Alabama Economic Outlook 2014

2014 ECONOMIC OUTLOOK CONFERENCE

Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama 1

Alabama Economic

Outlook 2014Center for Business and Economic Research



Alabama’s Aerospace Industry--

An Accelerate Alabama Focus



Boeing in Alabama – more than 50 years

Employees: 2,693 (Oct. 2013)

Additional engineering jobs to be created: up to 400*

Supplier/vendor locations: 234**

Supplier/vendor purchases: $483 million**

* The firm is establishing a new research center in Huntsville that will focus on simulation and decision analytics and metals and chemical technology; one of five technology centers nationwide.

** 2012 data



Lockheed Martin in Alabama –50th Anniversary in 2013

New missile contract: $3.9 billion*

Huntsville employees: 850

Troy employees: 360 + 100 by 2020

* New contract for Terminal High Altitude Defense Weapons Systems will boost the firm’s operating facility in Troy and program office in Huntsville.



Airbus A320 Project in MobileInvestment: $600 million

Employees: up to 1,000

First delivery: 2016

Investment: $75 million

Employees: up to 400 by 2020

New GE Aviation Factory in Auburn



Alabama Exports: Aircraft, Spacecraft, and Parts

0

200,000,000

400,000,000

600,000,000

800,000,000

Source: Alabama Department of Commerce, International Trade Division.



Department of Defense Contracts by Place of Performance, Southeastern States, FY2013

Tennessee

Louisiana

South Carolina

North Carolina

Mississippi

Georgia

Kentucky

Alabama

Florida

0.0 2.0 4.0 6.0 8.0

0.9

1.4

1.7

1.7

3.7

4.2

5.1

6.1

7.9

$ BillionsSource: USAspending.gov, prime award contracts data.



Alabama Average Weekly Wage, 2012

All industries

Manufacturing industries

Aerospace products and parts manufacturing

$100 $400 $700 $1,000 $1,300

$807

$969

$1,500

Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages.

Aerospace products and parts manufactur-

ing

Manufacturing indus-tries

All industries



Alabama Average Annual Pay

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012$20,000

$40,000

$60,000

$80,000

Aerospace products and parts manufacturing

All industries




Alabama Aerospace Products and Parts Manufacturing Employment

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201210,000

11,000

12,000

13,000

14,000




U.S. Aircraft Projections: Net Stock and Exports

2000 2003 2006 2009 2012 2015 2018 2021 20240

100

200

300

400Bi

llion

s of C

hain

ed 2

005

$

Real net stock of aircraft fleets

Real exports of aircraft

Source: IHS Global Insight.



Alabama’s Business Community:

Concerns and Expectations



Top Issues Facing Alabama1 Healthcare Healthcare costs; Affordable Care Act;

Medicare, Medicaid

2 Government Federal and state government; taxation; regulations

3 Education/ Training

Quality of education; workforce development

4 Economy/ Businesses

Economic growth and recovery; small businesses; business costs and investment

5 Jobs Job growth; unemployment; better quality jobs

Note: Football championships/Alabama loss to Auburn in the Iron Bowl issue was mentioned by 2.5% of respondents.Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov.-Dec. 2013.



Top Issues Facing Companies in Alabama

1 Government Policy (e.g., uncertainty, sequestration); taxation; regulations

2 Company Finances and Development

Profitability; business costs; cash flow; availability of credit; business opportunities; competition; concern about customers

3 Economy Economic growth; housing market; demand and consumer confidence

4 Healthcare Healthcare costs; Affordable Care Act

5 Workforce Lack of skilled labor; employee development

Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov.-Dec. 2013.



Alabama Business Confidence IndexTM (ABCI) First Quarter 2014

AlabamaChange

from Q4 2013ABCI 51.2 -0.7

National Economy 47.8 -2.6Alabama Economy 53.8 -2.2

Industry Sales 54.1 -0.2

Industry Profits 52.3 0.8

Industry Hiring 49.6 -1.2

Capital Expenditures 49.9 1.5Index above 50 indicates positive outlook.Index below 50 indicates negative outlook.



