Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama
Highlights
Alabama gained 4,500 jobs from May 2011
to May 2012, while the seasonally adjusted
unemployment rate dropped from 9.3 to 7.4
percent. Nonfarm payrolls totaled 1,881,100
in May 2012, up from 1,876,600 a year ago.
The seasonally adjusted number of unemployed workers declined significantly, from
203,806 in May 2011 to 159,218 in May 2012.
However, a 2.5 percent drop in the state’s
civilian labor force, which shrank from
2,197,336 to 2,143,105 during this time,
also contributed to the improvement in
unemployment.
Total nonfarm employment is forecasted to
increase about 0.5 percent in 2012, with most
gains in transportation equipment manufacturing, professional and business services,
educational and health services, and food
services and drinking places.
The state’s economy is estimated to expand by
approximately 2.0 percent in 2012, following an
estimated 1.0 to 1.5 percent gain in 2011.
After increasing 5.0 percent in fiscal year 20102011, state tax revenues are expected to grow
by 3.0 to 4.0 percent in FY2012, depending on
the pace of economic and payroll growth.
Employment. In May 2012 Alabama nonfarm
employment totaled 1,881,100, still 145,600 below
its December 2007 peak of 2,026,700. Over the
12-month period ending in May 2012, the state
gained a total of 4,500 jobs. Goods producing
businesses lost 4,200 workers while the service
providing sector gained 8,700. Among goods
producers, manufacturing added 2,900 jobs and
construction had a net loss of 7,200. Construction
2,000
Nonfarm Employment
Alabama
2,100
12
10
Employment
1,900
8
1,800
6
4
1,700
Unemployment Rate
2
1,600
1,500
1990
Unemployment Rate
Economic Outlook:
Third Quarter 2012
Alabama Nonfarm Employment and Unemployment Rate
Employment (Thousands), Unemployment (Percent) 0
1993
1996
1999
2002
2005
2008
2011
sector payroll losses were pretty much across the
board, including building construction (2,200), heavy
and civil engineering construction (1,500), and
specialty trade contractors (3,500). Within manufacturing, only three industries registered job gains
during the past 12 months: transportation equipment
manufacturing (3,200), mostly in motor vehicle parts
manufacturing (2,000); primary and fabricated metals
(800); and paper manufacturing (100). Several
manufacturing industries posted sizeable jobs losses,
including textiles and apparel (1,400); wood products
(600), furniture (600); and food manufacturing (300).
However, most other manufacturers saw only modest
job declines over the past year, with employment
stabilizing in recent months.
Alabama Forecast
(Annual Percent Change)
Probability: forecast (60 percent) and range (90 percent)
2010
2011
2012
2013
Real GDP
range
2.3
1.5
2.0
2.1
Employment
range
-0.8
Total Tax Receipts, FY
range
-2.5
0.5 to 2.5
-0.2
1.5 to 3.0 1.8 to 3.5
0.5
1.5
0.1 to 1.5 0.7 to 2.3
5.0
3.9
4.1
2.5 to 6.0 3.0 to 7.0
Source: Center for Business and Economic Research, The University of
Alabama.
Volume 81, Number 3 | Third Quarter 2012
Among service providing firms, employment gains
between May 2011 and May 2012 were primarily
associated with leisure and hospitality (7,100);
professional and business services (5,100); retailing
(4,400); educational and health services (2,700); and
other services (2,400). Over the same period, some
service providing sectors lost significant numbers of
jobs, including architectural and engineering services
(2,000); department stores (1,600); transportation
and warehousing (1,600), mostly in general freight
trucking; finance and insurance (1,200); nondurable
goods wholesalers (700); and telecommunications
firms (500). In terms of income growth, however,
several of the state’s fastest growing services-related
segments pay relatively low wages.
Of the three large industry groupings, government
accounted for the majority of Alabama job losses,
with a total of 10,300 jobs disappearing from May
2011 to May 2012. State government experienced
a decline of 7,200 in payrolls, while local governments shed 2,100 workers. Of state and local
government job losses, 4,700 were in education.
Federal government employment decreased by
1,000 during the year.
From May 2011 to May 2012, only two of the state’s
11 metropolitan areas managed job gains—FlorenceMuscle Shoals saw payrolls increase by 1,300 and
Gadsden added 100 nonfarm workers. Metro area
job declines over the past 12 months included
Huntsville (3,600), Montgomery (2,000), Tuscaloosa
(1,800), Birmingham-Hoover (1,000), AnnistonOxford (800), Mobile (600), Auburn-Opelika (400),
Dothan (200), and Decatur (100). Unemployment
rates dropped across the board during the same
period, largely due to labor force declines; only
Florence-Muscle Shoals saw its civilian labor force
Level of Alabama Employment Compared to
the Beginning of Each Recession
(Number of Months)
102
100
1980
1981
98
1990
2001
96
2007
94
92
90
1
5
9
13 17 21 25 29 33 37 41 45 49 53 57
Source: Alabama Department of Industrial Relations.
