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CenterforBusinessandEconomicResearch,CulverhouseCollegeofCommerce,TheUniversityofAlabama

EconomicOutlook: ThirdQuarter2013
NonfarmEmployment

AlabamaNonfarmEmploymentandUnemploymentRate Employment(Thousands),Unemployment(Percent)
2,100 2,000 12 10 8 6 4 UnemploymentRate

Highlights

Employment
1,900 1,800 1,700

Thestategained14,400nonfarmjobsbetween June2012andJune2013,whileseasonally adjustedtotalemploymentroseby33,990, increasingfrom1,995,962to2,029,952. Accordingtotheestablishmentsurvey,nonfarm payrollsinthestatetotaled1,909,700inJune 2013,upfrom1,895,300ayearago. Seasonallyadjusted,thenumberofunemployed workersfellfrom163,982inJune2012to 140,148inJune2013.Althoughthecivilianlabor forceexpandedfrom2,159,944to2,170,100, totalemploymentgrewfaster.Thestates unemploymentratedeclinedto6.5percentin June2013,downfrom7.6percentayearearlier. Totalnonfarmemploymentisforecastedto risebetween0.8and1.2percentin2013.Gains willbestrongestintransportationequipment manufacturing,professionalandbusiness services,healthservices,andinfoodservices anddrinkingplaces. Overall,thestateseconomyisestimatedto expandbyaround2.2percentin2013,about thesameastherateofgrowthseenin2012. Afterincreasingby3.8percentinFiscalYear 20112012,statetaxrevenuesareexpectedto bearound4.0percenthigherinFY2013.

UnemploymentRate
1,600 1,500 1990 2 0 2011 2013

1993

1996

1999

2002

2005

2008

Source:AlabamaDepartmentofLabor.

workers,whileheavyandcivilengineeringconstruction gained400jobsandbuildingconstructionadded100. Twoindustriesaccountedforallofthenetmanufac turingjobgrowthduringthepastyeartransportation equipmentmanufacturerscreated4,900positions,while plasticsandrubberproductsmanufacturersadded500. Payrollsintheremainingindustrieseitherdeclinedor wereflatduringthe12monthperiodendinginJune 2013.Sizeablejoblosseswerereportedintextilesand apparelandprimaryandfabricatedmetalsmanufacturing (1,000each);computerandelectronicproducts(800); woodproductsandfoodmanufacturing(500each);and inaerospaceproductsandpartsandfurnitureandrelated productsmanufacturing(400each). Amongserviceprovidingfirms,employmentgains betweenJune2012andJune2013wereprimarily

AlabamaForecast

Alabama
Employment. Nonfarmjobstotaled1,909,700inJune 2013,117,000belowtheprerecessionpeakof2,026,700 reachedinDecember2007.Accordingtotheestablish mentsurvey,overthe12monthperiodendinginJune 2013thestategainedatotalof14,400jobs.Goods producingbusinessesadded5,300workerswhilethe serviceprovidingsectorsawanetgainof9,100.Among goodsproducingindustries,manufacturingadded3,600 workersandconstructionhadanetincreaseof1,700. Constructionrelatedbusinessesexperiencedjobgrowth acrosstheboard:specialtytradecontractorsadded1,200

(AnnualPercentChange)

Probability:forecast(60percent)andrange(90percent) 2011 RealGDP


range

2012 2.1

2013 2.2
1.5to3.0

2014 3.2
2.0to4.0

1.1

Employment
range

0.4

0.7

1.0
0.5to1.5

1.4
0.7to2.0

TotalTaxReceipts,FY
range

5.0

3.8

3.8
3.5to5.0

4.2
3.0to6.0

Source:CenterforBusinessandEconomicResearch,TheUniversityofAlabama.

