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2015 ECONOMIC OUTLOOK

2015 Economic Outlook

Center for Business and Economic ResearchServing Alabama Since 1930

Ahmad Ijaz Center for Business and Economic Research

The University of Alabama

Alabama Economics ClubFebruary 6, 2015

2015 ECONOMIC OUTLOOK 2

Overview: U.S. Economic Conditions • Third quarter real GDP growth was revised up from 3.9 percent to 5.0

percent because of increase in business and consumer spending. Growth in fourth quarter was 2.6 percent. For the year, the rate of growth is estimated to be around 2.4 percent, followed by 3.1 percent in 2015.

• Stronger consumer spending driven by lower gasoline prices and generally better economic conditions is currently driving economic growth and is expected to remain strong at least during the first half of 2015.

• Slowest economic recovery since WWII. Economic growth in the next few quarters will depend on pace of improvement in labor markets and a relatively smooth transfer to a tighter monetary policy.

• Median family income flat for two years, in 2013 it was 8% below 2007. Weakness in wage gains and falling labor force participation rate will continue to keep consumers cautious about their spending (lowest participation rate since 1978).


Overview: U.S. Economic Conditions (Cont’d) • Despite a pickup in employment growth in the second half of 2014, there

is still a considerable slack in the labor market, one factor hindering increase in wages. Most of the job growth in recent years (30-40 percent) has been in low wages sectors of the economy or were part-time/temporary.

• Both consumers and businesses still continue to remain cautious about their spending. Business inventories added 1.4 percent to the growth (4.6 percent) in the 2nd quarter, and third quarter growth was also influenced by a one time increase in defense spending.

• Facing lack of wage and income growth, consumers taking on more debt, household nonmortgage debt increasing from $3.1 trillion in 2013 to $3.4 trillion in 2014.

• Slow job growth and high level of college related student debt is also resulting in low household formation (only about 0.5 million in late 2013 and early 2014).


U.S. Gross Domestic ProductInflation Adjusted Chained 2009 Dollars

(Quarter to Quarter Percent Change)

4

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2008 2009 2010 2011 2012 2013 2014 2015

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, and IHS Global Insight.


Consumer SpendingTotal, Durable Goods and Nondurable Goods

Inflation Adjusted Chained Dollars

5

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

-10

-5

0

5

10

15

Total

Durables

Nondurables

Source: Bureau of Economic Analysis and IHS Global Insight.


Consumer Sentiment Index

6

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

50

60

70

80

90

100

110

Source: University of Michigan and IHS Global Insight.


U.S. Nonfarm EmploymentManufacturing, Construction,

Leisure and Hospitality, and Financial Activity

-20

-15

-10

-5

0

5

10

ManufacturingConstruction Leisure & HospitalityFinancial Activity

Source: Bureau of Labor Statistics and IHS Global Insight.


U.S. Investment SpendingNonresidential and Residential

Inflation Adjusted Chained 2009 Dollars(Annual Percent Change)

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

-30

-25

-20

-15

-10

-5

0

5

10

15

20


Nonresidential

Residential


Government SpendingInflation Adjusted Chained 2009 Dollars

(Annual Percent Change)

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

-8

-6

-4

-2

0

2

4

6

8


State and Local

Federal


U.S. Economic Outlook(Percent change unless otherwise noted) 2012 2013 2014 2015 2016

Real GDP 2.3 2.2 2.4 3.1 2.7

Consumption 1.8 2.4 2.5 3.4 3.0

Residential Investment 13.5 11.9 1.6 11.1 11.3

Commercial, Healthcare Structures 8.5 3.4 7.3 10.9 15.4

Nonresidential Fixed Investment 7.2 3.0 6.2 6.2 5.5

Federal Government -1.8 -5.7 -2.0 -0.3 -0.4

State & Local Government -1.2 0.5 0.9 1.2 0.9

Exports 3.3 3.0 3.2 3.9 3.3

Imports 2.3 1.1 3.8 5.3 5.6

Payroll Employment 1.7 1.7 1.8 2.0 1.8

Unemployment Rate 8.1 7.4 6.2 5.5 5.3

CPI Inflation 2.1 1.5 1.6 0.1 2.3

Light Vehicle Sales (Millions) 14.43 15.52 16.41 16.89 17.24

4


Shares of nonfarm employment (2013) andAlabama Gross Domestic Product (2013) by industry