2 | Third Quarter 2012 Alabama Business
Alabama Nonfarm Employment
Change in Number of Jobs
Total Nonfarm Employment
Natural Resources and Mining
Construction
Manufacturing
Durable Goods Manufacturing
Nondurable Goods Manufacturing
Trade, Transportation, and Utilities
Wholesale Trade
Retail Trade
Transportation, Warehousing, Utilities
Information
Financial Activities
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
Federal Government
State Government
Local Government
May 2010
to May 2011
May 2011
to May 2012
-10,600
300
-7,000
0
500
-500
2,100
-200
600
1,700
-800
1,300
5,100
2,200
500
-300
-14,000
-8,300
-1,400
-4,300
4,500
100
-7,200
2,900
4,100
-1,200
2,800
100
4,400
-1,700
-500
-600
5,100
2,700
7,100
2,400
-10,300
-1,000
-7,200
-2,100
Source: Alabama Department of Industrial Relations and Center for Business
and Economic Research, The University of Alabama.
expand. As of May 2012 Mobile had the highest
metro area unemployment rate at 8.5 percent, while
Auburn-Opelika had the lowest at 6.5 percent.
Although unemployment rates rose in all but four
Alabama counties from April to May 2012, all
counties except Barbour experienced a decline
during the past 12 months. May unemployment
ranged from 16.2 percent in Wilcox County down
to 5.2 percent in Shelby.
Exports. According to the U.S. Department of
Commerce’s International Trade Administration,
Alabama exports rose by slightly over 14 percent
during the first three months of 2012 compared to the
same period in 2011, increasing from $4.2 billion to
over $4.8 billion. Exports to Canada, the state’s
largest trade partner, increased from almost $814
million to $924 million. Other major destinations for
Alabama exports in the first quarter of 2012 included:
China ($667 million), Germany ($636 million), Mexico
($508 million), the United Kingdom ($208 million),
Brazil ($164 million), and Japan ($160 million).
Shipments of transportation equipment, the state’s
top export product, rose from around $1.5 billion in
first quarter 2011 to $1.7 billion in first quarter 2012.
Other major exports during the first three months of
2012 were chemicals ($684 million), minerals and
ores ($511 million), primary metals ($360 million),
(ABCI), fell 6.6 points to 50.2, with a much weaker
outlook for both the state and U.S. economies. Still,
most business executives are more optimistic about
Alabama’s economy than the nation’s. At 44.0 the
U.S. economy index forecasts a much weaker
performance this quarter compared to last, while
Alabama’s index of 51.4 indicates modest improvement. However, while the sales index of 54.8 indicates moderate growth in sales for Alabama firms
in the third quarter, profits and capital spending are
expected to edge up only modestly, with both indexes
at 50.7. The pace of job growth could slow slightly
from the second quarter; the hiring index is down 4.4
points to 49.7, although there is a positive difference
of 1.5 percentage points between firms expecting to
increase hiring and those forecasting a decrease.
Of the four major metro areas tracked by the ABCI,
Birmingham-Hoover and Montgomery are the most
likely to post job gains in the third quarter and to
see general improvement in business performance.
Executives in Huntsville and Mobile expect economic
activity to slow this quarter.
nonelectrical machinery ($283 million), paper
products ($231 million), and fabricated metals
products ($153 million).
Tax Receipts. For the first nine months of the
current fiscal year (FY2012), Alabama’s tax revenues
totaled around $6.9 billion, up almost 4.0 percent
($264 million) from the same period a year earlier.
Sales tax revenues rose 5.6 percent (about $80
million) to approximately $1.5 billion. At around
$335 million, corporate income tax receipts were
$55 million higher than in the first nine months of
FY2011, an increase of over 19 percent. Individual
income tax revenues rose 4.3 percent, increasing
$112 million to about $2.7 billion.
During the first nine months of FY2012, appropriations to the Alabama Education Trust Fund, which
are primarily funded from income and sales taxes,
rose by almost $270 million (6.8 percent) to total
about $4.3 billion. At the same time, appropriations
to the state’s General Fund, directed toward noneducation-related spending, increased by around
$227 million to about $1.3 billion, a gain of 21.9
percent.
Alabama Business Confidence Index™
U.S. and Alabama Economies
Expectations versus Prior Quarter
65
Outlook for 2012
Inflation-adjusted Alabama GDP should increase
about 1.5 to 2.0 percent in 2012, with transportation
equipment manufacturing being one of the fastest
growing industries. Relatively strong sales of
vehicles produced in Alabama are expected to
continue throughout 2012; during the first four
months of this year a total of 237,166 state-produced
vehicles were sold and production for the first five
months is up 14.0 percent. Total nonfarm employment is expected to rise approximately 0.5 percent
in 2012, with the addition of about 10,000 jobs. Most
job gains will be in leisure and hospitality businesses,
healthcare-related services, retail trade, and transportation equipment manufacturing. Still, the unemployment rate is expected to remain relatively high as
more workers enter the labor force with a gradually
improving economy. Any decline in the state’s
unemployment rate so far has been due to both
moderate improvement in payrolls and a civilian labor
force that is still contracting as discouraged workers
drop out and workers retire and/or move out of state.