U.S. and Alabama EconomiesExpectations versus Prior Quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q135

40

45

50

55

60

Alabama

UnitedStates

53.8

47.8

2011 2012 2013 2014



Sales and ProfitsExpectations versus Prior Quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q140

45

50

55

60

65

Sales

Profits

54.1 52.3

2011 2012 2013 2014



Hiring and Capital ExpendituresExpectations versus Prior Quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q142

44

46

48

50

52

54

56

Hiring

Capital Expenditures

49.949.6

2011 2012 2013 2014



ABCI by IndustryChange from

Q1 2014 Q4 2013

Construction 59.0 5.7

Manufacturing 54.9 1.8

Transportation/Information/Utilities 45.8 -7.5

Wholesale Trade 46.1 -3.3

Retail Trade 48.6 7.3

Finance/Insurance/Real Estate 54.4 -1.1

Professional/Scientific/Technical Services 49.9 -0.8

Healthcare Services 42.3 -5.3All Other Services 51.3 -0.6



Metro Area ABCIExpectations versus Prior Quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q130

35

40

45

50

55

60

Birmingham-Hoover

Huntsville

Mobile

Montgomery

2012 2013 2014

56.255.453.2

44.9



96.5 percent use the ABCI forecast ----

ABCI National Economy and U.S. Real GDPQ1 2

002

Q3 200

2Q1 2

003

Q3 200

3Q1 2

004

Q3 200

4Q1 2

005

Q3 200

5Q1 2

006

Q3 200

6Q1 2

007

Q3 200

7Q1 2

008

Q3 200

8Q1 2

009

Q3 200

9Q1 2

010

Q3 201

0Q1 2

011

Q3 201

1Q1 2

012

Q3 201

2Q1 2

013

Q3 201

3

20

30

40

50

60

70

80

-6

-4

-2

0

2

4

6

U.S. Real GDP

ABCI National Economy

Nat

iona

l Eco

nom

y In

dex

U.S. R

eal GD

P (Percent Change)



Population and Workforce

Alabama: Where are we now and where are we heading?



Alabama Population by Age Group 2010 and Projected 2025 and 2040

2010 2025 2040 Age Group Number Percent Number Percent Number Percent

0-4 years 304,957 6.4 307,591 5.9 324,612 5.8

5-19 years 971,355 20.3 998,297 19.0 1,004,970 18.1

20-64 years 2,845,632 59.5 2,925,619 55.8 3,037,589 54.6

65+ years 657,792 13.8 1,010,916 19.3 1,199,853 21.6

85+ years 75,684 1.6 94,122 1.8 165,041 3.0

Total 4,779,736 100.0 5,242,423 100.0 5,567,024 100.0Source: U.S. Census Bureau and Center for Business and Economic Research, The University of Alabama.

The population is aging due to demographic factors and longevity increases

(4,833,722 on 07/01/2013)



The median age rose from 35.8 in 2000 to 37.9 in 2010 and 38.2 in 2012.Baby Boomers move from ages 46-64 in 2010 to ages 61-79 in 2025.

10.0 8.0 6.0 4.0 2.0 0.0 2.0 4.0 6.0 8.0 10.0

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+

0-4

5-9

10-14

15-19

20-24

25-29

30-34

35-39

40-44

45-49

50-54

55-59

60-64

65-69

70-74

75-79

80-84

85+

Alabama Total Population 2010 and 202520102025

Percent by Age Group

Age

Gro

ups

Source: U.S. Census Bureau and Center for Business and Economic Research, The University of Alabama.



From a 2010 base, worker shortfalls of about 113,000 in 2020 and 307,000 in 2030 are expected. Worker skills, shortfalls in critical

occupations, and both medium and long term worker shortfalls must be priorities through 2030, with heavy emphasis on skills and critical jobs.

Source: U.S. Bureau of Economic Analysis, IHS Global Insight, U.S. Census Bureau, and Center for Business and Economic Research, The University of Alabama.

6.7

12.2

2.7 3.2

10.4

15.5

0.0

5.0

10.0

15.0

20.0

2020 2030

Alabama Employment and Population Growthfor 2020 and 2030(Percent Change from 2010)

Total Population

Population 20-64

Nonagricultural Employment



Alabama Workforce Report VII

Total number of occupations = 785

High-demand = 40 (growth- and wages-weighted & minimum 40 annual job openings)

Fast-growing = 20 (3.40% annual growth rate & 15 annual job openings minimum)

High-earning = 50 (annual salary of $90,490 - $251,470)

Sharp-declining = 20 (10% or more job decline & minimum net job loss of 40)

YTD 2013* Labor force 2,153,828

Employed 2,010,681

Underemployment rate 23.8%

Number of underemployed workers 478,542

Unemployed 143,147

Available labor pool 621,689

* through November 2013Source: Center for Business and Economic Research, The University of Alabama and Labor Market Information Division, Alabama Department of Labor.



