alabama.business Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama

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1 alabama.business cber.cba.ua.edu Center for Business and Economic Research, Culverhouse College of Commerce, The University of Alabama Volume 77, Number 1 Economic Outlook: 1st Quarter 8 United States Current Economic Conditions. The U.S. economy grew by almost 5 percent in the third quarter of 7, its fastest pace in nearly four years, despite the fact that homebuilders reduced spending by.5 percent, the steepest decline in 16 years. While the economy looked like it might be headed for a recession in the fourth quarter, growth came in at a meager, but positive,.6 percent. Still, residential fixed investment, which includes both home sales and construction, declined by an estimated percent in the fourth quarter. Residential construction s share of GDP has fallen from over 6 percent in 5 to 3.4 percent in 7. Growth in consumer and business spending slowed in the fourth quarter, with increases of Selected Economic Indicators 2. percent and 7.5 percent, respectively. High energy costs and rising food prices are imposing additional burdens on both consumers and firms, causing inflation to increase at the same time that the economy is faltering. Overall inflation rose by 4.1 percent yearon-year in November 7, one of the highest rates in decades. Prices usually fall during a downturn because of declining demand from consumers and producers. The Fed has the option to curtail rising prices by raising short term interest rates; however, with economic conditions deteriorating, the Fed is expected to keep lowering rates until the economy shows signs of a recovery. There is now a percent chance that the U.S. economy could go into recession in 8, primarily due to weakening consumer spending, rising prices, and faltering employment growth. Furthermore, the financial crisis in the housing markets has resulted in tighter credit conditions for both consumers and businesses. 7 8 Economic Growth (Annual Change) United States Alabama Employment Growth (Annual Change) United States Alabama Consumer Expenditures (Annual Change) Total Durable Goods Nondurable Goods Services Inflation Rate Prime Interest Rate month Treasury Bill Rate year Treasury Note Rate year Fixed Mortgage Rate Employment Cost Index (Annual Change) Average Price of West Texas Intermediate Crude $72.28 $77.37 Source: U.S. Department of Commerce, Global Insight, and Center for Business and Economic Research, The University of Alabama. First Quarter 8 Consumer and business confidence in the economy fell significantly at the start of 8. Both the University of Michigan and the Conference Board s surveys of consumer confidence have dropped to near recession levels in recent months. Further retrenchment on the Michigan survey to around 7 would clearly signal a consumer-led recession. The Institute for Supply Management (ISM) index of factory activity fell from.8 in November to 47.7 in December, its lowest reading since April 3; a value below indicates contraction in the manufacturing sector. The index of new orders, an indicator of future business activity, fell 6.9 points in December to 45.7, while the production index dropped 4.6 points to Businesses are becoming more cautious about hiring and spending. Payrolls increased by only 18, in December, with heavy losses reported in construction, manufacturing, and retailing. The U.S. unemployment rate increased from 4.7 percent in November to 5. percent in December, a.3 percent monthly rise not seen since the recession in 1. Residential fixed investment fell 23.9 percent in the fourth quarter, its steepest decline yet in the current downturn and its eighth consecutive quarterly drop. With the inventory of new homes at Inside the BLCI: Fewer employees to see compensation gains in 8 as business optimism declines.

2 record levels, conditions in the housing markets seem to be getting worse. According to the U.S. Department of Commerce, construction of new homes fell to an annualized level of around 1. million in December, the slowest pace since May A sharp decline in both multi- and single-family homes dropped the pace of new home construction to almost percent below its peak of January 6. Sales of new homes declined by 26.4 percent to around 774, in 7, the largest downturn since the recession of 198. In December overall single-family home sales fell 13. percent, the largest drop in almost 25 years, while sales of condominiums declined 25. percent. The number of home mortgages entering foreclosure reached an all-time high in 7, and with almost $352 billion in subprime mortgages due to reset in 8 (approximately 1.5 million loans), housing markets are expected to get much worse before the current home inventory can be sold. High loan-to-value originations in recent years, together with falling home prices and the reset of adjustable mortgages, have left many people unable to meet their monthly mortgage payments, refinance their homes, or extract equity. The nonprime share of mortgage originations (including both Alt-A and subprime mortgages) increased from 11.3 percent in 1 to 33.5 percent in 6; typically there is a substantial increase in monthly payments when these adjustable rate loans reset. According to the National Association of Realtors, the average median price of a single-family home fell by 1.8 percent to $217,8 in 7, the first decline in nearly four decades. From December 6 to December 7, the price of existing homes declined 6. percent Outlook. After cutting the federal funds rate by 1.25 basis points to 3. percent in January, the Fed is expected to continue aggressive cutting, taking the rate as low as 2.5 percent by its April meeting, despite inflationary pressures. Housing will remain the biggest drag on the economy. Elevated inventories of both existing and new homes will continue to exert downward