Volume82,Number3|ThirdQuarter2013

associatedwithleisureandhospitality(9,500), Alabama NonfarmEmployment professionalandbusinessservices(3,100),healthcare ChangeinNumberofJobs andsocialassistance(2,100),andtrade(500inwholesale June2011 June2012 and400inretail).Manyofthejobsaddedwerein to June 2012 to June2013 accommodationandfoodservices(5,900)andin administrativesupport,wastemanagement,and NonfarmEmployment Total 17,100 14,400 remediationservices(3,800),sectorsthatpayrelatively 100 0 NaturalResourcesandMining lowerwages,offerlimitedbenefits,andtendtohire -1,800 1,700 Construction temporaryorparttimeworkers.Growthinthesetypes 5,900 3,600 Manufacturing ofjobsputsdownwardpressureonwages,thereby 6,400 2,200 DurableGoodsManufacturing restrictingconsumerandbusinessdemand. -500 1,400 NondurableGoodsManufacturing Overthesame12monthperiod,anumberofservice 2,500 300 Trade,Transportation,andUtilities providingsectorssawsignificantjoblosses,withthe 1,100 500 Wholesale Trade Trade largestinstategovernmentinstitutions(2,500)andthe -300 400 Retail 1,700 -600 informationsectorincludingtelecommunications(1,100). Transportation, Warehousing,Utilities -500 -1,100 Financialservices;professional,scientific,andtechnical Information -200 -900 Financial Activities services;andfederalgovernmententitiesshed900jobs 6,100 3,100 Professional andBusinessServices each,whilefirmsineducationalservicesandintruck 3,300 1,300 Educational andHealthServices transportationservicesbothlost800employees. 6,100 9,500 Leisure andHospitality Relativelysluggishconsumerandbusinessspending 1,800 -300 Other Services growthcontinuestohamperdemandfortheseservices. -6,200 -2,800 Government DuringtheyearendinginJune2013,sixAlabama -1,700 -900 Federal Government metroareasexperiencedjobgains.Nonfarmemploy -4,100 -2,500 State Government mentincreasedinMobile(2,100),Tuscaloosa(1,900), -400 600 Local Government Montgomery(1,500),AuburnOpelika(800),Florence AlabamaDepartmentofLaborandCenterforBusinessandEconomicResearch. MuscleShoals(500),andBirminghamHoover(100). Source: Metroareasthatlostjobsoverthesameperiodincluded AnnistonOxford(300),Dothan(200),andHuntsville WhileallofAlabamas67countiesexperienceda (100),whilepayrollsinDecaturandGadsdenwereflat. significantdeclineinunemploymentcomparedtoyear Despiterelativelystronggrowthinpayrolls,Mobilehad agolevels,12countiesstillsawratesof10.0percentand thehighestmetrounemploymentrateinJuneat7.8 over.WilcoxCountyhadthehighestunemploymentat percentstillaconsiderableimprovementover9.5 15.8percentwhileShelbyCountysrateof4.5percent percentunemploymentayearearlier.Unemployment wasthelowest.Overthepastthreeyears,allAlabama wasthelowestintheAuburnOpelikaareaat5.8percent, countiesandmetroareashaveshownsignificant followedcloselybyBirminghamHooverandHuntsville improvementinunemploymentrates. with5.9percentunemployment.
AlabamaEmploymentLevelComparedto theBeginningofEachRecession
(PercentofPreRecessionLevel) 102 1980 100 98 96 94 92 90 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 NumberofMonthsPostRecession
Source:AlabamaDepartmentofLabor.

1981 1990 2001 2007

Exports.AccordingtotheU.S.Departmentof CommercesInternationalTradeAdministration,Alabama exportsdeclined2.7percentduringthefirstthreemonths of2013comparedtothesameperiodin2012,slipping from$4.8billionto$4.7billion.WhileCanadaremained ourlargesttradingpartnerearlyin2013,Chinaassumed thepositionofsecondlargest,surpassingbothGermany andMexico.ExportstoCanadaincreasedfrom$925 millioninthefirstquarterof2012toaround$947million forthefirstquarterof2013.Firstquarter2013exportsto Chinatotaled$596million,followedbyGermany($522 million)andMexico($484million).Exportstoallthreeof thesecountrieswerebelowthelevelsseeninthefirst quarterof2012.Othermajortradingpartnersinthefirst quarterof2013includedJapan($173million),theUnited Kingdom($165million),SouthKorea($153million),and Brazil($139million).

