TM
Center for Business
and Economic Research
Serving Alabama since 1930
VOLUME 85 NO.4
CENTER FOR BUSINESS AND ECONOMIC RESEARCH, CULVERHOUSE COLLEGE OF COMMERCE, THE UNIVERSITY OF ALABAMA
Economic
Outlook:
Fourth Quarter 2015
Alabama
Highlights
The Alabama economy gained 28,600 nonfarm
jobs from September 2014 to September 2015,
as the seasonally adjusted unemployment rate
dropped from 6.3 percent to 6.0 percent. The
state employed a total of 2,010,873 workers in
September 2015, up from 1,994,980 a year ago.
Alabama’s year over year payroll growth slowed
slightly.
The number of seasonally adjusted unemployed,
declined from 134,959 in September 2014 to
129,343 in September 2015. Civilian labor force in
the state rose from 2,129,939 to 2,140,216 during
this period. An expanding labor force generally
results in an increase in the unemployment rate.
Total nonfarm employment is forecasted to
increase by about 1.3 percent in 2015, with
transportation equipment manufacturing,
professional and business services, healthcare and
social assistance, and leisure and hospitality related
businesses adding the most to their payrolls.
The state’s economy is estimated to grow by
approximately 2.2 percent, slightly higher than the
2.0 percent growth rate seen in 2014.
After increasing by about 1.3 percent in fiscal year
2014, state tax revenues rose by 4.0
percent in the fiscal year ending in September
2015.
Employment
Alabama Employment Level Compared to
the Beginning of Each Recession
102
1980
1981
1990
2001
2007
100
98
96
94
(Percent of
Prerecession
Employment)
92
90
1
6
11
16
21
26
31
36
41
46
51
56
61
66
71
76
81
86
91
Number of Months
Source: Alabama Department of Labor, Labor Market Information Division.
After peaking in December 2007 at 2,026,700, the state currently
employs 1,958,800 nonfarm workers – 67,900 below its pre-recession
level. In this, the seventh year of the recovery that started in June 2009,
the state continues to make gradual gains in payrolls. Employment
growth, however, is currently as it should be during a period of
economic recovery. Over the twelve-month period ending in September
2015, the state gained a net 28,600 jobs, 2,400 from goods producing
firms and 26,200 from services providing firms. The state’s
construction industry added 4,400 workers during the twelve-month
period ending in September 2015, with both building construction and
specialty trade contractors adding 1,500 jobs each while heavy and civil
engineering construction related firms added 1,400 to their payrolls.
Overall, manufacturing industries in the state experienced a net loss of
700 jobs, primarily due to the 1,500 jobs lost in nondurable goods
producing
Alabama Forecast
(Annual Percent Change)
Real GDP
2013
2014
2015
2016
2.0
2.0
2.1
2.3
1.5 to 3.0
1.5 to 3.0
range
Employment
1.0
0.7
range
Total Tax Receipts, FY
range
4.0
1.3
1.1
1.2
0.8 to 1.6
0.8 to 1.5
4.0
3.5
2.0 to 4.5
Source: Center for Business and Economic Research, The University of Alabama.
Alabama Business | Fourth Quarter 2015 1
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
industries. Durable goods producing industries,
however, added 800 jobs. The manufacturing sector,
after experiencing above average growth in payrolls in
recent years, is showing signs of weakness due to slowing
international demand and high inventory levels seen
earlier in the year.
From September 2014 to September 2015, durable
goods industries in the state added 800 workers. Job
gains within these industries were associated with motor
vehicle parts manufacturing (1,500); motor vehicles and
wood products manufacturing (300 each); machinery
manufacturing and aerospace products and parts
manufacturing (100 each); while payrolls in the remaining
durable goods producing firms either remained flat
or experienced a drop. Primary and fabricated metals
manufacturers shed 300 workers, due in part to a drop
in the price of raw steel, excess worldwide capacity, and
competition both in domestic and international markets.
Nondurables goods manufacturing experienced a net loss
of 1,500 jobs during the twelve month period ending in
September 2015. The only industry to add to their payrolls
was plastic and rubber products manufacturing (200).
All remaining industries producing nondurable goods
experienced net job losses with animal slaughtering and
processing firms losing 1,300 jobs; textile mills, textile
product mills, and apparel manufacturing had a net loss of
1,200 jobs, while paper manufacturing lost 200 jobs.
