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cber.cba.ua.edu
alabama.business
Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
Volume 76, Number 1
Economic Outlook:
1st Quarter 2007
United States
Review. The U.S. economy grew 3.5 percent
in the fourth quarter of 2006, a significant
improvement over the third quarter. The higher
than expected growth was due to increases in
consumer expenditures, exports, state and local
government spending, and federal government
spending. Overall, the U.S. economy grew 3.4
percent in 2006, slightly above the 3.2 percent
increase in 2005. It ended the year with much
stronger than anticipated activity, thus easing
some of the concerns about a recession.
Not all news was good news. Both high
energy prices and slowing residential fixed
investment, which includes home construction
and sales, affected the 2006 economy in the
middle of the year. During the last three
quarters of 2006, residential fixed investment
declined 11.1 percent, 18.6 percent, and 19.2
percent, respectively. Overall business spending, including expenditures on equipment and
software, also declined in the fourth quarter.
Spending on industrial equipment was down
by 0.5 percent. Industrial production also
dropped by 0.5 percent in the final quarter
of 2006, the first decrease since the fourth
quarter of 2001.
Consumer Spending. Consumer spending
helped offset the declines mentioned above.
With energy prices down and low unemployment rates in the final quarter of 2006,
consumer spending increased 4.4 percent,
a significant improvement over the 2.8 percent
rate of increase seen in the third quarter.
Consumer spending accounts for almost twothirds of the economy. Because of the U.S.
economy’s heavy reliance on consumers,
observers were glad to see that expenditures
for durable and nondurable goods increased
5.1 percent and 3.8 percent, respectively.
Within durable goods, not all products saw
increased sales. There was a 7.7 percent drop
in new light truck sales and sales of new
automobiles declined 0.1 percent. However,
Americans were making some major purchases
for their homes, despite a drop in home sales.
Spending on furniture and other household
First Quarter 2007
equipment increased more than 12
percent. Consumer spending on
services, which includes household
operations, transportation, medical
care, and recreation, increased
modestly. In 2006 Americans held on
to their usual interest in electronics.
Expenditures increased over 28 percent
for computers and 15 percent for
software.
Gross Domestic Product
Annual Percent Change
Over Same Quarter Previous Year
6
5
4
3
2
Business Spending. Family
shopping at the mall isn’t the whole
spending story in today’s economy.
Nonresidential fixed business spending
accounted for 11.5 percent of the
overall economy and that spending
increased 7.4 percent in 2006.
Business spending on equipment and
software increased 6.7 percent in
2006; below the 8.9 percent increase
in 2005. Businesses may have spent a
little less overall in 2006 than in 2005
on most kinds of equipment, but
expenditures for computers and
communications equipment remained
strong, and spending on industrial
equipment also rose.
1
0
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
2000 2001 2002 2003 2004 2005 2006 2007
Source: U.S. Department of Commerce, Global Insight, and Center for
Business and Economic Research, The University of Alabama.
Consumer Expenditures
Annual Percent Change
Over Same Quarter Previous Year
6
5
4
3
The Housing Market. Residential
fixed investment is another indicator
2
that was closely followed and fre1
quently reported in 2006. Anyone
who watches television news knows
0
the housing market suffered last year.
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
After increasing at an average annual
2000 2001 2002 2003 2004 2005 2006 2007
rate of almost 9 percent from 2003
Source: U.S. Department of Commerce, Global Insight, and Center for
to 2005, the national average for
Business and Economic Research, The University of Alabama.
residential fixed investment declined
by 4.2 percent in 2006. According
to the Commerce Department, the
average number of new homes sold in 2006
showed the largest drop in 17 years, since the
recession of 1990. Sales of existing homes,
Economic Outlook:
including both single-family and multifamily,
1st Quarter 2007
1
totaled approximately 6.5 million, down 8.4
percent, for the largest annual decline since
Business Leaders
1989. Most of that decline is attributable to
the reluctance of people buying single-family
Confidence Index:
homes, particularly newly-built ones. Accord1st Quarter 2007
5
ing to the Commerce Department, sales of new
single-family homes totaled 1.06 million units
Economic Indicators
9
for all of 2006, down 17.3 percent from the alltime high of 1.28 million units set in 2005.
There are some signs that housing markets may
Alabama Metro Areas
10
have bottomed out, but it is really too early to
In this issue:
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tell. Because the country has significant
inventories of both new and existing homes,
it might be a few more months before we see
the bottom in home sales.
Employment Growth and Losses. Despite
a slowdown in the middle of the year, employment grew on average for 2006, albeit both
manufacturers and retailers shed jobs. While
manufacturing lost almost 72,000 jobs,
retailing lost close to 80,000. Construction
also continues to lose workers. Most of the
job gains in 2006 were in education, healthcare
services, eating and drinking places, hotels,
engineering services, other business services,
and state and local governments.
Outlook. Except for housing and autos, the
economy will continue to grow in 2007, but
at a slightly slower pace. Slowdowns in
employment growth and housing markets
will definitely impact consumer purchasing
behavior. The recent easing of oil prices has
offset some of the impact from these shocks.