Alabama Workforce Report VII: Implications and Recommendations

Efforts to address skill needs, shortfalls in critical occupations, and both medium and long term worker shortfalls must include:

Improving education and its fundingFocusing on hard-to-serve populations (e.g. out-of-school & at-risk youth)

Lowering the high school dropout ratePrograms to assess, retrain, and place dislocated workers—especially those affected by outsourcing—should be continued and enhanced because they can improve the labor force participation rate

Recruiting: Using economic opportunities to attract new residents

Facilitating in-commuting

Encouraging older worker participation



GDP and EmploymentExports

Auto IndustryForecast

A better year in 2014!

Alabama Economy:Where are we heading?



Monthly Employment Indicators (November 2013)

Not Seasonally Adjusted

Seasonally Adjusted

Civilian Labor Force 2,137,173 2,126,952 Percent Change from Year Ago Level -0.8% -1.2% Absolute Change from Year Ago Level -17,125 -25,216

Employed 2,017,864 1,994,571 Percent Change from Year Ago Level 0.0% -0.4% Absolute Change from Year Ago Level 1,249 -8,641

Unemployed 119,309 132,381 Percent Change from Year Ago Level -13.3% -11.1% Absolute Change from Year Ago Level -18,374 -16,575

Alabama Unemployment Rate 5.6% 6.2%Alabama Unemployment Rate (Nov. 2012) 6.4% 6.9%U.S. Unemployment Rate 6.6% 7.0%U.S. Unemployment Rate (Nov. 2012) 7.4% 7.8%

Source: Alabama Department of Labor, Labor Market Information Division.



Unemployment Rates (Percent)

Source: Alabama Department of Labor.

United States

Alabama

Anniston-Oxford

Auburn-Opelika

Birmingham-Hoover

Daphne-Fairhope-Foley

Decatur

Dothan

Florence-Muscle Shoals

Gadsden

Huntsville

Mobile

Montgomery

Tuscaloosa

7.0

6.4

7.4

5.1

5.7

5.8

6.2

6.2

6.2

6.3

5.7

7.3

6.7

5.8

7.5

7.0

7.3

6.0

6.1

6.6

6.8

6.9

6.5

7.5

5.9

7.9

7.3

6.6

October 2012 October 2013

Anniston-Oxford



Alabama Nonfarm Employment(Change in Number of Jobs)


November 2011 to November 2012

November 2012 to November 2013

Total Nonfarm 12,400 2,800 Natural Resources and Mining -100 200 Construction -2,400 -2,600 Manufacturing 6,300 5,500 Durable Goods Manufacturing 6,400 2,600 Nondurable Goods Manufacturing -100 2,900 Trade, Transportation and Utilities -1,800 2,200 Wholesale Trade 300 -700 Retail Trade -4,200 5,500 Transportation, Warehousing and Utilities 2,100 -2,600 Information -800 -500 Financial Activities 1,200 -100 Professional and Business Services 6,800 -1,900 Educational and Health Services 3,900 -900 Leisure and Hospitality 4,100 4,900 Other Services 600 0 Government -5,400 -4,000 Federal Government -1,400 -1,200 State Government -4,900 -1,200 Local Government 900 -1,600



Alabama Jobs Scorecard


January 2011

November 2013 Change

Total Nonagricultural 1,839,400 1,898,800 59,400 Natural Resources and Mining 12,100 12,600 500 Construction 77,200 75,700 -1,500 Manufacturing 233,200 251,000 17,800 Durable Goods Manufacturing 143,500 158,400 14,900 Nondurable Goods Manufacturing 89,700 92,600 2,900 Trade, Transportation and Utilities 358,800 371,900 13,100 Wholesale Trade 70,900 72,300 1,400 Retail Trade 221,500 232,400 10,900 Transportation, Warehousing and Utilities 66,400 67,200 800 Information 23,500 21,500 -2,000 Financial Activities 91,100 93,100 2,000 Professional and Business Services 208,200 220,200 12,000 Educational and Health Services 213,200 221,700 8,500 Leisure and Hospitality 159,500 177,000 17,500 Other Services 78,400 80,200 1,800 Government 384,200 373,900 -10,300 Federal Government 57,200 54,400 -2,800 State Government 110,400 104,900 -5,500 Local Government 216,600 214,600 -2,000



1 6 11 16 21 26 31 36 41 46 51 56 61 66 7190

92

94

96

98

100

10219801981199020012007

Number of MonthsSource: Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama.

