in 2005, there is
a high probability that
some companies will start
to add to their payrolls
during the year.
significantly more than the 2003 figures.
For 2004, payrolls increased by 2.2 million, the best year for job growth since
1999 when the economy added almost
3.2 million to its payrolls, and a sharp
contrast to 2003, when the economy
experienced a net loss of 61,000 jobs.
Despite the U.S. economy’s solid growth
in 2004, payroll employment is still short
of optimum. People looking for work
hope 2005 will be a good year for companies to add employees.
Manufacturing added only 96,000 jobs
in 2004, accounting for approximately 4
percent of all new jobs. The nation’s
workers welcomed that 4 percent because
this was the first time payrolls in manufacturing have shown an increase since
1997. This recovery has been the weakest
in factory jobs among all past economic
recoveries, including the so-called jobless
recovery of 1991. Retailing employment
also languished in 2004. Retail sales payrolls were notably weak in December.
Where employers usually add jobs on a
seasonal basis in December for the holidays, retailers actually shed 20,000 jobs
in December 2004.
From 1998 to 2003, manufacturing
industries have lost approximately 3.3
million jobs. Not since the great depression of 1930-32 has the industrial sector
experienced a decline for three consecutive years. The economic news from the
nation’s industrial sector isn’t all bad,
however. The sector produced 4.1 percent more goods in 2004 than the previous year, even while employment held
There is a cautionary note
here. Despite a projected
production increase, manufacturers are reluctant to
hire new workers. Some
manufacturers are bearing
a heavy burden of higher
energy prices, and some
industries, due to competition, have great difficulty passing higher production costs along to customers. Energy
prices increased by 16.6 percent in 2004,
the largest increase experienced since
1990, when energy prices surged by 18.1
percent when Iraq invaded Kuwait.
Given these constraints, employment in
manufacturing could remain sluggish.
Outlook. If energy prices stay at current levels or if increases continue, consumers’ pocketbooks will feel the pinch.
Particularly vulnerable are people at
lower income levels. The cost of energy
could hamper consumer spending for
other items in 2005. Consumer prices
rose by 3.3 percent in 2004 as the biggest
increase in fuel prices in 14 years pushed
up inflation at the fastest pace since
2000. However, excluding volatile energy and food prices, the so-called core
inflation rate was only 1.1 percent.
Without any major disruption in the oil
supply, energy prices
will decline in 2005.
The overall inflation
rate will average around
2.5 percent.
Although 2005 will not
match the pace of economic growth set in
2004, the economy will
grow. Exports and business spending are
expected to be the key
drivers in 2005, replacing consumer spending
and housing markets as
major contributors to
economic growth.
During the first half of the year, GDP is
forecasted to grow at an average annualized rate of 3.7 percent, with a slight
slowdown expected in the second half.
By then both consumers and businesses
will start to feel the effects of increasing
interest rates. Short-term interest rates
will continue to rise, with the Fed gradually nudging up the Fed Funds rate at
each of its policy meetings. However,
if energy prices or overall inflation continue at high levels, the Fed could
ratchet up the rate much more rapidly.
Business spending on equipment and
software for the first half of the year is
expected to increase by close to 9 percent, while spending on information
processing equipment is forecasted to
increase by slightly over 18 percent.
Housing markets, which have been very
robust, perhaps peaked in 2004 and
could experience a slight decline from
year ago levels. Nevertheless, housing
markets are not expected to decline
quickly. They will remain strong at least
through the first half of the year. Thirtyyear fixed mortgage rates are forecasted
to increase to around 6.5 percent by
mid-year 2005. Nonresidential construction activity will also pick up in 2005,
primarily in office and other commercial
construction markets. Highway construction is expected to be strong in
2005. Unlike housing, commercial construction has been weak during the last
three years. But with continuing economic growth, the commercial sector
can see improvement in 2005.