1 20%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

17.7713.09

6.9111.81

9.18 11.49

7.4011.652.86

9.4316.80

19.85

39.08

22.69

All Other

Government

Leisure and Hospital-ity

Education and Healthcare Service

Professional and Business Services

Retail Trade

Manufacturing

Share of Alabama GDP Share of Alabama Non-farm Employment

Source: Bureau of Economic Analysis, Bureau of Labor Statistics.


Monthly Employment Indicators (December 2014)

Not Seasonally Adjusted

Seasonally Adjusted

Civilian Labor Force 2,098,563 2,102,201 Percent Change from Year Ago Level -0.7% -0.6% Absolute Change from Year Ago Level -14,697 -11,696

Employed 1,986,929 1,982,424 Percent Change from Year Ago Level -0.3% 0.0% Absolute Change from Year Ago Level -6,109 -1,840

Unemployed 111,634 119,777 Percent Change from Year Ago Level -7.1% -7.6% Absolute Change from Year Ago Level -8,588 -9,856

Alabama Unemployment Rate 5.3% 5.7%Alabama Unemployment Rate (Dec. 2013) 5.7% 6.1%U.S. Unemployment Rate 5.4% 5.6%U.S. Unemployment Rate (Dec. 2013) 6.5% 6.7%

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


Alabama Nonagricultural EmploymentChange in Number of Jobs


December 2012 to December 2013


Total Nonagricultural 16,700 31,800 Natural Resources and Mining -600 100 Construction -2,400 7,200 Manufacturing 3,000 7,100 Durable Goods Manufacturing 2,400 6,700 Nondurable Goods Manufacturing 600 400 Trade, Transportation and Utilities 5,400 -2,600 Wholesale Trade 1,100 -200 Retail Trade 2,300 -2,500 Transportation, Warehousing and Utilities 2,000 100 Information 0 -400 Financial Activities 1,500 -1,200 Professional and Business Services 1,500 7,000 Educational and Health Services 3,300 2,100 Leisure and Hospitality 7,900 8,800 Other Services -400 1,100 Government -2,500 2,600 Federal Government -2,100 0 State Government 1,700 2,300 Local Government -2,100 300


Total Annual Nonfarm Employmentand Unemployment Rate

Employment (Thousands), Unemployment Rate (Percent), 1990-2014

Source: Alabama Department of Labor.

Non

farm

Em

ploy

men

t

Une

mpl

oym

ent

Rat

e

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1,500

1,600

1,700

1,800

1,900

2,000

2,100

0

2

4

6

8

10

12

Employment

Unemployment Rate


Change in Alabama Employment From the Beginning of the Recession

Number of months

90

92

94

96

98

100

10219801981199020012007


Labor Force Participation Rate (Annual)

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

55

57

59

61

63

65

67

69

United States

Alabama

Source: Bureau of Labor Statistics.


• 4th in U.S. in vehicle exports

• 4 OEMs in the state (Original Equipment Manufacturers)

• 5th in U.S. in vehicles manufactured

• Alabama’s three assembly plants produced 918,172 vehicles in 2013 and the number is expected to climb in the coming years

• $6.5 billion in vehicles shipped to 99 countries in 2013

• Since 2011, Alabama has attracted more than 200 auto-related projects involving $4 billion in investment and 17,000 new jobs

Source: Economic Development Partnership of Alabama (EDPA) and Alabama Department of Commerce.

Manufacturing – Automotive Industry


U.S. Alabama$0

$1,000

$2,000

$3,000

$4,000

$5,000 $4,997

$3,991

$817

$1,731

$631 $517$236 $301

$121 $286

All Merchandise

Transportation Equipment

Chemicals

Primary Metal Manufacturing

Minerals and Ores

Source: International Trade Administration, U.S. Department of Commerce and U.S. Census Bureau.