Change in Alabama Employment From the Beginning of the Recession

(Number of Months)



Alabama Manufacturing EmploymentAnnual Percent Change

Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama.

-20

-15

-10

-5

0

5

10

TotalNondurable GoodsDurable Goods



Alabama Metro Percent of State GDP, 2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Anniston-Oxford; 2.1Auburn-Opelika; 2.3

Birmingham-Hoover,

32.0

Daphne-Fairhope-Fo-ley; 3.1

Decatur; 2.7

Dothan; 2.5Florence-Muscle

Shoals; 2.3

Gadsden; 1.5Huntsville; 11.8

Mobile; 9.1

Montgomery; 8.4Tuscaloosa; 5.3

Rest of state; 16.7

Source: U.S. Bureau of Economic Analysis.



Alabama Car and Light Truck Production

Source: Alabama OEM reports.

2005

2006

2007

2008

2009

2010

2011

2012

2013

0 200,000 400,000 600,000 800,000 1,000,000

479,465

698,086

739,019

672,102

467,708

711,283

743,167

880,000

915,000



Alabama Export Trends

Source: U.S. Department of Commerce, International Trade Center.

0

4

8

12

16

20

24$

Billi

ons

Total

Transportation Equipment



Southeastern States: Manufacturing Share of RealGross Domestic Product

(Percent of Total)

0%

5%

10%

15%

20%

25%

30%

AlabamaFloridaGeorgiaMississippiNorth CarolinaSouth CarolinaTennessee

Source: Estimates based on U.S. Bureau of Economic Analysis data.



Southeastern States: Manufacturing Share of Nonfarm Employment (Percent Of Total)

19901992

19941996

19982000

20022004

20062008

20102012

0%

5%

10%

15%

20%

25%

AlabamaFloridaGeorgiaMississippiNorth CarolinaSouth CarolinaTennessee

Source: U.S. Bureau of Labor Statistics.



U.S. Economic Outlook

Source: IHS Global Insight, January 2014.

(Percent change unless otherwise noted) 2011 2012 2013 2014 2015

Real GDP 1.8 2.8 1.7 2.5 3.1

Consumption 2.5 2.2 1.9 2.5 2.7

Residential Investment 0.5 12.9 13.6 14.8 16.2

Commercial, Healthcare Structures -0.4 7.9 1.8 6.9 18.5

Nonresidential Fixed Investment 7.6 7.3 2.4 4.8 6.0

Federal Government -2.6 -1.4 -4.7 0.4 -0.6

State & Local Government -3.6 -0.7 -0.2 0.2 0.7

Exports 7.1 3.5 2.4 4.5 5.6

Imports 4.9 2.2 1.6 4.9 5.8

Payroll Employment 1.2 1.7 1.6 1.6 1.8

Unemployment Rate 8.9 8.1 7.5 6.9 6.4

CPI Inflation 3.1 2.1 1.4 1.4 1.7

Light Vehicle Sales (Millions) 12.74 14.44 15.53 15.93 16.34



Alabama GDP and Nonfarm EmploymentAnnual Percent Change

Source: U.S. Bureau of Economic Analysis, Alabama Department of Labor, and Center for Business and Economic Research, The University of Alabama.