2|ThirdQuarter2013AlabamaBusiness

Shipmentsoftransportationequipment,thestates topexportproduct,rose$153milliontoalmost$1.9 billioninthefirstquarterof2013,anincreaseof0.9 percentcomparedtoyearagolevels.Othermajor exportsinthefirstquarterof2013werechemicals($677 million),mineralsandores($372million),primarymetals ($328million),paperproducts($225million),machinery ($216million),fabricatedmetals($173million),food products($143million),andcomputerandelectronic products($128million).Exportsofprimarymetal productsandnonelectricalmachinerypostedsteep declinescomparedtothefirstquarterof2012,with bothdownaround25percent. TaxReceipts.Inthefirstninemonthsofthecurrent fiscalyear(FY2013),Alabamastaxrevenuestotaled around$7.2billion,up4.6percent,orslightlyover $315million,fromthesameperiodayearearlier.Sales taxrevenuesrose0.9percent(almost$15million)to about$1.52billion,withtheweakgainaclearindication thatconsumersarestillverycautiousaboutspending.At around$370million,corporateincometaxreceiptswere $35millionabovethefirstninemonthsofFY2012. Individualincometaxrevenuesrose7.1percent,up $194milliontoabout$2.9billionduringthefirstthree quartersofFY2013. ForthefirstninemonthsofFY2013comparedtothe sameperiodinFY2012,appropriationstotheAlabama EducationTrustFund,whichareprimarilyderivedfrom incomeandsalestaxes,rosebyonly$13.5million(0.3 percent)tototalabout$4.3billion.Forthesameperiod, appropriationstothestatesGeneralFund,directed

towardsnoneducationrelatedspending,declinedby approximately$51milliontoabout$1.2billion,adrop of4.1percent.

Outlookfor2013
InflationadjustedAlabamaGDPshouldgrowbyabout 2.2percentin2013,closetothepaceofexpansionseen in2012.Transportationequipmentmanufacturingwill continuetobeoneofthefastestgrowingindustries. Relativelystrongdemandforvehiclesproducedin Alabamaisexpectedtokeepproductionatcurrentlevels fortheremainderofthisyear.Nonfarmemploymentis forecastedtorise0.8to1.2percent,withthestateadding between15,000and20,000jobsin2013.Mostjobgains willbeintransportationequipmentmanufacturing;food servicesanddrinkingplaces;administrativesupport, wastemanagement,andremediationservices;educa tionalservices;healthcareandsocialassistance;and financeandinsurancerelatedservices. Graduallyimprovingresidentialandcommercialreal estatemarketsareexpectedtohelpthestateregainsome oftheconstructionjobsthatwerelostduringrecent years.However,givenstillrelativelysluggishconsumer spendinggrowth,thepaceofpayrollgainsintheleisure andhospitalitysector,includingrestaurantsandother foodserviceestablishments,isexpectedtoslowinthe secondhalfofthisyear. Lookingatnotseasonallyadjusteddata,therecent improvementinAlabamasunemploymentratehasbeen duetomoderateemploymentgrowthcoupledwitha slightlylargerdecreaseinthecivilianlaborforce.Theloss ofalmost16,000laborforceparticipantsoverthe12 monthsendinginJune2013likelyresultsfromanumber offactors,includingdiscouragedworkerswhohavegiven uplookingforajob,workerswhohaveretired,and/or workerswhohavemovedoutofstateforemployment opportunities.Sluggishconsumerandbusinessspending growth,coupledwithuncertaintiesconcerningfederal fiscalpoliciesandupcomingimplementationofthe healthcarelegislation,willkeepmanyofthestates employerscautiousaboutnewhiringandcapital investmentduringtheremainderofthisyear. Businesssentiment,measuredquarterlybytheCenter forBusinessandEconomicResearchsAlabamaBusiness ConfidenceIndex(ABCI),rose5.2pointsto52.9onthe thirdquarter2013survey.Thatsthefirsttimethestates businesscommunityhashadapositiveoutlookoverall sincethethirdquarteroflastyear.However,business sentimenthasnotyetregainedtheprerecessionlevelof 56.8recordedinthethirdquarterof2007.Business executivesaremuchmoreoptimisticaboutprospectsfor thestatethanthenationaleconomy.AnAlabama economyindexreadingof55.2forecastsmoderate AlabamaBusinessThirdQuarter2013|3