2013 Exports Per Capita


Bioscience Industry Employment in Alabama, 2012

27

Drugs & pharmaceu-ticals, 10% (1,284)

Ag. feedstock & chemicals, 13%

(1,651)

Med. devices & equip., 13%

(1,662)

Research, testing & med. labs, 30% (3,844)

Bioscience-re-lated distribu-

tion, 34% (4,353)

Note: Number of employees in parenthesis.Source: U.S. Bureau of Labor Statistics data from Batelle/BIO report.


Alabama Average Annual Wage, 2012

28

All private sector industries

Bioscience industries average

Research, test. & med. labs

Medical devices & equip.

Bioscience-related distr.

Ag. feedstock & chemicals

Drugs & pharmaceuticals

$0 $40,000 $80,000

$41,074

$65,727

$46,939

$55,958

$66,255

$72,338

$73,583

Source: U.S. Bureau of Labor Statistics data from Batelle/BIO report.


Tax Revenues (FY2015, Year-to-Date January 2015)

Percent Change

From Year Ago

Change in Revenue

from Year Ago LevelTax Total Collection

Total $3,221,137,142 5.7% $174,981,887

Income (Individual) $1,069,145,493 4.4% $45,019,105

Sales $721,659,281 3.7% $25,728,195

Source: Alabama Department of Revenue.


20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

2016-6

-4

-2

0

2

4

6Annual Percent Change

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

AlabamaGDP

NonfarmEmployment

Alabama GDP and Nonfarm Employment


20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

2016-20

-15

-10

-5

0

5

10Annual Percent Change

Total Nondurable Goods Durable Goods

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

Alabama Manufacturing Employment


This Alabama GDP and employment forecast summary is the CBER January 2014 forecast

Alabama Forecast Summary

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

(Percent change) 2012 2013 2014 2015

Real GDP 2.3 2.0 2.0 2.4

range 1.0 to 2.5 2.0 to 3.5

Employment 0.8 1.0 0.7 1.7

range 0.3 to 1.7 0.8 to 2.0

Total Tax Receipts, FY 3.8 4.0 1.3 2.5

range 1.5 to 4.0


ABCITM

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q10

10

20

30

40

50

60

70

80

90

100

45.447.7

52.9 51.9 51.255.6 55.5 54.2

57.4

2013 2014 2015

Inde

x


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

57.4 56.4

2012 2013 2014 2015


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

60.6

57.8

2012 2013 2014 2015


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

58

Hiring

Capital Expenditures

56.3 55.9

2012 2013 2014 2015


ABCITM History

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

30

35

40

45

50

55

60

65

70

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

57.4

68.7

31.5


Alabama GDP and employment by metro areas, 2013

Source: Alabama Department of Labor and U.S. Bureau for Economic Analysis.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1.99 2.432.20 3.03

31.12 26.65

2.662.85

2.452.98

2.262.91

1.411.92

11.45 11.22

8.85 9.09

8.14 8.84

5.16 5.07

22.31 23.02Non-Metro Areas

Tuscaloosa

Montgomery

Mobile

Huntsville

Gadsden

Florence-Muscle Shoals

Dothan

Decatur

Birmingham-Hoover

Auburn-Opelika

Anniston-Oxford-Jacksonville

GDP Employment


Gross Domestic ProductAll Industry Total(Millions of chained 2009 dollars)

Percent Change2004 to2012 to

2013 2013 2013Alabama 180,727 7.5 0.8Anniston-Oxford 3,518 -3.1-3.0Auburn-Opelika4,293 28.9 3.4Birmingham-Hoover 55,913 3.0 -0.8Daphne-Fairhope-Foley 5,909 23.3 4.1Decatur5,063 0.5 0.6Dothan 4,583 -1.41.7Florence-Muscle Shoals4,255 12.1 3.9Gadsden 2,518 -5.0-3.1Huntsville 21,645 21.9 0.6Mobile 17,085 18.2 2.9Montgomery 15,489 1.2 0.3Tuscaloosa 9,437 20.5 0.4