pressure on home construction, sales, and prices. However, falling prices will make homes more 2 Alabama Business affordable a necessary condition to work through the current high level of housing inventory. Housing starts are expected to be below the 1. million unit annualized rate during the first half of 8. Home prices are expected to drop by around 6 percent during the year. Declining home prices and tightened lending conditions will make consumers relatively more cautious about their spending. In recent years, growth in consumer spending has outpaced gains in income, with the gap fueled primarily by home equity extraction. Home equity extraction as a share of disposable income increased from about 1 percent in 1994 to close to 8 percent in 4; for the first three quarters of 7, it amounted to around 5.5 percent of disposable income. The current forecast has the U.S. economy growing by about 1 percent in the first half of 8 and by around 2 percent in the second half. Consumer spending, which normally accounts for almost 7 percent of the growth in GDP, will rise by just 1.2 percent in the first half of 8, followed by a 2.5 percent increase during the second half. Consumer expenditures on durable goods are expected to decline by 3.4 percent in the first half of the year. After increasing by 4.5 percent in 7, business spending is forecasted to rise only.5 percent in the first half of 8, followed by an increase of close to 1 percent in the second half. The fiscal stimulus package of $1 billion that is currently being worked on should provide some help for the economy during the second half of the year. The $ billion in rebates to individuals will have a positive impact on consumer spending, while business tax cuts of approximately $ billion through depreciation allowances should boost spending on capital equipment and other investments. The housing sector will remain a drag on the economy. Residential investment, including both home construction and sales, will decline by almost 25 percent in the first half of 8, and is not expected to improve before the fourth quarter of 8 or perhaps early 9. Housing starts are expected to drop by over percent in 8, while sales of existing homes will plunge more than percent. Sales of new homes are forecasted to drop by over 15 percent in 8. Alabama Current Economic Conditions. The state s economy grew 2.3 percent in 7 to $141.1 billion. The fastest growing sectors were professional and business services and leisure and hospitality, particularly food services and drinking places. For the first nine months of 7 compared to the same period in 6, exports from Alabama rose 3.8 percent to $.9 billion. Motor vehicle manufacturing is one of the strongest industries in the state; a total of 738,832 vehicles were produced in 7 by Alabama s Honda, Hyundai, and Mercedes plants. Transportation equipment is the state s largest export sector; exports increased from $4. billion in the first nine months of 6 to $4.5 billion for the same period in 7. Germany was the destination for almost 26 percent of the state s total exports, followed by Canada, Mexico, Japan, and the United Kingdom. During the twelve month period ending in December 7, Alabama gained 25, new jobs. Approximately,, or 79 percent, were located in the 11 metropolitan areas, comprising 28 counties. The remaining 39 counties added 5, new jobs. The Birmingham-Hoover metropolitan area led the state with 6, jobs, followed by Huntsville (5,), Montgomery (3,), Mobile (2,), and Tuscaloosa (9). The majority of (continued on page 7)

3 Business Leaders Increasingly Pessimistic The Alabama Business Leaders Confidence Index (BLCI) fell into negative territory for the first quarter of 8, marking the first time that the index has been below the neutral point of in the six years of the survey. At 47.2, the BLCI is down 3.5 points from the fourth quarter of 7 and is 6.4 points below its reading a year ago. Problems in the U.S. economy weigh heavily on the expectations of Alabama business leaders; at 37.7, the national economy index is well below the other five BLCI component indexes. While the probability of a recession in the U.S. economy has increased, the performance of the state s economy should be approximately the same as last quarter, with growth continuing at a moderate pace. Three of the four industry indicators dropped into negative territory; sales is the only category expected to show an increase during the first quarter of 8. The stressed consumer has companies planning to reduce hiring and capital expenditures as they reign in costs in the wake of weakening profits and slowing sales. This tightening by businesses is also reflected in a forecast for smaller increases in employee compensation in 8, as shown in this quarter s topical question series. 3.9 National Economic Outlook Q1 8 compared to Q Alabama Economy Stays the Course Early in 8 Growth in the state s economy is generally expected to continue the pace seen in the fourth quarter of 7. At.2, this component index indicates that economic conditions will be stable during the first quarter of 8. Almost 43 percent of panelists anticipate no change, while about equal shares forecast worsening versus improving performance. Large-scale projects, including the National Alabama railcar plant in Muscle Shoals, the ThyssenKrupp steel plant in the Mobile area, and BRAC-related development in Huntsville, will contribute to construction employment in 8. Federal spending for national defense, a growing aerospace industry, burgeoning biotech and information technology, and additions to the state s auto supplier network should help Alabama maintain a relatively healthy economy. The state s housing market is holding up better than the nation s for the year ending with the third quarter of 7, the Alabama OFHEO House Price Index rose 5.3 percent, while the U.S. average increase was 1.8 percent..6 Much Somewhat