2000200120022003200420052006200720082009201020112012201320142015-6

-4

-2

0

2

4

6 Alabama GDP

Nonfarm Employment



Alabama Forecast Summary Probability: Forecast (60 Percent) and Range (90 percent)

(Percent change) 2012 2013 2014 2015Real GDP 1.3 1.9 2.4 3.1

range 2.0 to 3.2 2.5 to 4.0 Employment 0.7 0.3 1.3 1.0

range 0.5 to 1.8 0.7 to 2.0

Total Tax Receipts, FY 3.8 4.0 4.1 4.5range 3.5 to 5.6 3.5 to 6.0



Building a Brighter Future Begins with the Basics

Income and Education



Understanding the economy and economic development

Economy = People + Institutions + Property = Private & Public Sectors

Economic Development = Higher or better quality of lifeHuman Capital Development = Improved education and healthcareInstitutional Development = Better government, companies, culture Physical Capital Development = Better infrastructure and environment

There is no economic development without education (a public good)*** Informal education is also important

Pre-Kindergarten to High School (Pure Public Good)

Universities (Largely Public Good)

Vocational and Community Colleges (Mostly Public Good)

Development Policies must be Optimal = Efficient, Fair, Flexible, Sustainable



Labor force participation (2012): Alabama 57.3% United States 63.7%

Educational Attainment (Age 25 and over population)2008-2012 (2012) Alabama United States

High school graduates 82.6% (84.0%) 85.7% (86.4%)Bachelor’s or higher degree 22.3% (23.3%) 28.5% (29.1%)

Population Growth Alabama United States

1990-2000 10.1% 13.2%

2000-2010 7.5% 9.7%

2010-2013 1.1% 2.4%

Alabama has lower labor force participation, population growth, and

educational attainment than the nation



Per Capita Income 2012 Per Capita Percent Change

Income from 2011United States $43,735 3.4Alabama $35,926 2.9Anniston-Oxford $32,883 1.5Auburn-Opelika $30,236 2.0Birmingham-Hoover $41,850 3.9Daphne-Fairhope-Foley $38,548 1.1Decatur $33,127 2.9Dothan $35,816 3.1Florence-Muscle Shoals $33,249 3.2Gadsden $32,717 2.7Huntsville $41,595 1.5Mobile $32,772 0.6Montgomery $37,905 2.3Tuscaloosa $34,870 2.5Source: U.S. Bureau of Economic Analysis.



Average Annual Wage 2012Average Percent

Wage of StateUnited States $45,790 115.8Alabama $39,550 100.0Anniston-Oxford $35,410 89.5Auburn-Opelika $36,190 91.5Birmingham-Hoover $42,160 106.6Decatur $37,940 95.9Dothan $35,150 88.9Florence-Muscle Shoals $34,830 88.1Gadsden $33,990 85.9Huntsville $49,860 126.1Mobile $39,580 100.1Montgomery $39,460 99.8Tuscaloosa $39,470 99.8Source: U.S. Bureau of Labor Statistics, Division of Occupational Employment Statistics, May 2012.



Median Family Income FY2013United States

AlabamaAnniston-OxfordAuburn-Opelika

Birmingham-HooverDaphne-Fairhope-Foley

DecaturDothan

Florence-Muscle ShoalsGadsden

HuntsvilleMobile

MontgomeryTuscaloosa

$64,400$53,600$53,100

$63,000$57,100

$60,400$55,200

$50,000$51,000

$42,100$71,500

$52,400$61,500

$55,700

Note: Chilton and Walker counties are not included in the estimate for the Birmingham-Hoover metro and Henry County is not included in the Dothan MSA estimate. Source: U.S. Department of Housing and Urban Development, Office of Economic Affairs, Economic and Market Analysis Division.



Per Capita Income by Percent High School or HigherAlabama Metro Areas



Per Capita Income by Percent Bachelor’s or HigherAlabama Metro Areas



Per Capita Income by High School or Higher



Per Capita Income by Percent Bachelor’s or Higher



Per Capita Income by High School or HigherAll U.S. Metro Areas

$



Per Capita Income by Bachelor’s Degree or HigherAll U.S. Metro Areas

$



Rank of Alabama Per Capita Income1930 441940 451950 471960 461970 471980 461990 402000 432009 412010 412011 412012 41

Source: Estimates based on Bureau of Economic Analysis data.



Alabama Per Capita Income Share of U.S. Per Capita Income(Percent)

19291933

19371941

19451949

19531957

19611965

19691973

19771981

19851989

19931997

20012005

200930

40

50

60

70

80

90

1929: U.S. $697 Alabama $318

2012: U.S. $43,735 Alabama $35,926

Documents

Alabama Economic Outlook 2014