MonthlyEmploymentIndicators
(June2013)
NotSeasonally Adjusted Seasonally Adjusted

Alabama
CivilianLaborForce PercentChangefromYearAgoLevel AbsoluteChangefromYearAgoLevel Employed PercentChangefromYearAgoLevel AbsoluteChangefromYearAgoLevel Unemployed PercentChangefromYearAgoLevel AbsoluteChangefromYearAgoLevel AlabamaUnemploymentRate UnemploymentRate(June2012) U.S.UnemploymentRate UnemploymentRate(June2012) 2,169,797 0.7% 15,906 2,023,217 0.9% 17,824 146,580 18.7% 33,730 6.8% 8.2% 7.8% 8.4% 2,170,100 0.5% 10,156 2,029,952 1.7% 33,990 140,148 14.5% 23,834 6.5% 7.6% 7.6% 8.2%

Source:AlabamaDepartmentofLabor,LaborMarketInformationDivision.

expansioninthethirdquarter,whiletheU.S.economy couldperformslightlybetterthanlastquarterwiththe indexat50.6. Expectationsforsalesroseto57.8,upfrom53.9for thepreviousquarter,butstillbelowtheindexreadingof 61.8registeredayearearlier.Theprofitsindexincreased 3.2pointsto53.2.Hiringshouldproceedataboutthe samepaceasinthesecondquarter,withtheindexup3.2 pointstoaneutral50.Capitalexpenditurescouldpickup slightlytheindexrose3.0pointsto50.7.Thefinancial activitiessectorshowedthemostoptimismlookingahead tothethirdquarter,whilefirmsinconstruction; transportation,information,andutilities;wholesaletrade; andotherservicesweremoderatelyoptimistic. AmongthemetroareastrackedbytheABCIsurvey, Mobilehadthehighestconfidenceindexof59.0this quarter,followedbyMontgomeryat56.6andBirming hamHooverwith54.4.Althoughconfidencerosein everymetro,Huntsvilleareabusinessexecutiveshavea moderatelynegativeoutlookwithathirdquarterABCI of45.7.

Source:CenterforBusinessandEconomicResearch,TheUniversityofAlabama.

ExpectationsversusPriorQuarter 60 55.2 Alabama 55 50.6 50 United States 45 40 35 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010201120122013

AlabamaBusinessConfidenceIndex U.S.andAlabamaEconomies

sales,andgraduallyimprovingpayrollsaresomeofthe currentbrightspots.However,despitesomehelpfrom thehousingrecoveryanditseffectsonwealthand housingrelatedpurchases,thecurrentpaceofconsumer spendingwillbedifficulttomaintaingoingforward. Consumersfaceanincreaseinpayrolltaxesduetothe expirationofBusherataxcutsandwagesremain relativelystagnant.Householdshavelostapproximately 1.0percentoftheirdisposableincome($12to$13billion) thisyearduetoexpirationofthepayrolltaxcut.Inspite ofrecentdeclines,householddebtburdensremainhigh andnetnonmortgageconsumerdebtisexpectedto increasefromabout$2.8trillionin2012toover$3.0 trillionin2013. Thestrengthoftherecoveryisnothelpedbythefact thatmanyofthejobsbeingaddedareparttimeor temporaryinnature.Withaseasonallyadjustedincrease of322,000inJune,8.2millionAmericansareworking parttimedespitewantingfulltimework.Ifthese workersareincluded,theunemploymentrateis14.3 percentinsteadofthereported7.6percent.Of195,000 jobsaddedinJune,75,000oralmost39percentwerein theleisureandhospitalitysector;monthlyjobgrowthin thissectorhasaveraged55,000sofarin2013.There wereonemillionsocalleddiscouragedworkersinJune whosaytheyarenotcurrentlylookingforworkbecause theybelievenojobsareavailableforthem.Thatsan increaseofmorethan200,000fromayearagoandisone ofthereasonswhytheunemploymentratehasdropped. Theincreaseindiscouragedworkerscouldbeahurdlefor unemploymenttoreachthetarget6.5percentatwhich theFedwouldlikelyenditsbondbuyingprogram. Currently,about12millionAmericansarecountedas unemployed. ConsumerSpending,AnnualPercentChange (Chained2005Dollars)
14 12 10 8 6 4 2 0 2 4 6 1990 1994 1998 2002 2006 2010 2014 Total DurableGoods Services