Alabama Nonfarm Employment
Change in Number of Jobs
Sept. 2013 to Sept. 2014 to
Sept. 2014
Sept. 2015
24,400
Total Nonagricultural
Mining and Logging
Construction
Manufacturing
Durable Goods Manufacturing
Nondurable Goods Manufacturing
Trade, Transportation and Utilities
Wholesale Trade
Retail Trade
Transportation, Warehousing and Utilities
Information
Financial Activities
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Government
Federal Government
State Government
Local Government
Among services providing firms, job gains were predominantly
associated with accommodation and food services (6,300); healthcare
and social assistance (5,000); administrative support, waste
management and remediation services (3,600); motor vehicle and
parts dealers (2,500); finance and insurance (1,700); transportation
and warehousing (1,300); general merchandise stores (1,200); hospitals
(1,100); and educational services (1,000). Over the twelve month
period ending in September, wholesale trade related businesses had
a net loss of 2,200 workers while food and beverage stores laid off
400 workers. Payrolls in the government sector rose by 2,700 from
September 2014 to September 2015. Most of these gains were
associated with local government entities.
Among the state’s 12 metropolitan areas, job gains were experienced in
Birmingham-Hoover (6,700); Huntsville (2,600); Tuscaloosa (2,500);
Daphne-Fairhope-Foley (2,500); Montgomery (2,000); Auburn-Opelika
(1,700); Decatur (600); and Dothan and Anniston-Oxford-Jacksonville
(500 each). Metro-areas experiencing job losses over the same twelve
month period included Florence-Muscle Shoals (1,300); Mobile (700);
and Gadsden (200). As of September 2015, the Mobile and FlorenceMuscle Shoals metro-areas had the highest unemployment rates,
both at 7.0 percent, while Auburn-Opelika had the lowest rate at 4.8
percent. Among the major cities in Alabama, Selma had the highest
unemployment rate at 11.4 percent and Vestavia Hills had the lowest
at 3.6 percent. County unemployment rates also varied significantly
in September 2015, from a high of 15.1 percent in Wilcox County to
Shelby County’s statewide low of 4.1 percent.
2 Alabama Business | Fourth Quarter 2015
-200
1,600
3,700
5,900
-2,200
4,700
400
2,800
1,500
-800
300
6,200
2,200
4,500
200
2,000
-500
300
2,200
28,600
-1,300
4,400
-700
800
-1,500
2,800
-2,200
3,400
1,600
200
2,300
3,900
6,000
6,600
1,100
3,300
100
200
3,000
Source: Alabama Department of Labor, Labor Market Information Division, and
Center for Business and Economic Research , The University of Alabama
Tax Receipts
During the 2015 fiscal year (FY2015), total tax revenues increased
4.0 percent, up $377 million from the previous fiscal year, to total
approximately $9.8 billion. Individual income tax receipts rose 4.7
percent to over $3.9 billion while corporate income taxes were up 20.9
percent to total $567.4 million, up from $469 million in the previous
fiscal year. Corporate tax receipts also included a one-time payment of
$64.4 million. Improvement in both business and consumer spending
resulted in a 3.5 percent increase in sales taxes. For FY2015, sales tax
receipts totaled about $2.2 billion, an increase of $73 million over the
previous fiscal year.
For this same period, appropriations to the Alabama Education Trust
Fund increased 4.2 percent ($245.6 million) to about $6.0 billion.
At the same time, appropriations to the State General Fund during
FY2015 increased by 7.6 percent or $127.6 million compared to the
previous fiscal year, totaling approximately $1.8 billion.
Exports
State exports dropped from $14.6 billion during the first nine months
of 2014 to $14.4 billion during the first nine months of 2015, a decline
of $126 million. Annual exports in 2014 increased $146 million to total
$19.4 billion. Canada remained the state’s largest export market in 2014
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
with exports totaling $4.3 billion. During the first nine months of 2015,
exports totaled slightly over $3.1 billion, a decline from approximately
$3.2 billion during the first nine months of 2014. Over the last four
years, exports to China have risen dramatically, making it Alabama’s
second largest export market. Exports to China now surpass exports
to both Mexico and Germany. During the first nine months of 2015,
exports to China increased by $109 million, up from $2.2 billion for the
same period in 2014. Exports to Mexico and Germany during the first
nine months of 2015 totaled approximately $2.2 billion and $1.8 billion,
respectively.
