Third quarter forecast

7/27/2019 Third quarter forecast

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Volume82,Number3 | ThirdQuarter2013

AlabamaNonfarmEmploymentandUnemploymentRate

Employment

(Thousands),

Unemployment

(Percent)

Source: AlabamaDepartmentofLabor.

0

2

4

6

8

10

12

1,500

1,600

1,700

1,800

1,900

2,000

2,100

1990 1993 1996 1999 2002 2005 2008 2011 2013

Employment

Unemployment Rate

AlabamaForecast(AnnualPercentChange)

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

2011 2012 2013 2014

RealGDP 1.1 2.1 2.2 3.2

range

1.5to3.0 2.0to4.0

Employment 0.4 0.7 1.0 1.4

range

0.5to1.5 0.7to2.0

TotalTaxReceipts,FY 5.0 3.8 3.8 4.2

range 3.5to5.0 3.0to6.0

Source: CenterforBusinessandEconomicResearch,TheUniversityofAlabama.

CenterforBusinessandEconomicResearch,CulverhouseCollegeofCommerce,TheUniversityofAlabama

Economic

Outlook:

ThirdQuarter2013

AlabamaEmployment. Nonfarmjobstotaled1,909,700inJune2013,117,000belowtheprerecessionpeakof2,026,700reachedinDecember2007. Accordingtotheestablish

mentsurvey,overthe12monthperiodendinginJune

2013thestategainedatotalof14,400jobs. Goods

producingbusinessesadded5,300workerswhilethe

serviceprovidingsectorsawanetgainof9,100. Among

goodsproducingindustries,manufacturingadded3,600

workersandconstructionhadanetincreaseof1,700.

Constructionrelatedbusinessesexperiencedjobgrowth

acrosstheboard: specialtytradecontractorsadded1,200

workers,whileheavyandcivilengineeringconstruction

gained400jobsandbuildingconstructionadded100.

Twoindustriesaccountedforallofthenetmanufac

turingjobgrowthduringthepastyeartransportation

equipmentmanufacturerscreated4,900positions,while

plasticsandrubberproductsmanufacturersadded500.

Payrollsintheremainingindustrieseitherdeclinedor

wereflatduringthe12monthperiodendinginJune

2013. Sizeablejoblosseswerereportedintextilesand

appareland

primary

and

fabricated

metals

manufacturing

(1,000each);computerandelectronicproducts(800);

woodproductsandfoodmanufacturing(500each);and

inaerospaceproductsandpartsandfurnitureandrelated

productsmanufacturing(400each).

Amongserviceprovidingfirms,employmentgains

betweenJune2012andJune2013wereprimarily

HighlightsThestategained14,400nonfarmjobsbetween

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,

health

services,

and

in

food

services

anddrinkingplaces.

Overall,thestateseconomyisestimatedto

expandbyaround2.2percentin2013,about

thesameastherateofgrowthseenin2012.

Afterincreasingby3.8percentinFiscalYear

20112012,statetaxrevenuesareexpectedto

bearound4.0percenthigherinFY2013.

Nonfarm

Employment


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2 | ThirdQuarter2013 AlabamaBusiness

associatedwithleisureandhospitality(9,500),

professionalandbusinessservices(3,100),healthcare

andsocialassistance(2,100),andtrade(500inwholesale

and400inretail). Manyofthejobsaddedwerein

accommodationandfoodservices(5,900)andin

administrativesupport,wastemanagement,and

remediationservices(3,800),sectorsthatpayrelatively

lowerwages,offerlimitedbenefits,andtendtohire

temporaryor

part

time

workers.

Growth

in

these

types

ofjobsputsdownwardpressureonwages,thereby

restrictingconsumerandbusinessdemand.

Overthesame12monthperiod,anumberofservice

providingsectorssawsignificantjoblosses,withthe

largestinstategovernmentinstitutions(2,500)andthe

informationsectorincludingtelecommunications(1,100).

Financialservices;professional,scientific,andtechnical

services;andfederalgovernmententitiesshed900jobs

each,whilefirmsineducationalservicesandintruck

transportationservicesbothlost800employees.

Relativelysluggishconsumerandbusinessspending

growthcontinues

to

hamper

demand

for

these

services.