Index

UnitedStates
TheU.S.economyhasnowgrownfor15consecutive quarterssincetheendoftherecession,buttherateof growth,ataround2.0percent,hasbeenamongthe weakestofanyrecoverysinceWorldWarII.After expandingbyonly0.4percentinthefourthquarterof 2012,theeconomygrewataslightbetterpaceof1.8 percentinthefirstquarterof2013.Consumerspending, whichaccountsfortwothirdsofU.S.economicactivity, largelydroveoverallgainsinthefirstthreemonthsofthis year.Anincreaseinhousingactivity,strongautomobile

Source:U.S.BureauofEconomicAnalysisandIHSGlobalInsight. Consumerspendingisexpectedtoincreaseby approximately1.7percentinthethirdquarter,followed

4|ThirdQuarter2013AlabamaBusiness

bya2.0percentriseinfourthquarter2013.Light vehiclesaleswillremainabrightspotduetopentup demand,relativelylowinterestrates,andmanufacturers discounts.Overallbusinessspendingwillincreaseby5.5 percentinthethirdquarterand7.0percentinthefourth. Spendingonequipmentandsoftwarecouldrisebyabout 7.5percentforthesecondhalfoftheyear.Expenditures oninformationprocessingequipmentwillberelatively strongintheremainderof2013,increasingbyslightly over10percent.Afterconsistentlydeclininginrecent years,spendingoncommercialandhealthcarerelated structureswillincreaseamodest0.3percentinthethird quarter,followedbyasizeable5.0percentincreaseinthe fourthquarter. Althoughtheeconomywillcontinuetoaddjobsinthe comingmonths,thepaceofjobcreationisforecastedto befairlysluggish.Mostnewjobswillbeinleisureand hospitalityandprofessionalandbusinessservices,while employmentgainsinmanufacturingwillremainweakdue topoorexportgrowth.Aftergrowing1.8percentinthe firstquarterof2013,theU.S.economyisestimatedto expandbyabout1.6percentinthesecondquarter,and around2.0percentinthesecondhalfofthisyear.The rateofgrowthshouldpickupslightlyfromthethirdto thefourthquarter.For2013asawhole,realGDPis forecastedtoincreasebyapproximately1.6percent, comparedto2.2percentin2012.Someofthemajor riskstothisforecastincludethesluggishgrowthbeing experiencedbymajorEuropeaneconomiesandJapan. Cutsindomesticspendingwillalsocontinuetoimpede economicgrowththroughtheremainderof2013. SamuelAddy,Ph.D. saddy@cba.ua.edu AhmadIjaz aijaz@cba.ua.edu

ConsumerSentimentIndex,UniversityofMichigan
110 100 90 80 70 60 1990

1994

1998

2002

2006

2010

2014

Source:UniversityofMichiganandIHSGlobalInsight.

Articlesreflecttheopinionsoftheauthorsbutnotnecessarilythose ofthestaffoftheCenter,thefacultyoftheCulverhouseCollegeof Commerce,ortheadministrativeofficialsofTheUniversityofAlabama.

SavetheDate!
JANUARY2014
S 5 12 19 26 M 6 13 20 27 T 7 14 21 28 W 1 8 T 2 9 16 23 30 F 3 10 17 24 31 S 4 11 18 25

15
22 29

MakeplanstojointheCenterforBusinessandEconomic Researchfortheir26thannualEconomicOutlook ConferenceonJanuary15,2014inMontgomery.

TheCenterwilllookbackathowthenational,Alabama, andmetroareaeconomiesfaredin2013andpresentthe forecastsfor2014.

Wellletyouknowwhenregistrationisavailable.Check outinformationfromlastyearsOutlookandconference onourwebsiteathttp://cber.cba.ua.edu.

Sendyourquestionstouacber@cba.ua.eduorcall 205.348.6191.ContactCarolynTrentat205.348.3589to inquireaboutcorporatesponsorships.

AlabamaBusinessThirdQuarter2013|5