Although housing markets are expected to
remain in a slump in the near future, business
spending on equipment and software will
increase at a healthy pace. The U.S. economy
is forecasted to grow in the 2.5 to 3.0 percent
range in the first quarter of 2007. For the year
as a whole, economic growth is forecasted to
be around 2.5 percent.
Overall consumer spending will continue to
grow; however, consumer spending on durable
goods is forecasted to decline 3.0 percent in
the first quarter and approximately 1 percent
in the second quarter. Business spending on
equipment and software will increase in the
first and second quarters. Computer sales will
be very strong. After a decline in the fourth
quarter of 2006, business spending on
industrial equipment is expected to turn
2
Alabama Business
around, rising by approximately 6 percent in
the first quarter and 2.5 percent in the second.
Housing will remain a drag on the economy
and will also hurt the manufacturing industries
that are tied to housing. As long as there is a
high inventory of unsold homes, residential
investment will continue to decline throughout
2007. Forecasts call for an almost 20 percent
drop in the first quarter and another 14 percent
decline in the second quarter. The average
price of both new and existing homes is
forecasted to fall further in 2007.
Most employment gains will be in service
providing businesses, particularly healthcare
services, professional and business services,
and food services. The unemployment rate is
expected to increase from its current level. On
the bright side, inflation will remain tame in
the next two quarters, even though prices will
increase more than the Fed’s target of 1 or 2
percent. The Fed will probably start lowering
the funds rate by the second quarter.
Alabama
Employment. During calendar year 2006,
the state added 16,600 new jobs. While the
state’s 11 metropolitan areas, comprising 28
counties, gained 17,300 jobs, the remaining 39
counties lost 700 workers. The BirminghamHoover metropolitan area led the state by
adding 6,400 jobs, followed by Huntsville
(4,900) and Mobile (3,000). The Montgomery
and Tuscaloosa metro areas each added 1,600
jobs. Most job gains in the Birmingham metro
area were in food services and drinking places
(2,000), professional and business services
(1,700), and education and health services
(1,600). Surprisingly, retail trade in the
Birmingham area netted only 100 new workers
to its payrolls. In the Huntsville metro area the
industries that added the most jobs were
professional, scientific, and technical services
(1,300), and retail trade (1,000).
Durable goods manufacturing industries in
Alabama continued to add jobs. From
December 2005 to December 2006, these
industries added 2,900 new workers, primarily
in transportation equipment manufacturing
(2,200). Transportation equipment
manufacturing includes motor vehicle
production, aerospace products, and parts
manufacturing. Computer and electronics
producers added 500 jobs; wood products
manufacturing also gained 500 jobs. Industries
producing nondurable goods, on the other
hand, lost 6,700 jobs. Except for the 200 jobs
added by food manufacturing, every other
nondurable industry lost jobs during calendar
year 2006. The majority of these job losses
were in textiles and apparel; firms in these
industries lost 4,600 workers from their
payrolls. Despite job gains in durable goods,
as a whole, manufacturing firms in Alabama
experienced a net loss of 3,800 jobs.
Service providing firms in the state added
19,100 jobs to their payrolls last year, primarily
in leisure and hospitality services (3,500),
education and health services (5,200), and
professional and business services (5,800).
Most of the new professional and business
services jobs were in administrative and
support occupations (4,200). Healthcare jobs
were largely in ambulatory healthcare services
(2,700) and social assistance (2,000). Just as
at the national level, most of the new jobs
within Alabama’s leisure and hospitality
industry were at eating and drinking places
(3,000). Payrolls in retailing were up only 800,
while both financial activities and informationrelated firms experienced losses.
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Most (1,300) of the new 1,900 government
jobs were in state government, rather than
local or federal government.
Tax Receipts. Alabama’s tax revenues will
continue growing in the current fiscal year.
During the first quarter, total tax revenues
increased 5.9 percent, or $114 million, over the
first quarter of the previous fiscal year, reaching
over $2 billion. Sales taxes, corporate income
taxes, and individual income taxes were all up
compared to a year ago. Sales tax revenues
rose 1.7 percent to about $503 million, almost
$9 million higher than the first quarter of fiscal
year 2006. Corporate income tax receipts
totaled over $143 million, an increase of 30.3
percent, or $34 million above the revenues of
last year’s first quarter. Individual income tax
collections grew 12.6 percent to approximately
$737 million, about $83 million above last
year’s comparable time period.
Appropriations made to the Alabama
Education Trust Fund rose about $160 million
to approximately $1.2 billion, an increase of
13.2 percent. Alabama’s other large fund did
not do as well. Appropriations made to the
state’s General Fund declined by slightly over
$16 million, a drop of 3.9 percent compared to
the first quarter of the previous fiscal year.
construction, educational and health services,
and food services and drinking places.
Outlook. Alabama’s economy is forecasted to
slow from its 2006 growth rate of 3.1 percent.
Different scenarios point to growth in the
range between 2.5 and 2.9 percent. Rising
interest rates, slowing home sales, and
relatively high energy prices will drive this
forecasted slowdown in the economy.
Tax revenues for FY2007 will increase by
slightly over 7 percent to more than $8.9
billion, barring unexpected shocks such as
sharp energy price increases, a much deeper
housing recession, or mass layoffs by
manufacturing firms. Sales tax receipts could
increase 6.0 percent, or $118 million, to $2.1
billion. However, sales tax revenue gains will
not come in at that 6.0 percent rate if
Alabamians drastically cut their spending
levels. Individual income tax revenues will
increase about 8 percent, or $257 million,
totaling $3.5 billion.