Alabama Business
Alabama
Employment. Payroll employment in
Alabama substantially improved during
the second half of 2004, with both the
durable manufacturing and services sectors showing considerable gains. From
November 2003 to November 2004, the
state added 21,500 new jobs. After losing payrolls for almost three consecutive
years, manufacturing employment is now
showing net gains. During the twelve
month period ending in November 2004,
manufacturing added 2,800 new jobs.
Most of the gains were in durable goods
manufacturing; nondurable manufacturing experienced a net loss of 2,200 jobs.
Among nondurable goods producers,
there were two groups that showed net
employment gains—food processing (400
jobs), and plastics and rubber products
manufacturing (1,200 jobs). Some food
processors lost jobs, but there were 800
new jobs added in animal slaughtering
and processing. Within durable goods
manufacturing, most gains were in motor
vehicle manufacturing and wood product
manufacturing.
Service providers added 11,300 jobs
between November 2003 and November
2004. Most notable gains were in retail
trade (2,800—mostly in general merchandise stores) and professional and business
services (5,500—mostly administrative
support jobs). During the same period,
educational and health services added
1,400 new jobs, which were mainly in
health care and social assistance related
businesses. Nursing and residential care
facilities added 500 workers. The leisure
and hospitality industry in the state also
gained 1,500 new jobs, primarily in
accommodation and food services.
3
However, both financial services and
information industries continued to
lose jobs. The information industry
is plagued by excess capacity and lost
1,600 jobs, with 1,100 of those coming
from telecommunications, including
700 jobs lost in wired telecommunications carriers businesses. Nationwide,
since the most recent recession began
in March 2001, about 300,000 telecommunications workers have lost their jobs.
Tax Revenues. The fiscal year ending
in September 2004 was a good year for
the state’s revenue collections. Good
news is that receipts are expected to
remain strong through most of the
current fiscal year. During the first
quarter of the current fiscal year
(October through December, 2004), total
tax revenues in the state increased by
almost 10 percent, a gain of about $160
4
Alabama Business
Alabama Nonagricultural Employment
Change in Number of Jobs
November 2003 to
November 2004
Total Nonagricultural
21,500
Natural Resources and Mining
0
Construction
7,400
Manufacturing
2,800
Durable Goods Manufacturing
5,000
Wood Products Manufacturing
1,800
Primary Metal Manufacturing
800
Fabricated Metal Product Manufacturing
-300
Machinery Manufacturing
0
Computers and Electronic Products Manufacturing
-800
Electrical Equipment, Appliance and Component Mfg. 600
Transportation Equipment Manufacturing
1,800
Motor Vehicle Manufacturing
1,300
Furniture and Related Products
800
Nondurable Goods Manufacturing
-2,200
Food Manufacturing
400
Textile Mills
-300
Textile Product Mills
-100
Apparel Manufacturing
-800
Paper Manufacturing
-400
Plastics and Rubber Product Manufacturing
1,200
Trade, Transportation and Utilities
4,000
Wholesale Trade
200
Retail Trade
2,800
Transportation, Warehousing and Utilities
1,000
Information
-1,600
Telecommunications
-1,100
Financial Activity
-700
Professional and Business Services
5,500
Educational and Health Services
1,400
Leisure and Hospitality
1,500
Other Services
700
Government
500
Federal Government
-100
State Government
0
State Education
0
Local Government
600
The Alabama Economic Outlook 2005 examines current
economic conditions and trends and their likely effects on the
national and Alabama economies in the coming year.
The Alabama forecast focuses on the short-term outlook for
output and employment in the state by sector and presents a look
at revenues. Trends in the state’s metropolitan areas are also discussed.
The Alabama Economic Outlook 2005 is produced by the Center
for Business and Economic Research. Copies are $30 each.
To order, please make checks payable to The University of Alabama
and send to: Center for Business and Economic Research, Box
870221, Tuscaloosa, Alabama 35487-0221.
Source: Alabama Department of Industrial Relations.
million over the first quarter of the previous fiscal year.