DuringtheyearendinginJune2013,sixAlabama

metroareasexperiencedjobgains. Nonfarmemploy

mentincreasedinMobile(2,100),Tuscaloosa(1,900),

Montgomery(1,500),AuburnOpelika(800),Florence

MuscleShoals(500),andBirminghamHoover(100).

Metroareasthatlostjobsoverthesameperiodincluded

AnnistonOxford(300),Dothan(200),andHuntsville

(100),whilepayrollsinDecaturandGadsdenwereflat.

Despiterelativelystronggrowthinpayrolls,Mobilehad

thehighestmetrounemploymentrateinJuneat7.8

percentstillaconsiderableimprovementover9.5

percentunemploymentayearearlier. Unemployment

wasthe

lowest

in

the

Auburn

Opelika

area

at

5.8

percent,

followedcloselybyBirminghamHooverandHuntsville

with5.9percentunemployment.

WhileallofAlabamas67countiesexperienceda

significantdeclineinunemploymentcomparedtoyear

agolevels,12countiesstillsawratesof10.0percentand

over. WilcoxCountyhadthehighestunemploymentat

15.8percentwhileShelbyCountysrateof4.5percent

wasthe

lowest.

Over

the

past

three

years,

all

Alabama

countiesandmetroareashaveshownsignificant

improvementinunemploymentrates.

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).

AlabamaEmploymentLevelComparedto

theBeginningofEachRecession

(PercentofPreRecessionLevel)

Source: AlabamaDepartmentofLabor.

90

92

94

96

98

100

102

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67

1980

1981

1990

2001

2007

NumberofMonthsPostRecession

AlabamaNonfarmEmploymentChangeinNumberofJobs

June2011 June201

toJune2012 toJune201

TotalNonfarmEmployment 17,100 14,40

NaturalResourcesandMining 100

Construction

-1,800 1,70Manufacturing 5,900 3,60

DurableGoodsManufacturing 6,400 2,20

NondurableGoodsManufacturing -500 1,40

Trade,Transportation,andUtilities 2,500 30

WholesaleTrade 1,100 50

RetailTrade -300 40

Transportation,Warehousing,Utilities 1,700 -60

Information -500 -1,10

FinancialActivities -200 -90

ProfessionalandBusinessServices 6,100 3,10

EducationalandHealthServices 3,300 1,30

LeisureandHospitality 6,100 9,50

OtherServices

1,800 -30

Government -6,200 -2,80

FederalGovernment -1,700 -90

StateGovernment -4,100 -2,50

LocalGovernment -400 60

Source: AlabamaDepartmentofLaborandCenterforBusinessandEconomicResearch.


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AlabamaBusiness ThirdQuarter2013 | 3

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($143

million),

and

computer

and

electronic

products($128million). Exportsofprimarymetal

productsandnonelectricalmachinerypostedsteep

declinescomparedtothefirstquarterof2012,with

bothdownaround25percent.

TaxReceipts. Inthefirstninemonthsofthecurrentfiscalyear(FY2013),Alabamastaxrevenuestotaled

around$7.2billion,up4.6percent,orslightlyover

$315million,fromthesameperiodayearearlier. Sales

taxrevenuesrose0.9percent(almost$15million)to

about$1.52billion,withtheweakgainaclearindication

thatconsumers

are

still

very

cautious

about

spending.

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

MonthlyEmploymentIndicators(June2013)

NotSeasonallyAdjusted SeasonallyAdjustedAlabamaCivilianLaborForce 2,169,797 2,170,100 PercentChangefromYearAgoLevel 0.7% 0.5%

AbsoluteChangefromYearAgoLevel 15,906 10,156

Employed 2,023,217 2,029,952

PercentChangefromYearAgoLevel 0.9% 1.7%


Unemployed 14 6,580 140,148

PercentChangefromYearAgoLevel 18.7% 14.5%


AlabamaUnemploymentRate 6.8% 6.5% UnemploymentRate(June2012) 8.2% 7.6%

U.S.Unemployment Rate 7.8% 7.6% UnemploymentRate(June2012) 8.4% 8.2%

Source: AlabamaDepartmentofLabor,LaborMarketInformationDivision.

towardsnoneducationrelatedspending,declinedby

approximately$51milliontoabout$1.2billion,adrop

of4.1percent.