Alabama’s manufacturing sector will grow 4.3
percent in 2007, mainly due to an expected
increase in motor vehicle manufacturing.
Other positive economic forces in 2007 will be
professional and business services, industrial
There will be 15,000 Alabama jobs added in
nonagricultural fields. Job growth rates have
been slowing in recent months and will
continue to do so for the remainder of the
year. However, the state’s motor vehicle
Alabama Business
3
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Alabama Nonagricultural Employment
Change in Number of Jobs
December 2005 to
December 2006
Total Nonagricultural
Natural Resources and Mining
Construction
Manufacturing
Durable Goods Manufacturing
Wood Products
Primary and Fabricated Metals
Machinery
Computers and Electronic Products
Electrical Equipment, Appliance, and Component
Transportation Equipment
Motor Vehicle
Furniture and Related Products
Nondurable Goods Manufacturing
Food
Textile Mills
Textile Product Mills
Apparel
Paper
Plastics and Rubber Products
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
16,600
-300
1,600
-3,800
2,900
500
-600
-500
500
-200
2,200
600
500
-6,700
100
-900
-1,700
-200
0
-1,600
2,800
1,100
800
900
-200
-200
-500
5,800
5,200
3,500
600
1,900
-100
1,300
700
700
NOW AVAILABLE!
Alabama Economic
Outlook 2007
The Alabama Economic Outlook 2007 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 2007 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.
Name
Address
City
State
Zip
Source: Alabama Department of Industrial Relations.
Phone
manufacturing industries, aerospace companies, and parts manufacturers will
continue to add to their payrolls. With the new Kia automotive plant slated
to open in 2009 just across the state line in Georgia, most of Hyundai’s tier
one and tier two suppliers in Alabama probably will expand, adding workers
to supply parts for both plants. However, payrolls in Alabama’s retailing
sector will decline slightly or remain flat. Corporate profits will continue to
be healthy, providing a boon for business investments in equipment,
software, and other capital investments.
Ahmad Ijaz
[email protected]
We also accept selected credit cards. Please check the
appropriate box:
Visa
Master Card
Name (as it appears on the card)
Signature
Card No.
Exp. Date
4
Alabama Business
First Quarter 2007 • Volume 6, Number 1
Panelists’ confidence in the performance of their respective
industries during the next several months improved overall. All
four industry indicators rose from their fourth quarter values, led
by a modest rebound in hiring expectations. Sales will continue
to be the strongest contributor to growth. While business
leaders are most likely to forecast increases in sales and profits,
hiring and capital expenditures are generally expected to follow
their fourth quarter 2006 trends.
50
Q1 2007 compared to Q4 2006
40
39.6
29.4
30
26.8
20
10
3.0
0
Much
Worse
1.1
Somewhat Remain Somewhat Much
Worse the Same Better
Better
THE OUTLOOK
100
National Economy
48.4
80
Alabama Economy
56.2
Industry Sales
56.1
Industry Profits
54.0
40
Industry Hiring
53.1
20
Capital Expenditures 54.1
60
59.3 61.4 58.9
54.2 53.6
BLCI
0
Q1 Q2 Q3 Q4 Q1
2006
2007
53.6
Index above 50 indicates expansion.
increase from previous quarter
decrease from previous quarter
Pessimism about U.S. Economy Rises The outlook for the U.S.
economy is slightly below the midpoint on the first quarter 2007 survey.
At 48.4, the component index is down 2.7 points from its fourth quarter
2006 value and indicates stagnant growth. For only the third time in
survey history, pessimists outnumber optimists—32.4 percent of
panelists think the national economy could worsen during the first
quarter, while 27.9 percent expect it to improve. Almost 40 percent
anticipate that conditions will be about the same as in the fourth quarter
of 2006. The housing decline and its ripple effects on consumer
spending and on industries that are closely tied to housing will likely be
most pronounced in the first half of the year. Global Insight, a global
economic consulting and forecasting firm, expects real GDP growth to
weaken from around 2.4 percent in the fourth quarter to 2.0 percent in
the first quarter of 2007. The Federal Reserve held interest rates steady
in December, expressing concern over the cooling housing market.
Alabama Economy Improving at a Slower Pace Business leaders
remain optimistic about prospects for the Alabama economy in the first
quarter of 2007. The state component index value of 56.2 indicates
expansion, with just 13.6 percent of panelists expecting economic
conditions to be worse than in the fourth quarter of 2006 and 36.6 percent
forecasting improvement. However, an increase in the share of panelists
expecting state economic growth to be unchanged from the prior quarter
contributed to a decline of 3.0 points in the component index. Although
growth is expected to slow from its 2006 pace, Alabama’s economy should
outperform the nation’s in 2007. Continued growth in auto supplier plants,
as well as strength in shipbuilding and aerospace industries could counter
weakness in wood products and textile and apparel manufacturing
industries, while gains in services will offset losses in the finance,
insurance, and real estate (FIRE) sector. The state’s housing market is
expected to hold up fairly well, with low unemployment rates and job
growth attracting people to the state. Alabamians have more to spend as
state personal income growth has outpaced that of the nation in recent
months.