With consumer and business spending still sluggish,
most employers are likely to remain cautious about
hiring new workers during the remainder of 2012.
Business sentiment for the third quarter of 2012,
measured by the Center for Business and Economic
Research’s Alabama Business Confidence Index™
60
55
Alabama
51.4
50
45
United States
44.0
40
35
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2009
2010
2011
2012
Source: Center for Business and Economic Research, The University of
Alabama.
United States
After growing at a modest pace though most of 2011,
the U.S. economy picked up some steam and
expanded 3.0 percent in the fourth quarter, primarily
due to the inventory cycle. However, the increase in
GDP for the year averaged just 1.7 percent, significantly below both the economy’s potential rate of
growth and the kind of consistent pace of expansion
needed to bring down the unemployment rate. With
struggling economies in Europe and a slowdown in
Alabama Business Third Quarter 2012 | 3
emerging market economies, particularly China, the
weakness in both output and employment growth
seen in the United States in the first half of 2012 is
likely to characterize the second half as well. In May
the U.S. manufacturing industry contracted for the
first time in almost three years. After losing almost
five million jobs during the previous decade, manufacturing has been a positive force in the recovery,
adding about 470,000 jobs since January 2010,
largely on the strength of exports to both Europe
and to emerging economies. The ISM index of
manufacturing activity fell 3.8 points to 49.7 in May.
Uncertainty in Europe contributed to a 12.3 point
drop in the new orders index which, at 47.8, posted
its lowest reading since April 2009.
According to the payroll survey, the U.S. economy
gained an average of 96,000 jobs a month from
March through May, significantly below the 141,000
average monthly gains seen since payrolls first
began rising in March 2010. Most job creation in
recent months has been in business and professsional services, leisure and hospitality establishments, healthcare, and manufacturing. The
household survey found job gains even weaker,
averaging 74,000 a month for the three months
ending in May. Conditions remain relatively bleak
for the long-term unemployed; the proportion of
the unemployed out of work 27 weeks or longer
increased from 41.3 to 42.8 percent. If we include
workers who would like a job but are not currently
looking, plus those who want a full-time job but can
only find part-time work, the U.S. unemployment rate
in May was 14.8 percent, up from 14.5 percent in
April. Furthermore, the share of working age people
who are either working or actively looking for work
(civilian labor force) is currently at its lowest level
since 1981 with just 70 percent of men now in the
labor force—the lowest reading since the Department
of Labor began data collection in 1948.
Following an expected 1.7 percent rate of growth in
the first half of 2012, the U.S. economy is forecasted
to grow by approximately 2.0 percent in the third
quarter. With a significant slowdown in job growth in
recent months and with almost 13 million people still
unemployed, consumer spending is likely to slow
further from an already sluggish pace. Although the
recent drop in gasoline prices will help household
budgets, overall expenditures are only expected to
increase by around 2.5 percent. For the year as a
whole, consumer spending, which accounts for
almost two-thirds of the U.S. economy, is forecasted
to grow by about 2.0 percent, the same pace as in
2011. Spending on durable goods will rise by 5.5
percent during the second half of 2012, below the
4 | Third Quarter 2012 Alabama Business
approximately 8.5 percent rate of growth seen in the
first half.
Business spending as a whole will increase around
7.0 percent in the third quarter, while spending on
equipment and software is expected to rise 9.5
percent. Expenditures for information processing
equipment will remain relatively strong this quarter,
increasing by around 9.0 percent. Spending on
computers and peripherals and on communications
equipment should post stronger gains of 13.9 and
17.7 percent, respectively. Business investment in
structures is forecasted to remain lethargic in the
coming months, declining by about 0.5 percent in the
second half of this year, despite the fact that commercial lending picked up slightly in the first half of
2012. However, investments for commercial and
healthcare-related structures could rise 1.0 percent in
the third quarter. Although the economy will continue
to add jobs in the coming months, albeit at a relatively slow pace, the U.S. unemployment rate is
forecasted to remain stubbornly high at around 8.0
percent.
One of the biggest risks to economic growth remains
the financial and debt crises in Europe. Given the
high probability that European economies will slide
into another recession, Eurozone woes could have
a significant impact on U.S. economic growth, in
particular domestic manufacturing industries, since
the region accounts for almost 18 percent of total
U.S. exports. The United States also faces
numerous economic challenges here at home as
both household and public debt are hindering the
ability of the economy to grow at a higher rate, state
and local governments continue to shed workers,
housing markets remain distressed, and credit for
both consumers and small business is still hard to
get. Despite these headwinds, the U.S. economy
will continue to perform relatively better than the
global economy. Real GDP is expected to grow at
a modest pace of around 2.0 percent in 2012, with
payroll employment forecasted to increase 1.4
percent.
Samuel Addy, Ph.D.
[email protected]
Ahmad Ijaz
[email protected]
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.