Outlookfor2013InflationadjustedAlabamaGDPshouldgrowbyabout

2.2percent

in

2013,

close

to

the

pace

of

expansion

seen

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

finance

and

insurance

related

services.

Graduallyimprovingresidentialandcommercialreal

estatemarketsareexpectedtohelpthestateregainsome

oftheconstructionjobsthatwerelostduringrecent

years. However,givenstillrelativelysluggishconsumer

spendinggrowth,thepaceofpayrollgainsintheleisure

andhospitalitysector,includingrestaurantsandother

foodserviceestablishments,isexpectedtoslowinthe

secondhalf ofthisyear.

Lookingatnotseasonallyadjusteddata,therecent

improvementinAlabamasunemploymentratehasbeen

duetomoderateemploymentgrowthcoupledwitha

slightlylargerdecreaseinthecivilianlaborforce. Theloss

ofalmost

16,000

labor

force

participants

over

the

12

monthsendinginJune2013likelyresultsfromanumber

offactors,includingdiscouragedworkerswhohavegiven

uplookingforajob,workerswhohaveretired,and/or

workerswhohavemovedoutofstateforemployment

opportunities. Sluggishconsumerandbusinessspending

growth,coupledwithuncertaintiesconcerningfederal

fiscalpoliciesandupcomingimplementationofthe

healthcarelegislation,willkeepmanyofthestates

employerscautiousaboutnewhiringandcapital

investmentduringtheremainderofthisyear.

Businesssentiment,measuredquarterlybytheCenter

for

Business

and

Economic

ResearchsAlabama

Business

ConfidenceIndex(ABCI),rose5.2pointsto52.9onthethirdquarter2013survey. Thatsthefirsttimethestates

businesscommunityhashadapositiveoutlookoverall

sincethethirdquarteroflastyear. However,business

sentimenthasnotyetregainedtheprerecessionlevelof

56.8recordedinthethirdquarterof2007. Business

executivesaremuchmoreoptimisticaboutprospectsfor

thestatethanthenationaleconomy. AnAlabama

economyindexreadingof55.2forecastsmoderate


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4 | ThirdQuarter2013 AlabamaBusiness

expansioninthethirdquarter,whiletheU.S.economy

couldperformslightlybetterthanlastquarterwiththe

indexat50.6.

Expectationsforsalesroseto57.8,upfrom53.9for

thepreviousquarter,butstillbelowtheindexreadingof

61.8registeredayearearlier. Theprofitsindexincreased

3.2pointsto53.2. Hiringshouldproceedataboutthe

samepaceasinthesecondquarter,withtheindexup3.2

pointsto

aneutral

50.

Capital

expenditures

could

pick

up

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.

UnitedStatesTheU.S.economyhasnowgrownfor15consecutive

quarterssince

the

end

of

the

recession,

but

the

rate

of

growth,ataround2.0percent,hasbeenamongthe

weakestofanyrecoverysinceWorldWarII. After

expandingbyonly0.4percentinthefourthquarterof

2012,theeconomygrewataslightbetterpaceof1.8

percentinthefirstquarterof2013. Consumerspending,

whichaccountsfortwothirdsofU.S.economicactivity,

largelydroveoverallgainsinthefirstthreemonthsofthis

year. Anincreaseinhousingactivity,strongautomobile

sales,andgraduallyimprovingpayrollsaresomeofthe

currentbrightspots. However,despitesomehelpfrom

thehousingrecoveryanditseffectsonwealthand

housingrelatedpurchases,thecurrentpaceofconsumer

spendingwillbedifficulttomaintaingoingforward.

Consumersfaceanincreaseinpayrolltaxesduetothe

expirationofBusherataxcutsandwagesremain

relativelystagnant. Householdshavelostapproximately

1.0percent

of

their

disposable

income

($12

to

$13

billion)

thisyearduetoexpirationofthepayrolltaxcut. Inspite

ofrecentdeclines,householddebtburdensremainhigh

andnetnonmortgageconsumerdebtisexpectedto

increasefromabout$2.8trillionin2012toover$3.0

trillionin2013.