Source: U.S. Bureau of Economic Analysis. 39


Metropolitan Areas, Exports in 2013Total Merchandise

Metro Area ExportsAlabama $19.3 billionAnniston-Oxford $192.7 millionAuburn-Opelika $395.4 millionBirmingham-Hoover $1.9 billionDaphne-Fairhope-Foley $515.3 millionDecatur $673.1 millionDothan $374.7 millionFlorence-Muscle Shoals $229.7 millionGadsden $54.6 millionHuntsville $1.5 billionMobile $1.5 billionMontgomery $1.7 billionTuscaloosa NA

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


Metro Percent of State Exports2013 2012

Alabama 100.0 100.0Anniston-Oxford 1.1 1.2Auburn-Opelika 2.4 2.6Birmingham-Hoover 11.1 11.4Daphne-Fairhope-Foley 3.1 NADecatur 4.0 3.8Dothan 2.2 1.6Florence-Muscle Shoals 1.4 0.8Gadsden 0.3 0.2Huntsville 9.0 8.8Mobile 9.2 11.2Montgomery 9.9 10.4Tuscaloosa NA NA

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


Unemployment Rate

Tuscaloosa

Montgomery

Mobile

Huntsville

Gadsden

Florence-Muscle Shoals

Dothan

Decatur

Birmingham-Hooover

Auburn-Opelika

Anniston-Oxford

Alabama

United States

5.4

5.9

6.6

4.9

5.6

5.6

5.6

5.6

4.9

4.5

6.3

5.7

6.5

4.8

5.5

6.2

4.7

5.1

6.3

5.4

5.3

4.6

4.1

5.8

5.3

5.4 Dec-14Dec-13


Median Family Income FY2014United States

AlabamaAnniston-OxfordAuburn-Opelika

Birmingham-HooverDaphne-Fairhope-Foley

DecaturDothan

Florence-Muscle ShoalsGadsden

HuntsvilleMobile

MontgomeryTuscaloosa

$63,900$54,100

$51,600$59,700$61,000

$68,800$53,500

$51,700$52,100

$46,900$69,700

$53,900$59,600

$54,400

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


Population gains varied widely since 20107/1/2010 to 7/1/2013

Number Percent7/1/2013 Change Change

Alabama 4,833,722 48,152 1.0Anniston-Oxford 116,736 -1,712 -1.4Auburn-Opelika 150,933 10,083 7.2Birmingham-Hoover 1,140,300 11,204 1.0Daphne-Fairhope-Foley 195,540 12,317 6.7Decatur 153,374 -488 -0.3Dothan 147,691 1,815 1.2Florence-Muscle Shoals 147,317 88 0.1Gadsden 103,931 -567 -0.5Huntsville 435,737 16,306 3.9Mobile 414,079 789 0.2Montgomery 373,510 -1,698 -0.5Tuscaloosa 235,628 5,154 2.2

Source: U.S. Census Bureau.


Three metros past 2007/2008 annual peak in December 2014

* Gadsden, Huntsville and Mobile employment peaked in 2008; all others saw peaks in 2007.Note: Nonfarm employment (jobs) is by place of work.Source: Alabama Department of Labor and U.S. Bureau of Labor Statistics.

2007 or 2008 Job Loss to 2014Nonfarm Employment Peak Year Number PercentAlabama 2,005,700 54,000 2.69%Anniston-Oxford 53,400 8,100 15.17%Auburn-Opelika 54,800 -6,300 -11.50%Birmingham-Hoover 533,400 13,500 2.53%Decatur 58,600 4,400 7.51%Dothan 63,100 5,300 8.40%Florence-Muscle Shoals 57,300 0 0.00%Gadsden* 38,000 900 2.37%Huntsville* 214,300 -2,700 -1.26%Mobile* 184,600 11,600 6.28%Montgomery 178,000 7,500 4.21%Tuscaloosa 98,500 -3,300 -3.35%Net Jobs in Metropolitan Areas 39,000Net Jobs in Nonmetro Counties 15,000