The transportation equipment manufacturing sector continues to remain
the state’s largest exporter. From 2013 to 2014, exports from this sector
rose $234 million to $8.7 billion. During the first nine months of 2015,
transportation exports from Alabama totaled almost $6.9 billion, up from
about $6.6 billion from the same period a year ago. For the first nine
months of 2015, other major exports from the state included chemicals
($1.6 billion), primary metals ($1.2 billion), nonelectrical machinery
($748 million), mineral and ores ($611 million), paper products ($566
million), and computer and electronic products ($438 million). A
general slowdown in the economies of the state’s trading partners
continues to have an impact on local manufacturers, resulting in slight
declines in some exports during the first nine months of 2015 compared
to same period the year before, consequently causing slower payroll
growth in affected industries.
Outlook
Payroll gains in transportation equipment manufacturing along with
professional and business services; education and health services; and
leisure and hospitality related services will continue to remain the state’s
major economic drivers for the remainder of 2015 and at least through
the first quarter 2016. Above average growth is expected in motor vehicle
parts manufacturing, motor vehicle and parts dealerships, administrative
support services, real estate and rental and leasing services,
administrative support and waste management, educational services,
healthcare and social assistance, and accommodation and food services.
Total Annual Nonfarm Employment
and Unemployment Rate
Employment (Thousands), Unemployment Rate (Percent), 1990-2015
12
Nonfarm Employment
2,100
Employment
2,000
10
Unemployment Rate
1,900
8
1,800
6
1,700
4
1,600
2
1,500
1995
2000
2005
2010
2015
0
Source: Alabama Department of Labor.
Monthly Employment Indicators
June 2015
Not Seasonally
Adjusted
Civilian Labor Force
Percent Change from Year Ago Level
Absolute Change from Year Ago Level
Employed
Percent Change from Year Ago Level
Absolute Change from Year Ago Level
Unemployed
Percent Change from Year Ago Level
Absolute Change from Year Ago Level
Alabama Unemployment Rate
Alabama Unemployment Rate (Sept. 2014)
U.S. Unemployment Rate
U.S. Unemployment Rate (Sept. 2014)
Seasonally
Adjusted
2,147,772
0.6%
13,831
2,140,216
0.5%
10,277
2,020,665
1.0%
19,642
2,010,873
0.8%
15,893
127,107
-4.4%
-5,811
129,343
-4.2%
-5,616
5.9%
6.2%
4.9%
5.7%
6.0%
6.3%
5.1%
5.9%
Source: Alabama Department of Labor, Labor Market Information Division.
Alabama’s gross domestic product (GDP) — the total value of goods
and services produced in the state — should grow at a slightly faster
pace in 2015 compared to 2014, increasing by a forecasted 2.2 percent to
around $189 billion. Relative output gains could be substantially higher
for manufacturers of motor vehicles and parts and other transportation
equipment related industries. Among service providing sectors, output
gains will be strongest among professional and business services firms,
particularly those engaged in administrative support, waste management
services and remedial services. The healthcare and social assistance
sector of the economy is also expected to grow at a relatively faster pace.
Nonfarm employment is forecasted to rise by 1.3 percent, adding 28,000
to 30,000 jobs for the year. Employment in service providing industries is
expected to rise by over 24,000 for the year. Most job growth is expected
to be in the private sector of the economy, however, local government
related entities will also show substantially higher gains than seen in
recent years. If the economy begins to accelerate at a much faster pace
than we have seen in recent months, it could encourage even more
currently discouraged workers to enter the labor market, which could
serve to push the unemployment rate slightly higher. At this stage of the
recovery, however, the probability of such a scenario is fairly low. State
revenues for the first quarter of FY2016 are forecasted to rise by 3.0
percent.
Overall, the state’s economy will continue to expand at its current annual
pace (around 1.5 to 2.0 percent) at least through the first quarter 2016.
Overall business sentiment for the fourth quarter of 2015 as measured
by the Center for Business and Economic Research’s quarterly Alabama
Business Confidence Index™ (ABCI), was down 3.6 points to 51.2
below the 54.2 index reading of a year ago. Most of the survey panelists
were relatively more optimistic about the state’s economy than the U.S.
economy, despite a drop in the Alabama index of 4.6 points to 52.0. The
index for the national economy declined 1.4 points to 49.3. An index
Alabama Business | Fourth Quarter 2015 3
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
reading above 50.0 indicates expansion while a reading below 50.0 signals
a contracting economy. All of the indexes included in the most recent
survey fell. The indexes for industry sales and profits were down 5.0 and
5.1 to 53.3 and 50.6, respectively. The index for hiring also declined 2.3
points to 50.9 while the index for expected business investment registered
50.9 for the fourth quarter, 5.7 points below the previous quarter. For
the detailed results of the index please go to (http://cber.cba.ua.edu/abci/
results/ABCI_Q4_2015.pdf).