Alabama Economic Outlook
Q1 2007 compared to Q4 2006
49.8
50
40
34.7
Percent
Percent
National Economic Outlook
Alabama
BLCI
Index
Business Optimism Continues to Weaken The Alabama
Business Leaders Confidence Index® (BLCI) decreased for the
third consecutive quarter to a reading of 53.6, indicating that
the economy will expand at a slower rate in the first quarter
of 2007. An index value of 50 marks the division between
improving and deteriorating economic conditions. Lowered
expectations for the national and state economies resulted in
a decline of 0.6 points in the index from its fourth quarter
2006 value. Alabama’s economy is expected to continue to
outperform the nation’s. While the state should see moderate
growth, panelists forecast very slow growth with the possibility
of contraction for the U.S. economy.
30
20
13.6
10
0
1.9
0.0
Much
Worse
Somewhat Remain Somewhat Much
Worse the Same Better
Better
Center for Business and Economic Research, The University of Alabama
30
20
10
34.7
30
23.4
20
10
4.2
1.9
No
Strong Moderate
Moderate Strong
Decrease Decrease Change Increase Increase
0
Service Industries Expected to Lead Profit Gains Profits are expected
to improve modestly across Alabama industries in the first quarter of 2007.
At 54.0, the profits component index is up 0.4 points from the fourth
quarter 2006 reading. Almost 39 percent of the state business leaders
surveyed expect profits in their industry to increase during the first quarter,
while 25.3 percent forecast a decrease. At the national level, the pace of
profit growth is expected to slow markedly in 2007 as continued weakness
in housing cools the economy. Alabama’s housing market is expected to
hold up well; however, wage pressures from tight labor markets could cut
into profit margins. More than half of panelists in professional, scientific,
and technical services and in other services (including leisure and
hospitality services) forecast profit growth for their industry during the first
quarter. In most other industries, panelists generally expect to maintain
current profit levels, with the exception of retail trade, where a decline in
profits is forecasted.
Job Growth Less Robust than a Year Ago Alabama will continue to add
jobs early in 2007, but the pace of job growth is likely to be slower than it
was during the first quarter of 2006. The hiring plans component index
registered 53.1 for first quarter 2007, up 1.4 points from the prior quarter,
but 2.9 points below its value a year ago. Almost half of BLCI respondents
expect no change in hiring plans during the quarter, while 31.7 percent
forecast an increase. Most manufacturers (61.5 percent) expect hiring to
continue at its fourth quarter 2006 pace; just 23.1 percent forecast an
uptick. Manufacturing jobs will largely come from new and expanding
automotive suppliers, other transportation equipment companies, and
defense contractors. Hiring plans are most upbeat in services, while retail
trade panelists forecast a strong decrease in hiring and wholesale trade and
FIRE are expected to see moderate declines.
Industry Hiring Plans
Q1 2007 compared to Q4 2006
49.4
50
40
28.7
30
20
15.5
10
3.4
Industry Capital Expenditures
Q1 2007 compared to Q4 2006
50
42.3
40
Percent
34.3
30
20
16.6
10
3.8
0
2
3.8
2.3
Percent
35.8
27.2
22.6
No
Strong Moderate
Moderate Strong
Decrease Decrease Change Increase Increase
Q1 2007 compared to Q4 2006
40
Percent
40
Industry Profits
50
0
Industry Sales
Q1 2007 compared to Q4 2006
44.1
50
Percent
Moderate Sales Growth Continues Sales trends are generally positive
across Alabama industries, with almost 48 percent of panelists forecasting
an increase in sales during the first quarter of 2007 compared to about
25 percent expecting a decline. The sales component index registered
56.1, up 0.1 points from last quarter. Generally strong business and
employment conditions in the state should continue to support consumer
spending growth, overriding any weakness in housing markets. National
defense-related service and manufacturing industries will be an important
component of sales gains. Export growth trends could also bolster sales.
At least half of panelists in health care; professional, scientific, and
technical services; other services; and retail and wholesale trade expect
sales in their industry to improve in the first quarter. Finance, insurance,
and real estate, affected by consolidation in the banking industry and the
housing slowdown, is the only sector anticipating a contraction in sales.
3.0
No
Strong Moderate
Moderate Strong
Decrease Decrease Change Increase Increase
0
3.0
No
Strong Moderate
Moderate Strong
Decrease Decrease Change Increase Increase
Capital Spending Continues to Support Growth Capital expenditures
should help sustain the Alabama economy during the first quarter of 2007.
The component index value of 54.1 is up 0.5 points from the prior quarter
and indicates a modest pick-up in investment activity. Nationally, relatively
high utilization rates and competitive pressures are among factors driving
investment in structures and equipment. Nonresidential construction
should continue the rebound that began in 2006. Building by aerospace,
automotive, national defense, and biotech businesses is contributing to
activity in areas across the state. Hotel, retail, and health care are among
other sectors with ongoing construction projects. Over 37 percent of
panelists expect investment activity in their industry to increase during the
first quarter. The investment outlook is most robust among professional,
scientific, and technical firms; construction companies; and in retail trade.