Birmingham Nonfarm EmploymentChange in Number of Jobs




Total Nonfarm 7,900 5,000 Natural Resources and Mining -200 0 Construction -300 600 Manufacturing 1,300 1,900 Durable Goods Manufacturing 1,100 1,700 Nondurable Goods Manufacturing 200 200 Trade, Transportation and Utilities 3,100 -1,900 Wholesale Trade 500 -600 Retail Trade 1,500 -1,600 Transportation, Warehousing and Utilities 1,100 300 Information -100 0 Financial Activities 1,100 700 Professional and Business Services -600 3,500 Educational and Health Services 1,000 1,200 Leisure and Hospitality 3,400 -200 Other Services 500 100 Government -1,300 -900 Federal Government -200 600 State Government 300 -1,200 Local Government -1,400 -300


Change in Birmingham Metro Area Employment From the Beginning of the Recession

47

12345684

86

88

90

92

94

96

98

100

102

1990

2001

2007


ABCI by Metro AreaQ1 2015 compared to Q4 2014

49

Montgomery

Mobile

Huntsville

Birmingham-Hoover

Alabama

52.0 53.0 54.0 55.0 56.0 57.0 58.0 59.0 60.0

59.4

58.2

54.9

58.1

57.4


Birmingham-Hoover Metro Area ABCITM

50

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0

10

20

30

40

50

60

70

80

90

100

50.7 52.7 54.4 53.3 53.257 56.9 53.9

58.1In

dex

2013 2014 2015


Birmingham-Hoover Metro AreaBusiness Environment Expectations

Q1 2015 compared to Q4 2014

51

Worse

Remain the Same

Better

0 5 10 15 20 25 30 35 40 45

21.2

36.5

42.3

National Economic Outlook

Alabama Economic Outlook

Worse

Remain the Same

Better

0 5 10 15 20 25 30 35 40 45 50

17.3

38.5

44.2


Sales

Decrease

No Change

Increase

0 10 20 30 40 50 60

21.2

19.2

59.6

Profits

Decrease

No Change

Increase

0 10 20 30 40 50 60

17.3

30.8

51.9

Birmingham-Hoover Metro AreaIndustry Performance Expectations



Birmingham-Hoover Metro AreaIndustry Performance Expectations


53

Hiring Plans

Decrease

No Change

Increase

0 10 20 30 40 50 60

13.5

51.9

34.6

Capital Expenditures

Decrease

No Change

Increase

0 10 20 30 40 50 60

13.5

51.9

34.6


GDP and Nonfarm Employment Forecasts, 2015Nonfarm Employment Real GDPForecast, Percent Forecast, Percent

Anniston-Oxford 0.3 1.3Auburn-Opelika 2.5 3.7Birmingham-Hoover 1.0 1.5Daphne-Fairhope-Foley 1.2 3.0Decatur 0.4 1.0Dothan 1.4 1.8Florence-Muscle Shoals 1.0 3.5Gadsden 1.1 1.4Huntsville 2.0 3.8Mobile 1.2 3.2Montgomery 0.9 1.4Tuscaloosa 2.2 3.8

Source: U.S. Department of Commerce, Alabama Department of Labor, and Center for Business and Economic Research, The University of Alabama, December 2014.


Top issues that Alabama is facing:

1 Education/Training (Quality of education; workforce development)

2 Government (Federal, state & local government; tax reform; prison reform; state constitution)

3/4 Economy/Businesses (Economic & business growth; small businesses)

3/4 Jobs (Job growth; better paying jobs)

5 Healthcare (Healthcare cost; Affordable Healthcare Act; Medicaid, Medicare)

6 Infrastructure (Infrastructure; roads and bridges)

Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov. 2014.

Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov. 2014.


Top issues that companies in Alabama are facing:

1 Company Finances & Development

(Profitability; business costs; availability of credit; business growth; competition; concern about customers)

2 Government (Federal, state & local government; taxation; regulations; uncertainty)

3 Workforce (Lack of skilled workers; retaining qualified employees)

4 Economy (Economic recovery & growth; consumer spending)

5 Healthcare (Healthcare cost; Affordable Healthcare Act)

Note: Companies facing no issues was mentioned by 1.0% of respondents.Source: Center for Business and Economic Research, ABCI Panelists’ Poll, Nov. 2014.


Thank you

Center for Business and Economic ResearchCulverhouse College of Commerce

The University of AlabamaBox 870221

Tuscaloosa, Alabama 35487-0221205.348.6191

http://cber.cba.ua.edu

Serving Alabama Since 1930

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