The state’s economy will continue to grow at a moderate pace over the
next few months. Although payroll growth has shown some slowdown,
we are most likely seeing some seasonal affects and it is highly unlikely
that it will dip into negative territory over the next few quarters. T he
state’s economy will grow by 2.0 percent in the fourth quarter 2015 and
most likely at the same pace in the first quarter 2016.
from approximately 2.5 percent for this year. Based on the improved
employment situation in October, the Federal Reserve Bank will most
likely raise fund rates at their next meeting in December.
Consumer Spending
Accounting for almost two-thirds of the U.S. economy, consumer
spending increased by 3.0 percent in the third quarter — following a
3.6 percent rise in the previous quarter — and is expected to increase
by 3.2 percent for the year as a whole. Expenditures on durable
and nondurable goods rose 6.5 and 4.0 percent in the third quarter,
respectively. Consumer spending on durable goods rose 8.0 percent
in the second quarter, primarily due to automobile purchases based
Consumer Spending
Percent Change from Same Quarter Previous Year
United States
12 Total 10 Gross Domestic Product
Durable Goods 8 6 Gross Domestic Product and
Nonfarm Employment
Percent Change from Same Quarter Previous Year
4 3 2 4 2 0 Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Real gross domestic product, the value of the goods and services
produced and the value of goods and services used in production,
adjusted for inflation, increased at an annualized rate of 2.1 percent in
the third quarter of 2015, revised upward from the advance estimate of
1.5 percent, primarily due to a smaller than expected decrease in private
inventory investment. Real GDP rose by 3.9 percent in the second
quarter. The increase in real GDP in the third quarter reflected positive
contributions from personal consumption expenditures, nonresidential
fixed investment, state and local government spending, residential fixed
investment, and exports that were partly offset by a negative contribution
from private inventory investment. Imports, which are subtracted to
arrive at the estimation of GDP also rose. The fundamentals of the
economy remain strong, however, if the 3.0 percent increase in the private
inventory adjustment (real final sales of domestic products) is excluded.
With the inventory cycle beginning to ease over the next couple of
quarters, real growth in the fourth quarter of this year and the first quarter
of next year should accelerate to about 2.5 percent and 3.5 percent,
respectively. Growth is expected to be around 3.0 percent for 2016, up
2010
2011
2012
2013
2014
2015
2016
Source: Bureau of Economic Analysis
on favorable financing and other incentives offered by dealers. With
improving personal income, spending on durable goods will increase by
about 4.0 percent in the fourth quarter. Spending on nondurable goods,
such as food, shelter and apparel is forecasted to rise by 3.1 percent in the
fourth quarter. Expenditures on services increased by 2.7 percent in the
second quarter, followed by a 2.2 percent increase in the third quarter
and will rise about 3.0 percent in the fourth quarter. Christmas retail
sales are expect to rise 3.5 percent from the previous year (totaling about
$600 billion to $650 billion), less than, however, last year’s increase of 4.1
percent — but significantly higher than the 2.7 percent rise seen in both
2013 and 2012. Online holiday retail sales growth is likely to outpace last
year’s increase, growing from the 10.9 percent year over year rise seen last
year to about 12.0 percent this year. As a share of total holiday spending,
online Christmas sales should set a new record this year, accounting for
almost 15.0 percent of total retail sales, compared to 13.7 percent last year
(holiday or Christmas online sales are defined as not seasonally adjusted
November and December electronic and mail order retail sales.)
Investment
1 0 -­‐1 GDP Nonfarm Employment -­‐3 Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. -­‐2 2010
2011
2012
2013
2014
2015
2016
Source: Bureau of Economic Analysis and Bureau of Labor Statistics
4 Alabama Business | Fourth Quarter 2015
Inflation-adjusted nonresidential business spending rose by 2.4 percent
in the third quarter, following the 4.1 percent increase seen in the
second quarter but should increase 5.5 percent in the fourth quarter.