Transportation, information, and public utilities is least likely to see capital
investment growth.
Center for Business and Economic Research, The University of Alabama
Topical Question Series:
Alabama Trends in Employee Compensation
Compensation to Rise for Most Workers Alabama business
leaders who responded to the first quarter 2007 survey are
generally upbeat about employee compensation (excluding
benefits) in 2007, with 83.7 percent expecting an increase at
their firm during the year. This compares to 81 percent of
employers nationwide planning an increase on a recent
Careerbuilder.com survey. Most increases will be between
2 and almost 4 percent—25.5 percent of panelists are planning
increases in the 2 to 2.99 percent range and 26.2 percent expect
increases to range from 3 to 3.99 percent. Another 20.2 percent
of employees will see compensation rise 4 percent or more.
Compensation will be flat for 1 in 8 of Alabama’s workers, while
just 2.7 percent may see a decrease. Overall the average
increase in worker compensation is expected to be higher this
year. In 2006, 19.9 percent of firms expected no change
compared to 12.5 percent in 2007, while 46.4 percent of firms
are planning an increase of 3 percent or more this year versus
38.1 percent last year.
Over the next year do you expect employee
compensation* in your firm to:
Decrease
2.7
Stay the same
12.5
Increase 0.1-1.99%
11.8
Increase 2-2.99%
25.5
Increase 3-3.99%
26.2
Increase 4-4.99%
10.3
9.9
Increase 5% or more
Don’t know
1.1
0
5
10
15
20
25
30
Percent
*Compensation excludes benefits.
What portion of the change in total compensation
will each of these categories comprise?
A 2006 year-end bonus
10.1%
Merit/performance increase
Granting of stock options
43.2%
1.8%
Other
4.4%
Cost of living adjustment
40.5%
Size of Bonus Varies Widely About 39 percent of
firms represented in the fourth quarter BLCI panel
planned to offer bonuses as part of their compensation at year-end 2006. Many bonuses were small,
with 23.2 percent of respondents expecting bonuses
to average less than 1 percent of wages. Some
Alabama workers had their income generously
augmented by a year-end bonus, however. Bonuses
were expected to average 9 percent or more of
wages at 21.6 percent of companies and between 5
and 8.99 percent at 19.1 percent of firms that give
bonuses.
Merit Increases Outweigh Cost of Living Adjustments
Just over 43 percent of the change in total compensation
will result from increases based on merit/performance,
while cost of living adjustments should account for 40.5
percent. This is in line with the current emphasis on the
importance of merit, as companies are increasingly
segmenting their workforces based on performance.
The share of compensation coming from cost of living
adjustments is up from 30.5 percent last year, driven by
consumer price inflation estimated at 3.2 percent in 2006.
Year-end bonuses are expected to account for just 10.1
percent of compensation gains in 2007—a steep drop
from a 21.7 percent share last year. Indications are that
holiday bonuses are becoming less widespread, while
rewards for performance may take the form of merit
increases or bonuses. Few Alabama firms include stock
options in their compensation packages. Other forms of
compensation noted by panelists include incentives and
investments to keep good employees. Most companies
(71.6 percent) include more than one form of compensation in their package.
If your firm offers a year-end bonus, what percentage
of employee wages does it average?
Less than 1%
23.2
17.0
1-2.99%
19.1
3-4.99%
10.3
5-6.99%
8.8
7-8.99%
21.6
9% or more
0
5
10
15
20
Percent
25
30
Center for Business and Economic Research, The University of Alabama
3
Alabama BLCI by Component and Region Losses of close
to three points in both the national and Alabama economy
components of the index were partially countered by modest
increases in all four industry indicators on the first quarter 2007
survey. As a result, the BLCI was off just 0.6 points from its
fourth quarter 2006 value.
Business optimism continued to run highest in the Mobile metro
area with a first quarter 2007 BLCI of 58.5, although the index
dropped 0.9 points from the previous quarter. Aerospace,
shipbuilding, and shipping industries should continue to grow,
and the Retirement Systems of Alabama’s Battle House Hotel
and Office Tower are expected to open in downtown Mobile in
the spring. Huntsville’s BLCI registered a state-average 53.6,
down 4.1 points from the previous quarter. Aerospace and
defense-related companies are strong, with expansions planned
or underway at a number of firms to accommodate growth from
the implementation of BRAC recommendations.
Birmingham was the only major metro area to see an increase in
the BLCI this quarter; the index rose 0.3 points to 52.8. Although
banking job losses loom, new industry announcements will bring
jobs in manufacturing and services and the area’s health care
and research sectors continue to expand. Montgomery panelists
remained the least optimistic group, with the area BLCI falling 2.9
points to 49.0. Area growth was moderate in 2006 and new job
prospects in the first quarter appear limited.