Individual income tax revenues increased
from $572 million collected in the first
quarter of the previous fiscal year to
almost $623 million in the first quarter
of the current fiscal year, a gain of 8.8
percent, or $51 million. Corporate
income tax revenues totaled $103.9 million in the first quarter of the fiscal year,
a significant increase over the first quarter of the previous fiscal year. With relatively strong consumer and business
spending, sales tax receipts totaled
$436.3 million, up by almost $11 million over the same period in the previous fiscal year. Appropriations made to
the Alabama Education Trust Fund
totaled $1.166 billion, up from $1.165
billion appropriated in the first quarter
of the previous fiscal year.
However, the state’s General Fund is
seeing a different side of the coin.
Although the General Fund received
almost $63.5 million more than in the
same period of the previous fiscal year,
the increase in collections needs to be
larger to meet the demands on the Fund.
Outlook. The state’s economy is
expected to grow by 3.3 percent in 2005.
Although the first half of the year is
expected to be strong, we could see a
slight slowdown in the second half,
caused mainly by weaker consumer
spending and a small decline in con-
struction activity. Within the manufacturing sector, automotive and other
transportation related businesses will see
continued growth, adding almost 4,000
new jobs. Wood product manufacturing
is expected to remain strong. However,
both textiles and apparel industries will
continue to lose jobs. There is a good
possibility that payroll losses in these
two industries could even accelerate, particularly if the expiration of quotas in
December 2004 is not offset by new tariffs on imports.
Payroll employment will grow a little
faster in 2005 than it did in 2004.
Nonagricultural payroll employment is
forecasted to increase by 1.5 percent in
2005. Most of the job growth will be in
construction and service industries,
specifically in professional and business
services and health services. These construction and services sectors will add
approximately 9,000 new jobs in 2005.
Although retailing is expected to have a
good year, particularly in major metropolitan areas of the state, job gains will
be moderate. Retailing statewide will
add approximately 3,000 new jobs in
2005.
Ahmad Ijaz
[email protected]
®
First Quarter 2005 • Volume 4 • Number 1
Alabama Business Leaders Confidence Index
The optimism of Alabama business
leaders indicated by the 2004 BLCI
results correctly presaged the strengthening rebound in both the national and
state economies. Consumer spending
continued to boost sales, job creation
resumed, profits posted strong gains, and
capital expenditures rose. Nationally, the
rate of economic growth was highest in
the third quarter of 2004; a peak accurately reflected in the BLCI forecasts.
Survey participants expect the expansion
to continue in the first quarter of 2005
but at a slightly slower pace. The BLCI of
62 is down four points from the previous
quarter. Given strong gains in every com-
ponent of the index in 2004, some deceleration in growth toward a long-term
trend rate would be expected. Industry
sales and profits should post the strongest increases during the first quarter.
Although the rate of job creation and capital spending gains will slow, Alabama
business leaders predict a net increase in
hiring and in capital expenditures. While
the index for most industries was close to
the overall consensus of 62, panelists in
retail and wholesale trade posted a slightly lower 59 for the quarter. Survey participants in transportation, information, and
public utilities (TIPU) were most optimistic, tallying a BLCI of 67, while construction panelists came in at 65.
BLCI Barometer
Both public and private businesses of all
sizes are faced with the burden of rising
health insurance costs. Nationally, premiums climbed 11.2 percent between 2003
and 2004, according to the Kaiser Family
Foundation, for a fourth straight year of
double-digit increases. Globally, health
care expenses impact the competitiveness
of U.S. firms. The National Coalition on
Health Care found that at 13.9 percent in
2001, the United States spent a larger
share of GDP on health care than any
other major industrial nation. Costs continue to rise rapidly, with a recent Towers
Perrin study of 200 large U.S. firms finding employers planning to spend about
8 percent more on health care costs in
2005—a figure that does not reflect the
portion of health insurance costs transferred to the employee.
