Samuel Addy

1

• Samuel Addy
• Center for Business and Economic Research
• July 22, 2009

2
Is above average growth on the horizon again for
Alabama?
3
Alabama employment fell earlier in 2001, later
in 2008
4
Alabamas job slide accelerated after June 2008

• Nonagricultural jobs declined modestly from the
  start of the recession until mid-2008. The drop
  was much steeper over the last year
• No. of Jobs No. Change Pct. Change
• December 2007 2,026,700
• June 2008 2,011,200 -15,500 -0.8
• December 2008 1,962,300 -48,900 -2.4
• June 2009 1,917,600 -44,700 -2.3
• After a drop of 40,600 jobs (-2.1 percent) from
  December 2008 to January 2009, losses moderated
  in 2009.

Center for Business and Economic Research, The
University of Alabama 4
5
With jobs disappearing across the U.S., workers
are likely not leaving the state

• Alabama gained almost 18,600 residents from net
  migration between July 1, 2007 and July 1, 2008.
• Recent trends suggest that the number of U.S.
  residents moving has dropped sharply since then.
• This is seen in the sizeable discrepancy between
  Alabama total employment and labor force changes
• July-Dec. 2008 Jan.-June 2009
• Average labor force 2,163,426
  2,128,671
• Average total employment
  2,039,274 1,935,755
• During this time, the number of employed
  residents fell by 103,519 (-5.1 percent), while
  the labor force shrank by 34,755 (-1.6 percent).

Center for Business and Economic Research, The
University of Alabama 5
6
Sectors share of employment versus share of job
losses in Alabama
June 2008 to June 2009 (Percent)
7
Manufacturing employment fell sharply from Q2
2008 retail slipped later
8
Motor vehicle manufacturing helped drive job
growth until 2007
9
All of the states metros lost jobs from June
2008 to June 2009
Source Alabama Department of Industrial
Relations.
CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE
UNIVERSITY OF ALABAMA 9
10
Total and sales tax receipts have been down since
Q4 2008
11
Germany, Canada major export destinations
12
Exports dropped sharply in Q1 2009 compared to
Q1 2008

• Alabama exports totaled 2.8 billion in the first
  quarter of 2009, down 26.4 percent compared to a
  year ago
• Transportation equipment exports, the lead export
  category, declined by 53.1 percent to 381.9
  million over the same period
• In the first quarter of 2009, Canada resumed its
  status as the state's largest trading partner
  (463 million), followed by Germany (382
  million), China (194 million), Mexico (168
  million), Japan (137 million), and the United
  Kingdom (127 million)

13
House prices holding up better across state than
nation

• FHFA House Price Index through Q1 2009
• (Percent Change)
• 1-quarter 1-year
• United States -0.42 -3.35
• Alabama 0.14 0.98
• Anniston-Oxford 1.14 0.47
• Auburn-Opelika -0.38 -0.48
• Birmingham-Hoover 1.01 1.09
• Decatur -3.09 -0.23
• Dothan 1.81 1.97
• Florence-Muscle Shoals 2.90 5.35
• Gadsden -2.00 -0.10
• Huntsville -1.79 1.24
• Mobile 2.03 1.08
• Montgomery -3.49 -0.94
• Tuscaloosa -2.11 2.63
• Source Federal Housing Finance Agency.

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE
UNIVERSITY OF ALABAMA 13
14
Strengths in the Alabama economy in 2009

• BRAC-related construction, job growth, increasing
  defense contractor presence in the Huntsville
  area
• Biotechnology and healthcare industry growth
• Kia start-up on track for December20 percent of
  applicants from Alabama Hyundai suppliers
  serving Kia
• New projects are complete or nearing completion
  and will be ready to go as the economy
  reboundsNational Alabama Railcar, ThyssenKrupp
• Continued expansion at Alabama State Docks
• Auto industry self-analysis and fine-tuning of
  processes during downturn will improve
  competitiveness
• AIDT, two- and four-year colleges are working
  together with industry for targeted training of
  the states workforce
• New incentives for white-collar jobs helping
  economic development efforts aimed at
  diversifying the economy

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE
UNIVERSITY OF ALABAMA 14
15
Challenges facing the Alabama economy in 2009

• Continuing, but slowing job losses in the
  manufacturing sector
• Declines in consumer spending and income
• Sales tax receipts were down 9.1 percent for the
  first three quarters of FY2009 compared to the
  same period in FY2008
• Individual income tax collections were 8.2
  percent lower for the same period
• Declining revenue to fund public education
• Cutbacks in federal government spending for some
  programs
• Continuing problems in commercial and residential
  real estate
• Business optimism still indicates contraction (Q3
  2009 ABCI)
• Long-term workforce development

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE
UNIVERSITY OF ALABAMA 15
16
ABCI Business confidence is improving

• ABCI is a forward-looking quarterly gauge of
  business sentiment across Alabama
• The third quarter ABCI is up 14 points, the
  largest gain in almost 8 years of survey history
• With a reading of 46.0, the economy is expected
  to contract at a more moderate pace this quarter
• Of the six components of the index, only sales
  passed the threshold of 50 with a value of 50.3
• Hiring and capital spending will be the weakest
  links in the recovery

17
ABCI U.S. and Alabama not expected to pull out
of recession in third quarter
18
ABCI Sales slide leveling off profits should
see moderate decline in Q3
Sales and Profits Expectations versus Prior
Quarter
19
ABCI Hiring and capital spending declining at
slower rate still weakest components
20
Areas with more government-related jobs most
optimistic
21
In conclusion

• The recession has dealt Alabamas economy a sharp
  blow. 2010 should see the start of a recovery
• 2009 2010
• Alabama GDP -3.0 (-4.5 to -1.3) 1.5
  (0.6 to 2.0)
• Employment -3.3 (-4.5 to -2.7) -0.3
  (-0.8 to 0.2)
• Total tax collections -4.5 (-7.1 to -3.4)
  1.2 (-2.0 to 1.9)
• Education and diversification must be priorities
• Workforce and economic development funding
  challenges remain
• Focus on optimality, sustainability, and
  flexibility
• Tax policy (education, infrastructure, health and
  safety, )
• Business and consumer behavior

CENTER FOR BUSINESS AND ECONOMIC RESEARCH, THE
UNIVERSITY OF ALABAMA 21
22
Save the Date!

• 2010 Economic Outlook Conference
• Thursday, January 14, 2010
• Renaissance Montgomery Hotel
• We hope to see you there for updated global,
  U.S., and Alabama forecasts.