Component Index by Area, Q1 2007
Q1 2007
Alabama
Change from Q4 2006
Birmingham
MSA
Huntsville
Mobile
Montgomery
National Economy
48.4
-2.7
46.4
45.4
55.4
44.7
Alabama Economy
56.2
-3.0
55.7
58.0
62.5
47.7
Industry Sales
56.1
0.1
56.0
54.5
60.1
51.5
Industry Profits
54.0
0.4
54.2
57.1
56.0
49.2
Industry Hiring
53.1
1.4
51.3
54.5
60.7
50.0
Capital Expenditures
54.1
0.5
53.4
51.8
56.6
50.8
BLCI
53.6
-0.6
52.8
53.6
58.5
49.0
Alabama BLCI History The first quarter of 2007 begins the sixth year
that Alabama business leaders have gone online and completed the
quarterly BLCI survey. Each survey is open during the last month of
a quarter and asks panelists to register their expectations for the
upcoming quarter compared to the current quarter. The number of
respondents varies as the survey depends on voluntary participation.
Panelists come from a wide range of firms representing small, midsize,
and large businesses across industry sectors and across the state.
Alabama BLCI History
70
65
60
55
The survey history indicates changing expectations for improving or
declining economic conditions. Since its inception in the first quarter
of 2002, the BLCI value has remained above the neutral point of 50.
This parallels actual results as the economy has not been in recession
since 2001.
Please join us in March for the Second Quarter 2007 survey at
www.blci.com/alabama.
53.6
50
45
40
Q1/2002 Q1/2003 Q1/2004 Q1/2005 Q1/2006 Q1/2007
Analysis provided by Carolyn Trent, Socioeconomic Analyst,
Center for Business and Economic Research, The University of Alabama.
The BLCI is a
Compass on Business
initiative created in
collaboration with:
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.
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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
Total Nonagricultural
Employment (thousands)
Percent Change
Manufacturing
Employment (thousands)
Percent Change
Durable Goods Manufacturing
Employment (thousands)
Percent Change
Nondurable Goods Manufacturing
Employment (thousands)
Percent Change
Wholesale Trade
Employment (thousands)
Percent Change
Retail Trade Employment (thousands)
Percent Change
Alabama Unemployment Rate
Initial Benefit Claims (thousands)
Manufacturing Weekly Hours
Total Tax Revenues (millions)
Percent Change
Total Income Tax Revenues (millions)
Percent Change
Total Sales Tax Revenues (millions)
Percent Change
2005/Q2 2005/Q3
11,001.8
3.1
4.2
2.9
1.9
2.954
2.2
6.1
133.2
1.5
5.1
11,115.1
3.4
4.2
3.4
2.0
3.801
2.2
5.9
133.7
1.6
5.0
2005/Q2 2005/Q3
2005/Q4 2006/Q1 2006/Q2 2006/Q3 2006/Q4
11,163.8
3.1
4.5
3.8
2.0
3.733
2.3
7.3
134.2
1.4
4.9
11,316.4
3.7
4.6
4.4
2.0
3.676
2.3
2.9
134.7
1.5
4.7
11,388.1
3.5
5.1
4.7
2.0
3.986
2.0
-9.1
135.1
1.4
4.6
11,443.5 11,510.8
3.0
3.1
4.9
4.6
4.9
4.9
2.0
2.0
3.340
1.860
1.8
1.6
-18.3
-27.8
135.6
136.0
1.4
1.4
4.7
4.5
2005/Q4 2006/Q1 2006/Q2 2006/Q3 2006/Q4
1,947.6
2.3
1,946.4
2.2
1,967.3
2.2
1,960.2
2.5
1,982.6
1.8
1,974.0
1.4
1,983.7
0.8
298.1
2.5
298.7
2.0
300.7
1.8
301.5
2.9
302.5
1.5
300.5
0.6
297.5
-1.1
177.8
5.9
179.5
5.8
181.7
5.4
182.9
6.0
184.5
3.8
184.3
2.7
184.8
1.7
120.3
-2.2
119.2
-3.3
119.0
-3.3
118.7
-1.5
118.0
-1.9
116.2
-2.5
112.7
-5.3
79.0
1.4
235.2
1.6
3.8
18.6
40.8
2,150.8
13.7
1,088.8
16.3
467.7
7.1
79.6
1.7
232.9
1.1
4.1
23.2
40.5
1,780.0
10.1
766.7
17.4
457.2
6.8
79.8
1.6
238.4
0.2
3.5
17.8
40.5
1,903.1
8.0
764.0
5.1
494.7
13.4
79.7
2.1
232.8
0.2
3.8
21.6
40.6
2,126.2
10.2
899.9
12.4
478.5
7.4
80.8
2.3
234.2
-0.5
3.4
17.8
41.4
2,365.9
10.0
1229.2
12.9
498.9
6.7
81.0
1.7
233.1
0.1
3.8
20.0
41.2
1,963.7
10.3
854.9
11.5
496.5
8.6
80.9
1.3
237.0
-0.6
3.2
20.7
40.9
2,029.2
6.6
879.7
15.2
503.3
1.7
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, 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
Alabama Business
9
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Alabama Metro Areas:
Keeping the Momentum
Going in 2006
Alabama’s metropolitan areas fueled the
economic momentum that spread across the
state in 2006. The 25,200 jobs created in the
11 metro areas during the first 10 months of
the year amounted to 82.4 percent of job gains
statewide. Positive economic developments
brought new residents who helped grow the
labor force. Employment increased faster than
workers, however, and unemployment fell in
the state and every metro area. The 17,500
jobs created in services accounted for more
than 69 percent of new metro area jobs.