The BLCI topical question asked Alabama
business leaders how their firms are deal-
ing with the rising costs of health
insurance. Over half (56.8 percent)
shared the increased cost with their
employees. Just 25.5 percent
absorbed the increase, while 7.7
percent did the opposite by charging the entire increase to their employees. With another 9.3 percent
offering reduced benefits or terminating coverage, about three fourths
of insured workers at the firms represented in the first quarter 2005
BLCI survey directly felt the negative impact of the rising cost of
health insurance.
Survey results show differences in
how small, midsize, and large firms
handle health insurance cost increases. Among firms with under one
million in sales, 14.5 percent
(continued on next page)
C e n t e r and
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Center for Business
Economic
(continued from previous page)
dropped coverage completely, while 8.1 percent reduced
benefits. But no larger firms dropped coverage in response
to rising costs, while a smaller 6.5 percent offered fewer benefits. Trends are similar if size of firm is categorized by sales
or by number of employees. Overall, small companies are
the most likely to absorb the insurance cost increases and the
least likely to pass a portion of the increase on to employees,
although their workers may also be left with reduced coverage or no coverage. Of firms with fewer than 20 employees,
42.6 percent absorbed the increase and a third shared the
cost. By comparison, firms with 20 to 99 employees were
less likely to pay the entire increase (25.4 percent) and much
more likely to share the increase (60.9 percent). This trend
was even more pronounced for firms with 100 or more
employees—just 12.2 percent funded the increased health
insurance cost entirely, while 72 percent shared the added
expense. Manufacturing and retail and wholesale trade
firms were most likely to share health insurance cost increases with their employees. Above average percentages
of panelists in construction, health care, and professional,
scientific, and technical services absorbed the entire cost.
The National Economy
BLCI panelists generally expect the U.S. economy to continue to
expand early in 2005. Over 67 percent forecast improvement in
the first quarter, down about five points from last quarter. With
the national economy posting the strongest growth rate since
1999 in 2004, gains could moderate in 2005 as the economy settles into a mid-cycle pattern. The growing federal and current
account deficits and the falling dollar are cause for concern,
although a weak dollar should boost demand for U.S. exports.
Consumer spending growth is likely to be adversely affected by
high fuel prices, rising interest rates and inflation, and modest
job gains. Expectations for growth in the U.S. economy are widely divergent by industry. Forecasts came in well above average in
retail trade, construction, TIPU, and finance, insurance, and real
estate (FIRE) and considerably below in wholesale trade, health
care, and professional, scientific, and technical services. Overall,
just 8.6 percent of survey respondents anticipate a slowdown in
the U.S. economy during the first quarter.
The Alabama Economy
Alabama business leaders expect the state’s economy to build on
the gains seen in 2004 during the first quarter of 2005. The consensus has weakened slightly, however, with 60.1 percent forecasting an increase in the rate of economic growth in Alabama, down
from 68.9 percent last quarter. About 21,500 new jobs were created in the state between November 2003 and November 2004,
and strong gains in state tax receipts reflect increases in retail
sales as well as individual and corporate incomes during the year.
Alabama’s automotive industry will continue to support job and
income growth as Mercedes ramps up new model production and
Hyundai commences production during the first quarter. But
with a higher base for comparison, the pace of growth is likely to
moderate. Sentiment varies among industry sectors, however.
Expectations of panelists in construction and retail trade are well
above average, while respondents in leisure, hospitality, and other
services are less optimistic about Alabama’s growth during the
first quarter of 2005. Overall, 9.0 percent of all participants
think the state’s economic gains could slow.
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
Moving into 2005, Alabama business leaders expect sales growth to
moderate from the strong gains forecast in 2004. Sales remains the
most positive indicator, although the 63.8 percent anticipating
increased sales during the first quarter of 2005 is below 2004 readings ranging from 72 to 80 percent. Rising interest rates and higher
prices for energy and other goods are cutting into disposable income,
while the stimulus of tax cuts and mortgage refinancing is fading.
