Economic Outlook for Alabama and the US

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Transcript Economic Outlook for Alabama and the US

Federal Reserve Bank of Atlanta
2nd Annual LEARN Conference
Atlanta, Georgia
March 29, 2010
Samuel Addy, Ph.D.
Center for Business and Economic Research
Culverhouse College of Commerce
The Alabama Business Confidence Index™
(ABCI) is a forward-looking quarterly
measure of business sentiment across the
state. The online survey is in its 9th year
(34 consecutive quarters).
The second quarter 2010 ABCI is up 0.7
points; a jump of 14 points in third quarter
2009 indicated a clear turnaround in
confidence.
With an index of 49.5, panelists feel
economic conditions will be better in the
second quarter. However, they do not think
the state will yet see a broad-based
recovery encompassing output, sales,
profits, employment, and capital spending.
Two of the six components, sales and
profits, are above the expansion threshold
of 50 this quarter.
Hiring and capital spending are the weakest
links in the recovery.
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National Economy
47.0
Alabama Economy
49.8
Industry Sales
56.4
Industry Profits
50.5
Industry Hiring
47.3
Capital Expenditures
46.1
ABCI
49.5
Index above 50 indicates expansion.
Index below 50 indicates contraction.
increase from previous quarter
decrease from previous quarter
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Many economic and workforce development successes with accolades
for state agencies.
A number of cities listed as best places to live and do business.
Continued and faster than expected population growth; moving
companies report sharp reductions nationwide but net gain for
Alabama in 2009.
Per capita income reached highest levels relative to the nation’s.
Fast-growing tourism and exports industries.
Continuing diversification of the state economy into biotechnology,
healthcare, aerospace, automotive, national defense, education, steel,
shipbuilding, and other high-paying manufacturing and white-collar
jobs.
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7/1/2009
Alabama
4,708,708
Anniston-Oxford
114,081
Auburn-Opelika
135,883
Birmingham-Hoover
1,131,070
Decatur
151,399
Dothan
142,693
Florence-Muscle Shoals
144,238
Gadsden
103,645
Huntsville
406,316
Mobile
411,721
Montgomery
366,401
Tuscaloosa
210,839
Non-metro (29.5%)
1,390,422
2008 to 2009
Number Percent
Net
Change Change Migration
31,244
659
2,778
7,924
1,055
1,247
412
210
9,088
2,589
805
1,937
2,540
0.7
0.6
2.1
0.7
0.7
0.9
0.3
0.2
2.3
0.6
0.2
0.9
0.2
16,363
497
1,993
3,975
571
822
435
254
7,077
691
-1,130
1,063
-19
Source: U.S. Census Bureau, Population Estimates Division.
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Alabama Per Capita Income as Percent of U.S.
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
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Continuing, but slowing, job losses
Declines in consumer spending and income
Declining revenue to fund public education
Long-term workforce development
Cutbacks in federal government spending for some
programs
Continuing problems in commercial and residential real
estate
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The number of employed residents declined at a slower rate from the
start of the recession until mid-2008, but has fallen sharply since;
288,441 have lost their jobs and many have become discouraged.
After being below the national rate from 2002 through 2008, the state’s
unemployment rate has been above the nation’s since February 2009.
Most job losses were in manufacturing, construction, retail trade, and
professional and business services; except for retail, these sectors pay
high salaries and wages. Tax revenues have declined sharply.
Unemployment Rate (%) Number Employed Change Percent Change
Dec-07
3.9
2,100,370
Jun-08
5.3
2,060,097 -40,273
-1.9
Dec-08
7.0
1,995,929 -64,168
-3.1
Jun-09
10.8
1,916,297 -79,632
-4.0
Dec-09
10.6
1,837,542 -78,755
-4.1
Jan-10
11.8
1,811,929 -25,613
-1.4
Source: Alabama Department of Industrial Relations (non-seasonally adjusted).
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Four main components
– Output
State Real Output in Sector i = F(The Corresponding U.S. Sector
Output or Industrial Production, The Relative Sector Wage Rate,
The Relative Tax Burden,…)
– Employment
State Wage and Salary Employment in Sector i = F(The
Corresponding State Industrial Real Output, The Real Industry
Wage Rate,…)
– Wage rates
State Wage Rate in Sector i = F(The Corresponding U.S. Sector
Wage Rate, The State Unemployment Rate,…)
– Income, includes personal income and its components and
detailed wages and salaries by industry
State Income category = F(The Corresponding U.S. Income
Category,…)
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2008
2009
2010
2011
0.4
-2.4
3.0
2.9
-0.2
-0.8
2.4
2.7
-22.9
-20.4
2.1
27.6
Business Fixed Investment
1.6
-17.7
1.7
7.3
Federal Government
7.7
5.2
3.7
-2.8
State & Local Government
0.5
-0.2
-0.4
0.2
Exports
5.4
-9.6
11.5
6.7
Imports
-3.2
-14.2
-10.3
7.5
Payroll Employment (% growth)
-0.6
-4.3
-0.7
1.6
Unemployment Rate
5.8
9.3
9.6
9.1
CPI Inflation
3.8
-0.3
1.8
1.8
13.2
10.4
11.8
13.8
(Percent change unless otherwise noted)
Real GDP
Consumption
Residential Investment
Light Vehicle Sales (Millions)
Source: IHS Global Insight.
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Annual Percent Change (2000 Chained Dollars)
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The state’s economy will be recovering in 2010:
– Alabama GDP
– Alabama employment
– Total tax collections
Forecast
1.9 percent
-0.1 percent
0.1 percent
Range
1.0 to 2.5 percent
-1.0 to 1.0 percent
-1.5 to 1.5 percent
Education and diversification must be priorities
– Workforce and economic development funding challenges remain
Focus on optimality, sustainability, equity, and flexibility
– Public policy (education, infrastructure, health & safety, taxes, …)
– Business and consumer behavior
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