Manufacturing generally took a breather from
its strong automotive-related expansion in
2005, but should pick-up in 2007. And the
housing slowdown did not significantly impact
Alabama’s metro areas.
Developments during 2006 laid the foundation
for continued strength in the metropolitan
areas during 2007 as new projects come online
and the momentum builds for Base Realignment and Closure (BRAC). Workforce concerns
are paramount, with each metro area trying to
provide an adequate supply of workers with the
skills required for new and existing jobs. Other
challenges must also be met to keep the momentum rolling in 2007, including providing
adequate funding for business recruitment and
communities with an attractive quality of life
and competitive local school systems.
Developments in Alabama’s metropolitan areas
in 2006 and activity ongoing into 2007 are
summarized below. A more detailed report is
included in the Alabama Economic Outlook
2007 publication.
Metro Area Developments in 2006
Anniston-Oxford. National defense-related
activity is strong at the Anniston Army Depot
and area contractors. Construction underway
on Kronospan plant that will employ 700;
National Gypsum making substantial investment in its Oxford plant. Development at
McClellan including senior housing, National
Guard Armory, Intellimed Solutions, and Center
for Domestic Preparedness expansion. Retail
stores opening at new Oxford Exchange.
Auburn-Opelika. Five new auto suppliers,
including one for Kia, were announced in 2006.
However, manufacturing additions during the
year were offset by plant closings and layoffs.
Jo-Ann Stores distribution center opened and
additions to East Alabama Medical Center were
completed. Construction underway on Auburn
University Research Park. Strong population
10
Alabama Business
and housing growth will be augmented by
military families moving to the Fort Benning
area with BRAC. Retirement Systems of
Alabama’s (RSA) first residential development,
The National Village, adding to housing
options.
Birmingham-Hoover. Services job growth
continuing with health care expansions, biomedical research, and biotech development.
Banking in transition, but indications are that
Regions/AmSouth merger may bring jobs to
Birmingham from other areas. Wachovia and
Infinity customer service centers creating jobs.
New auto supplier firms in St. Clair County;
auto manufacturing to grow in Jefferson
County with planned Isuzu truck plant.
Suburban housing market holding up; loft and
condo development progressing downtown.
Strong suburban retail development spreading
to underserved areas; redevelopment of Eastwood Mall site underway near downtown.
Tourism boosted by RSA’s Ross Bridge Golf
Resort and Barber Motorsports Park.
Decatur. United Launch Alliance won
approval in December, merging satellite launch
businesses of Boeing and Lockheed Martin and
bringing about 100 jobs. Expansions completed or underway at existing companies
including BP, Wayne Farms, 3M, Toray Fibers,
Nucor, International Paper, BranShaw Mechanical, and Lockheed Martin. Construction
ongoing on Crossings of Decatur shopping
center. Events held at new recreation complex
and marina helped tourism. Area readying
infrastructure and housing for BRAC movers.
Dothan. Strong job gains in services, particularly professional and business services.
Dothan ranked high for its entrepreneurial
spirit. Retail continues to grow with villagestyle center Dothan Pavilion, new Rock Creek
Crossing shopping center, and other businesses
and restaurants under construction. Manufacturing sector saw new KFH Industries plant
and expansion at Cummings Signs. Strong
residential growth spreading to smaller towns
in metro area.
Florence-Muscle Shoals. RSA investment in
Marriott Shoals Hotel, Spa, and Conference
Center, with two adjoining Robert Trent Jones
Golf Trail courses, boosting tourism and leisure
and hospitality employment; strong convention
traffic. Plant for auto supplier North American
Lighting to open in 2007, creating 320 jobs.
Growth in warehousing and distribution
industry and in retail businesses. Housing
development in Florence and Muscle Shoals;
area cooperating to attract families with BRAC.
Gadsden. Health care and hospitality services
were the primary contributors to job growth in
2006; services accounted for a metro area high
Key Sectors for Growth in 2007
1. Professional, scientific, and technical jobs
in services related to national defense,
aerospace, biotechnology, and medical
research.
2. Transportation equipment manufacturing, including automotive, shipbuilding, aviation, and aerospace.
3. Customer care and call centers.
4. Retailing, with significant retail additions
in many areas.
5. Leisure and hospitality, boosted by
expanded convention capabilities.
6. Infrastructure and housing development
in North Alabama as BRAC-related
moves begin.
of 42.4 percent of all jobs. Auto supplier jobs
increasing with Prince Metal Stampings
expansion. Rigid Building Systems plant ready
early in 2007. Cintas opened laundry and
distribution center in Gadsden. Three new high
schools opened in 2006 and early in 2007.
Honda-related population growth in southern
Etowah County.
Huntsville. Companies engaged in national
defense-related research and development
seeing substantial growth in facilities and
employment. Metro area readying infrastructure, housing, and facilities for BRAC-driven
growth that will begin in 2007 as Redstone
Arsenal adds over 4,000 military, civilian, and
contract personnel. New contractor firms
beginning to establish a presence. Plans for
space exploration boosting aerospace employment. Hudson-Alpha Institute for Biotechnology should open late in 2007. Verizon
building headquarters and customer service
center to employ 1,300. Retail development
includes Bridge Street Town Centre; medical
services expanding. Population and housing
growth strong.