Spending growth could move back to a more normal range, sustained primarily by income and employment gains. Consumers
remained upbeat in December, however, with the Conference Board’s
Consumer Confidence Index reaching a five-month high. Sales
expectations are robust for panelists in TIPU and health care with
over 75 percent forecasting growth. In contrast, fewer than 60 percent of respondents in FIRE, retail trade, and construction expect
sales to increase. Concern about the sustainability of spending is evidenced by 16.2 percent of all panelists and 26.5 percent of retail
trade respondents thinking sales could decline during the quarter.
Industry Profits
Profit expectations continued to slide from their third quarter 2004
peak when almost 70 percent of Alabama business leaders expected
gains. About 53 percent of BLCI panelists forecast higher profits in
their industry during the first quarter of 2005, while 18.8 percent
think profits could dip. Strong profit gains in 2004 provide a higher
basis for comparison moving into 2005. The coupling of higher
prices for energy and commodity inputs with softening consumer
demand make it difficult to pass along cost increases in the form of
higher prices. With producer prices rising faster than prices for consumer goods, corporate profits are negatively impacted. Profits in
the retail sector are likely to take the biggest hit, with just 41.2 percent of industry respondents forecasting an increase for first quarter
2005 and 29.4 percent thinking profits will decline. And fewer than
half of panelists in wholesale trade, health care, and manufacturing
expect first quarter profits to be up, with 30 percent of manufacturers
expecting profits to be below fourth quarter 2004 levels.
Industry Hiring
While the pace of hiring growth is expected to slow in the first quarter of 2005, job trends remain a positive indicator of an improving
Alabama economy. An estimated 18,400 nonagricultural jobs were
created in the state in October and November 2004. In this context,
the 48 percent of BLCI panelists anticipating that hiring in their
industry will not change during the first quarter of 2005 is a positive
indicator. And, with 39.9 percent of Alabama business leaders
expecting industry hiring to pick up versus 12.1 percent forecasting a
decrease, more jobs should be created during the quarter. Results
indicate that job gains are becoming more broad-based. TIPU, which
had the weakest hiring expectations last quarter, reported the highest
expectations this quarter. More than half of construction industry
(continued on next page)
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)
panelists also expect hiring to pick up. However, the pace of
job creation in manufacturing and trade will slow from the
strong increase in the fourth quarter of 2004, with around 27
percent of panelists in these industries predicting an increase
and most expecting hiring to continue at fourth quarter
levels.
Industry Capital Expenditures
Capital spending plans pulled back from the four prior quarters when over 58 percent of panelists expected investment to
increase in their industry. At the same time, the share expecting to maintain current investment levels rose. For first quarter
2005, 45.9 percent of Alabama business leaders forecast
increased capital expenditures, while 42 percent expect no
change. Expiration of the bonus depreciation provision at
year-end likely prompted higher investment late in 2004 with
a corresponding payback early in 2005. Capital investment in
2005 could also be impacted by a slowdown in consumer
spending growth, while an anticipated rise in exports could
prompt capacity expansion in some manufacturing firms.
Industries where investment was particularly strong in 2004,
including manufacturing, health care, and professional, scientific, and technical services, as well as trade, posted belowaverage expectations for the first quarter of 2005. Panelists
from the TIPU and construction industries forecast the
strongest gains.
BLCI Panelists
The trend of growing participation in the BLCI survey
continued with completion of the first quarter 2005 survey.
About 430 Alabama business leaders took the online survey,
well above a year ago, but off a little from the fourth quarter
of 2004 as the response rate in December tends to slip.
Panelists 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. All of
these variables are weighted equally in the BLCI. The
question on interest rates, which was never used in
calculation of the index, was removed.
The BLCI is a
Compass on Business
initiative created in
collaboration with:
Business leaders responding to the survey are drawn from
small, midsize, and large companies in Alabama’s 11
metropolitan areas and over 40 nonmetro communities.