Thestrengthoftherecoveryisnothelpedbythefact

thatmanyofthejobsbeingaddedareparttimeor

temporaryinnature. Withaseasonallyadjustedincrease

of322,000inJune,8.2millionAmericansareworking

parttimedespitewantingfulltimework. Ifthese

workersareincluded,theunemploymentrateis14.3

percentinstead

of

the

reported

7.6

percent.

Of

195,000

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)

Consumerspendingisexpectedtoincreaseby

approximately1.7percentinthethirdquarter,followed

6

4

20

2

4

6

8

10

12

14

1990 1994 1998 2002 2006 2010 2014

Total

DurableGoods

Services

AlabamaBusinessConfidenceIndexU.S.andAlabamaEconomiesExpectationsversusPriorQuarter

Source: CenterforBusinessandEconomicResearch,TheUniversityofAlabama.

35

40

45

50

55

60

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

Alabama

United

States

55.2

50.6

2010 2011 2012 2013

Source: U.S.BureauofEconomicAnalysisandIHSGlobalInsight.

Index


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AlabamaBusiness ThirdQuarter2013 | 5

bya2.0percentriseinfourthquarter2013. Light

vehiclesaleswillremainabrightspotduetopentup

demand,relativelylowinterestrates,andmanufacturers

discounts. Overallbusinessspendingwillincreaseby5.5

percentinthethirdquarterand7.0percentinthefourth.

Spendingonequipmentandsoftwarecouldrisebyabout

7.5percentforthesecondhalfoftheyear. Expenditures

oninformationprocessingequipmentwillberelatively

strongin

the

remainder

of

2013,

increasing

by

slightly

over10percent. Afterconsistentlydeclininginrecent

years,spendingoncommercialandhealthcarerelated

structureswillincreaseamodest0.3percentinthethird

quarter,followedbyasizeable5.0percentincreaseinthe

fourthquarter.

Althoughtheeconomywillcontinuetoaddjobsinthe

comingmonths,thepaceofjobcreationisforecastedto

befairlysluggish. Mostnewjobswillbeinleisureand

hospitalityandprofessionalandbusinessservices,while

employmentgainsinmanufacturingwillremainweakdue

topoorexportgrowth. Aftergrowing1.8percentinthe

firstquarter

of

2013,

the

U.S.

economy

is

estimated

to

expandbyabout1.6percentinthesecondquarter,and

around2.0percentinthesecondhalfofthisyear. The

rateofgrowthshouldpickupslightlyfromthethirdto

thefourthquarter. For2013asawhole,realGDPis

forecastedtoincreasebyapproximately1.6percent,

comparedto2.2percentin2012. Someofthemajor

riskstothisforecastincludethesluggishgrowthbeing

experiencedbymajorEuropeaneconomiesandJapan.

Cutsindomesticspendingwillalsocontinuetoimpede

economicgrowththroughtheremainderof2013.

SamuelAddy,Ph.D. [email protected] [email protected]

Articlesreflecttheopinionsoftheauthorsbutnotnecessarily those

ofthestaffoftheCenter,thefacultyoftheCulverhouseCollegeof

Commerce, ortheadministrative officialsofTheUniversityofAlabama.

ConsumerSentimentIndex,UniversityofMichigan

Source: UniversityofMichiganandIHSGlobalInsight.

60

70

80

90

100

110

1990 1994 1998 2002 2006 2010 2014

SavetheDate!JANUARY2014

S M T W T F S1

2

3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 1819 20 21 22 23 24 25

26 27 28 29 30 31

MakeplanstojointheCenterforBusinessandEconomic

Researchfortheir26thannualEconomicOutlookConferenceonJanuary15,2014inMontgomery.TheCenterwilllookbackathowthenational,Alabama,

andmetroareaeconomiesfaredin2013andpresentthe

forecastsfor2014.

Wellletyouknowwhenregistrationisavailable. Check

outinformationfromlastyearsOutlookandconference

onourwebsiteathttp://cber.cba.ua.edu.

[email protected]

205.348.6191. ContactCarolynTrentat205.348.3589to

inquireaboutcorporatesponsorships.

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