Business spending on information processing equipment should rise by
approximately 7.0 percent in the fourth quarter — after a 17.0 percent
increase in the third quarter. Inflation-adjusted residential fixed
investment, which includes both home construction and sales, will rise
by about 9.0 percent in the fourth quarter, following a 9.3 and 7.3 percent
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
increase seen in the second and third quarters, respectively. Sales of
existing homes will total 5.3 million units, up from 4.9 million units in
2014, while new home sales are expected to be around 517,000 units,
also up from 440,000 units in 2014. Currently, one of the weakest
sectors of the economy is investment in mining and petroleum
structures, after dropping by almost 50.0 percent in the third quarter,
this hard hit sector is expected to drop by another 26.0 percent in the
fourth quarter. Investment in commercial and healthcare related
structures declined by about 3.0 percent in the third quarter, following a
31.1 percent increase from the second quarter. These investments are
expected to rise by about 4.0 percent in the fourth quarter.
Employment
Nonfarm payrolls rose by a seasonally adjusted 271,000 in October,
bringing the three month average to around 187,000. Employment was
also revised for August and September, adding about 12,000 more jobs.
T he unemployment rate, based on a separate survey of U.S. households,
fell to 5.0 percent in October, the lowest level seen since April 2008 and
down from 5.1 percent of the previous month. T he 271,000 jump in
payrolls was significantly higher than expected and indicated that the
economy currently has the strength to allow the Fed to begin its move
away from the near zero percent interest rate policy that it has followed
for almost eight years. T he Fed was actually poised to raise short-term
interest rates in September but held off as economic conditions overseas
worsened and domestic job growth slowed down in August and
September. Average hourly earnings of workers also rose last month by
$0.09 to $25.20 from the levels of a year ago. The average workweek,
however, remained unchanged at 34.5 hours in October. Hourly wages
have increased by about 2.5 percent this year, a slightly higher rate than
Labor Force Participation Rate
(Annual)
Manufacturing lost 25,000 jobs while the mining and logging industry
also shed jobs, and has cut almost 100,000 jobs from its level of twelve
months ago.
Despite a relatively strong job growth in October, some slack remains in
the labor markets. Labor participation rate, the share of the population
participating in the labor force, remained at 62.4 percent in October, still
the lowest reading since 1977. In October, 7.9 million workers who
wanted a job were not able to find work, even after over six years of
economic expansion. A broader measure of unemployment that
includes workers in part-time jobs and those too discouraged to look for
work stood at an encouraging 9.8 percent — the lowest level seen since
May 2008. Employment growth will most likely slow from its October
level in the coming months.
Summary
The U.S. economy is forecasted to grow at a slight-ly slower pace in the
second half than in the first. Payroll growth will continue to average
around 200,000 per month, which should help consum-er demand.
Consumer spending is expected to remain fairly strong during the next
few months as long as job growth remains at its current trend levels.
One of the fundamental problems, however, is that most of the jobs
being added are in either low wage sectors or part-time jobs, resulting in
consumers having to take on higher debt levels to finance their
purchases. Despite this, the Fed-eral Reserve Bank will most likely raise
interest rates after their December meeting, perhaps 0.25 percent
initially. An increase in interest rates is, however, expected to be very
slow depending on the reaction of some sectors of the economy to
tighter monetary policy — particularly housing and durable goods
spending. Cutbacks in mining, petroleum related capital spending and
manufac-turing, together with slower economic growth in emerging
markets and other major trading part-ners, will continue to remain a
drag on the economy — at least in the near future.
Samuel Addy, Ph.D.
[email protected]
69
United States
67
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
65
63
Alabama
61
59
57
20
12
20
09
20
06
20
03
20
00
19
97
19
94
19
91
19
88
19
85
19
82
19
79
19
76
55
Source: Bureau of Labor Statics
the average 2.0 percent increase seen throughout most of the current
expansion. Job growth in October was mostly concentrated in the
private sector, which added 268,000 jobs, while government payrolls
grew by only 3,000. Most of the jobs were in professional and business
services (78,000), an increase from an average of 52,000 per month
experienced over the pre-vious 12 months. Other sectors to add jobs
included administrative and support services (46,000), and health-care
(45,000). T his sector has added about 495,000 jobs over the past year.
Center for Business
and Economic Research
Alabama Business | Fourth Quarter 2015 5