On the first quarter 2005 survey, a third of participating
firms reported sales of under $5 million, while 37.4 percent
had sales between $5 and $50 million, and 23.7 percent
tallied sales of over $50 million annually. Broken down by
number of employees, 29.9 percent of first quarter panelists
were from firms with fewer than 20 employees, while 32
percent employed 20 to 99, and 38 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.
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
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/Q2
2003/Q3
2003/Q4
2004/Q1
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
10,697.5
5.0
4.0
0.9
1.864
1.8
2.1
9.9
130.4
0.2
5.6
2003/Q2
2003/Q3
2003/Q4
2004/Q1
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
1,879.8
0.5
290.0
-0.4
163.5
-4.5
164.1
-3.7
165.0
-1.0
165.6
0.0
166.8
2.0
127.6
-5.7
125.4
-6.4
123.7
-5.9
123.4
-5.3
123.2
-3.5
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
77.2
0.3
232.7
1.3
5.9
23.0
39.3
1,617.0
8.1
653.1
1.9
427.9
8.5
Total Nonagricultural
Employment (thousands)
1,878.9
Percent Change
-0.5
Manufacturing Employment (thousands) 295.9
Percent Change
-4.4
Durable Goods Manufacturing
Employment (thousands)
165.6
Percent Change
-4.5
Nondurable Goods Manufacturing
Employment (thousands)
130.3
Percent Change
-4.2
Wholesale Trade
Employment (thousands)
76.6
Percent Change
-2.0
Retail Trade Employment (thousands)
227.2
Percent Change
0.8
Alabama Unemployment Rate
5.9
Initial Benefit Claims (thousands)
27.1
Manufacturing Weekly Hours
41.4
Total Tax Revenues (millions)
1,664.7
Percent Change
-3.0
Total Income Tax Revenues (millions)
791.4
Percent Change
-5.1
Total Sales Tax Revenues (millions)
404.2
Percent Change
2.6
2004/Q2 2004/Q3 2004/Q4
10,784.7
4.7
4.6
1.1
1.886
2.8
2.0
9.3
131.1
1.0
5.6
10,891.0
3.7
4.3
1.5
1.895
2.7
2.1
3.1
131.5
1.3
5.4
10,988.4
3.7
4.2
2.0
1.911
3.1
2.0
-4.0
132.1
1.5
5.4
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
Alabama Metro Areas:
Looking Back at 2004
Job gains returned to the state’s metro
areas in 2004 following three straight
years of losses. From December 2003 to
December 2004, the 11 metro areas netted 16,810 jobs; about half of the more
than 33,300 lost in the three years from
December 2000 to December 2003.
Retail trade and services saw solid job
growth during the year. The nation’s
defense concerns contributed to professional and business service jobs. Manufacturing job losses subsided as employment in transportation equipment and
related industries picked up. And
improving finances for state and local
governments strengthened job growth.
During 2004 every metro area worked
on improvements that will contribute
to the quality of life for residents, with
emphases including downtown revitalization, convention center development,
expanding retail options, providing river
access, creating recreational opportunities, and improving infrastructure.
Going into 2005, Alabama’s metro areas
face ongoing concerns about providing a
skilled, educated workforce for jobs now
and for jobs that will be vacated in the
near future as retirements increase.
Attracting and retaining young, collegeeducated professionals is a focus for
many, as is recruiting and nurturing jobs
that will boost the income level of residents. Strong local efforts are cause for
optimism that the state’s metropolitan
areas will build on the successes of 2004
this year.
2004 Highlights
Anniston: Local economy boosted by
U.S. defense and security concerns;
Anniston Army Depot supporting Iraq
war; new and expanding auto suppliers
and jobs at nearby Honda; job gains
in trade and professional and business
services.
Auburn-Opelika: Strong manufacturing
gains, including new and expanding auto
suppliers; growing retail with TigerTown
opening and mall expansion; new
research park approved at Auburn complements other technology initiatives.
Birmingham: Growing facilities and funding for biomedical research; expanding healthcare facilities and jobs; new
and expanding auto suppliers;
suburban population, housing,
and retail growth in areas
including Pelham, Hoover,
Alabaster, and Trussville; Park
Place mixed income community complements continued loft
development in Birmingham.