Mobile. Area transitioning to emphasis on
aerospace, shipbuilding, and shipping. International Shipholding and CG Railway relocating
headquarters to Mobile; work continues on
Choctaw Point container port and other projects at Alabama State Docks. Military and
commercial contracts adding to employment in
shipbuilding. Aerospace and aviation developments include EADS engineering center to be
completed in 2007 and new projects and jobs
at ST Mobile Aerospace Engineering. Standard
Concrete Products plant to employ 200. RSA’s
Battle House Tower and Hotel bringing office
space and hotel rooms on line in 2007. Strong
health services job growth; University of South
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Metropolitan Area Workforce
October 2006
Alabama
Anniston-Oxford
Auburn-Opelika
Birmingham-Hoover
Decatur
Dothan
Florence-Muscle Shoals
Gadsden
Huntsville
Mobile
Montgomery
Tuscaloosa
Labor Force
Underemployed
Unemployed
Unemployment Rate
Available Labor Pool
2,223,237
54,990
66,690
549,010
72,979
68,188
69,054
48,544
203,948
187,763
173,331
98,529
542,422
10,500
15,085
128,235
14,685
18,020
16,000
9,780
55,525
51,490
45,500
25,720
70,768
1,907
1,713
15,729
2,393
1,877
2,195
1,575
5,004
6,122
5,488
2,713
3.2%
3.5%
2.6%
2.9%
3.3%
2.8%
3.2%
3.2%
2.5%
3.3%
3.2%
2.8%
613,190
12,407
16,798
143,964
17,078
19,897
18,195
11,355
60,529
57,612
50,988
28,433
Note: Underemployment estimates the number of workers who would consider a better job.
Source: Alabama Department of Industrial Relations.
Alabama building Cancer Research
Center. New projects providing living
options downtown.
Metropolitan Area Nonagricultural Job Creation
January to October 2006
Alabama
Anniston-Oxford
Auburn-Opelika
Birmingham-Hoover
Decatur
Dothan
Florence-Muscle Shoals
Gadsden
Huntsville
Mobile
Montgomery
Tuscaloosa
Total
Manufacturing
Services
30,600
200
400
9,200
-100
1,500
400
-800
5,500
3,700
3,200
2,000
-4,200
-300
-400
0
-300
-200
-100
-1,400
700
100
200
-100
22,600
500
500
6,600
300
900
400
300
3,300
2,700
1,200
800
Montgomery. Professional and
business services and construction
largest sources of job growth in 2006.
Hyundai added Santa Fe production in
2006; supplier job growth modest, but
should pick up as suppliers prepare to
serve the Kia plant under construction in
Georgia. Manufacturing to benefit from
250 jobs with GKN Aerospace expansion
in 2007. Renovated Convention Center,
new hotel and spa, and performing arts
theater, joint projects of City of Montgomery and RSA, will up convention
traffic when completed late in 2007.
Substantial retail and housing development in Millbrook and Prattville. East
Montgomery seeing housing and retail
growth; some loft and condo development downtown.
Note: Numbers for Gadsden reflect the strike at Goodyear.
Source: Alabama Department of Industrial Relations.
Residential Building Permits
Single-Family
2006* Change from 2005*
Alabama
Anniston-Oxford
Auburn-Opelika
Birmingham-Hoover
Decatur
Dothan
Florence-Muscle Shoals
Gadsden
Huntsville
Mobile
Montgomery
Tuscaloosa
20,909
154
1,518
5,870
250
530
299
170
3,795
2,101
1,384
974
-81
-38
277
-434
-60
37
64
-38
765
557
-113
-129
Multifamily
2006* Change from 2005*
6,368
39
503
817
0
16
8
24
280
212
17
1,353
* Data for both 2005 and 2006 cover the period January through November.
Note: Data are for permit-issuing places and hence do not represent all residential construction.
Source: U.S. Census Bureau, Building Permits Survey.
1,198
31
158
186
0
-88
-41
24
262
-110
-677
934
Tuscaloosa. The University of Alabama
is successfully increasing its student
body, boosting construction employment
as it builds several thousand new dorm
rooms. Condominium development
extremely strong, with some units completed in 2006 and others set for 2007
or later. Units focus on a variety of
clients including UA students, alumni,
empty nesters, and young professionals.
Mercedes added G and R-Class production, but manufacturing employment
growth was modest. Retail development
includes new Lowe’s in Northport and
Tuscaloosa’s Midtown Village that will
open late in 2007.
Carolyn Trent
[email protected]
Alabama Business
11
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cber.cba.ua.edu
alabama.business
The Center for
Make the Right Decision.
Business and
The quality of one’s decisions grows from the quality of the
information upon which they are based. The Alabama Business
Leaders Confidence Index® (BLCI), a collaborative effort by
Compass Bank and The University of Alabama’s Center for Business
and Economic Research, provides executives like you with valuable
perspectives on the latest economic news and business trends.
Economic Research
gratefully
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 March 1st.
acknowledges
the financial
With increased participation from business leaders like you, 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!
support of
Compass Bank.
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
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Compass Bank and The University of Alabama.
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CENTER FOR BUSINESS &
ECONOMIC RESEARCH