Decatur: Solid gains in professional and business services;
expansion of existing manufacturers; new industry focused
on food processing and steel;
health services growth; planning underway to extend I-565
to Decatur.
Metropolitan Area Nonagricultural
Employment
Change from
December 2003
December 2004
Alabama
Anniston
Auburn-Opelika
Birmingham
Decatur
Dothan
Florence
Gadsden
Huntsville
Mobile
Montgomery
Tuscaloosa
Russell County*
1,907,200
49,700
49,100
482,500
54,800
69,700
52,000
37,600
192,500
231,800
166,600
84,300
12,280
Net Jobs in Metropolitan Areas
Net Jobs in Nonmetro Counties
Number Percent
21,100
-100
700
2,100
100
800
-200
-100
2,300
7,400
1,900
2,000
-90
1.1
-0.2
1.4
0.4
0.2
1.2
-0.4
-0.3
1.2
3.3
1.2
2.4
-0.7
16,810
4,290
Note: Metro area definitions in effect in 2000 are used.
*Russel County is part of the Columbus, GA MSA.
Source: Alabama Department of Industrial Relations.
Dothan: Manufacturing
expansions and job gains;
growing distribution center
focus; job growth in education
and health services and leisure and hospitality; developments supporting Fort
Rucker; progress made on I-10 connector.
Florence: Diminishing job losses;
expansions at area manufacturers; opening of The Shoals on Robert Trent Jones
Golf Trail boosting leisure and hospitality jobs; adjoining hotel under construction; Walgreens Health Initiative adding
to service jobs; jobs in trade up.
Gadsden: New and expanding auto suppliers as well as jobs at nearby Honda;
construction jobs up; gains in retail trade
employment; quality of life improvements including library renovation,
Noccalula Falls project, convention
center planning, and consolidated high
school.
Huntsville: Strong professional and
technical services job growth fueled by
sizeable defense industry contracts; residential and retail development in west
Huntsville and Madison; Toyota engine
plant expanding; Embassy Suites and
nearby office building under construction in downtown Huntsville.
Mobile: Successful launch of Carnival’s
Holiday from new cruise terminal; RSA
downtown Mobile development includ-
ing second hotel; coastal areas rebounding from Hurricane Ivan; shipbuilding
and aerospace industries expanding;
strong job gains in retail trade and educational and health services.
Montgomery: Hyundai and at least
11 area suppliers completed plants and
hired workers toward spring 2005 production start-up; job gains in services;
residential and retail growth in east
Montgomery and Prattville; successful
Biscuits inaugural season and continued
downtown development including RSAbacked convention center and hotel.
Tuscaloosa: Second Mercedes plant
completed and about 1,400 workers
added toward launch of new models
early in 2005; new and expanding
Mercedes suppliers; strong retail job
gains; residential and neighborhood
retail growth in Tuscaloosa and Northport; ongoing riverfront development.
A report on developments in 2004 for
each of Alabama’s 11 metro areas is
included in the Alabama Economic
Outlook 2005 publication.
Carolyn Trent
[email protected]
Alabama Business
Redefining Alabama’s
Metropolitan Areas
Metropolitan area definitions are revisited by the U.S. Office of Management
and Budget (OMB) following a decennial census. The term “core based statistical area” was adopted in 2000 to encompass metropolitan statistical areas and the
newly-created micropolitan statistical
areas (see Alabama Business, Fourth
Quarter 2004). To be considered metropolitan, an area must encompass at least
one urbanized area of 50,000 or more
inhabitants. OMB continues to use
county geographies as building blocks,
but now relies solely on commuting patterns for designating outlying county
members. If 25 percent or more of the
workers in an outlying county commute
into a central metro county to work, that
county is included in the metropolitan
statistical area (MSA). This departure
from earlier guidelines that required
“metropolitan character” renders the
designation more objective, but results
in the addition of some very “rural”
counties to several of Alabama’s 11
MSAs. Dothan added Geneva and
Henry counties (while dropping Dale),
and Lowndes County was added to the
Montgomery MSA, while both Hale and
Greene joined the Tuscaloosa metro area.
And predominately rural Bibb, Chilton,
and Walker counties became part of the
Birmingham-Hoover MSA, which
already included largely rural Blount
and St. Clair counties.
Although membership of predominately rural Alabama
counties in its metro areas is
not a new concept, the inclusion of some of the state’s most
economically depressed counties is. Greene, Hale, and
Lowndes ranked in the bottom
10 of the state’s 67 counties on
both poverty and per capita
income in 2002. Bibb
County’s per capita income
was also in the lowest group.
While being part of a metropolitan area is indicative of
where a segment of the population works, it is not in and of
itself an economic remedy. In
December 2004, unemployment rates in Greene, Hale,
and Lowndes were among the
10 highest in the state.
However, strengthening ties
from a common designation
can only help improve the
opportunities for residents of
these new metro counties.
11
Metropolitan Area Wages and Income
Average Wage
Per Capita
Most federal and state statistics
per Job 2003 Income 2002
will begin using the revised metroUnited States
$37,130
$30,906
politan statistical area definitions
Alabama
31,548
25,548
this year. Tables on this page are
Anniston-Oxford
28,366
23,504
based on these designations. With
Auburn-Opelika
26,679
21,445
the addition of three counties, the
Birmingham-Hoover
35,979
30,661
Birmingham-Hoover MSA encom- Decatur
30,905
24,884
passed 23.9 percent of Alabama’s
Dothan
27,922
25,462
population in 2003, up from 21
Florence-Muscle Shoals
27,255
22,769
percent under its previous bound- Gadsden
26,841
22,999
Huntsville
39,261
28,959
aries. In terms of economic data,
30,453
22,620
the Tuscaloosa Mobile
Montgomery
31,980
27,533
metro area in
Population of Alabama Metropolitan Areas
Tuscaloosa
30,317
25,152
particular will
2000
2003 Change 2000-2003
Source: U.S. Department of Commerce, Bureau of
see a negative
Census Estimate Number Percent
Economic Analysis.
impact on its
Alabama
4,447,100 4,486,508
39,408
0.9
numbers—while
Anniston-Oxford
112,249
112,012
-237
-0.2
per capita income for Mobile County’s wage per job of
Auburn-Opelika
115,092
119,561
4,469
3.9
$30,453 in 2003 was above Baldwin
Tuscaloosa County
Birmingham-Hoover 1,052,238 1,072,646
20,408
1.9
County’s $24,986. However, per capita
alone was $26,339 in
Decatur
145,867
147,204
1,337
0.9
income for the Mobile MSA will drop
2002,
per
capita
Dothan
130,861
133,336
2,475
1.9
since Mobile County’s per capita income
income
for
the
metro
Florence-Muscle Shoals 142,950
141,499
-1,451
-1.0
of $22,620 in 2002 was well below
area amounted to
Gadsden
103,459
103,035
-424
-0.4
Baldwin County’s $27,224. Statistical
$25,152. Removing
Huntsville
342,376
357,907
15,531
4.5
data users need to be cautious about
Mobile
399,843
399,747
-96
0.0
rapidly growing
Montgomery
346,528
352,536
6,008
1.7
having consistent metropolitan area
Baldwin County
Tuscaloosa
192,034
194,645
2,611
1.4
definitions when making comparisons,
from the Mobile
Russell County*
49,756
48,986
-770
-1.5
particularly until revised historical data
MSA resulted in a
series are released.
Note: Based on new metropolitan area definitions released
sharp decrease in
by OMB in February 2004.
population but a
* Russell County is part of the Columbus, GA MSA.
Carolyn Trent
higher metro area
Source: U.S. Census Bureau, Population Estimates Branch.
[email protected]
average wage, as
AlabamaBusiness
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