Remain Somewhat Much Worse Worse the Same Better Better Index Alabama BLCI Q1 Q2 Q3 Q4 Q1 7 8 First Quarter 8 Volume 7, Number 1 Probability of U.S. Recession Rises Expectations for the U.S. economy fell 5.2 points to 37.7 in the first quarter of 8, with almost 59 percent of panelists finding it likely that economic conditions will be worse than in the fourth quarter of 7. Pessimists outnumber optimists by almost five-to-one, pushing the index well below the neutral point of. Only 12.9 percent of survey respondents forecast improvement during the first quarter. The continuing decline in housing starts, sales, and prices and the credit crunch, which makes it harder for both households and businesses to secure funding, are the primary culprits forecasting group Global Insight estimates that housing will cut GDP growth by one percentage point in 8. High fuel costs and their effect on consumer well-being is another major factor; consumer spending normally accounts for about two-thirds of the U.S. economy. Steady growth in exports, helped by a weak dollar, is a key factor in keeping the U.S. economy out of recession. Looking back, Alabama business leaders correctly forecasted the third quarter as the high point for the national economy in Alabama Economic Outlook Q1 8 compared to Q THE OUTLOOK National Economy 37.7 Alabama Economy.2 Industry Sales 51.4 Industry Profits 47.4 Industry Hiring 47.9 Capital Expenditures 48.7 BLCI 47.2 Index above indicates expansion. increase from previous quarter decrease from previous quarter Much Somewhat Remain Somewhat Much Worse Worse the Same Better Better THE UNIVERSITY OF ALABAMA

4 Gains in Sales Help Support State s Economy Sales by Alabama businesses are forecasted to increase modestly in the first quarter of 8, as indicated by a component index of Rising exports are helping some companies; approximately $.9 billion in products were exported during the first nine months of 7, up 3.7 percent from the same period in 6. Other businesses are hurting, however, from the negative effects of high energy prices and housing and credit market problems on the U.S. consumer. The Reuters/University of Michigan s Index of Consumer Sentiment reading of 75.5 in December 7 compares to 91.7 a year ago. While 38.3 percent of BLCI panelists think sales in their industry could increase during the first quarter of 8, 33.7 percent expect a decline. A marked decrease in sales is forecasted for construction and retail trade, with a modest drop in sales among the state s manufacturing industries. Flat sales are expected in finance, insurance, and real estate (FIRE). Job Growth Slowing in 8 An increasing number of firms are trimming hiring plans the 28 percent of BLCI panelists forecasting a decrease in hiring in their industry during the first quarter of 8 is approximately 7 percentage points above the.9 percent expecting an increase. This discrepancy throws the hiring component index into negative territory at 47.9, despite the fact that 51.1 percent of respondents expect hiring to continue at fourth quarter 7 levels. While these reports indicate reductions in hiring at existing businesses and perhaps curtailment of expansion plans, recently announced projects entering the construction phase and new firms and expansions coming online early in 8 will contribute to job growth in many areas of Alabama. Companies in transportation, information, and utilities (TIPU) and in the services sector are most likely to add jobs during the first quarter, while construction and retail trade businesses will cut back most severely. Panelists in manufacturing and FIRE expect modest reductions in hiring. 3.9 Industry Profits Q1 8 compared to Q Strong Moderate No Moderate Strong Decrease Decrease Change Increase Increase Industry Capital Expenditures Q1 8 compared to Q Center for Business and Economic Research, The University of Alabama Strong Moderate No Moderate Strong Decrease Decrease Change Increase Increase 3.2 Industry Sales Q1 8 compared to Q Strong Moderate No Moderate Strong Decrease Decrease Change Increase Increase Six-Year Trend of Increasing Profits Coming to an End Profit expectations slipped to 47.4 for the first quarter of 8. This is down 3.2 points from the component index value of.6 in the fourth quarter of 7. Equal shares of panelists,.2 percent, predict profits will be unchanged or higher for the first quarter of 8, while almost percent expect earnings to decrease. Slower productivity growth, wage gains, a falling dollar, and an inability to raise prices due to weak consumer demand are among factors cutting into profits for many firms. However, profits from foreign divisions and from exports are helping some companies. Global Insight forecasts a 3.9 percent decline in aftertax profits during 8, the first negative year since 1. Panelists in most Alabama industries are predicting lower profits in the first quarter; the drop-off will be most pronounced in retail trade and construction. Profit growth should continue in the services sector, with the strongest increases in professional, scientific, and technical services. 3.9 Industry Hiring Plans Q1 8 compared to Q Some Firms Putting the Brakes on Investment The 9 percent share of Alabama BLCI panelists who expect capital spending in their industry to show a strong decrease in the first quarter of 8 is almost double the percentage on the previous quarterly survey. At 48.7, the capital expenditures component index is down 2.8 points. Pessimism about the course of the national economy is causing firms to be cautious, particularly concerning investments in structures a position that will deal a further blow to the already-depressed construction sector. Weak consumer demand has reduced the need for investment at some businesses, while declining profits have cut into resources available for capital expenditures. Higher credit costs and less available credit have also hurt capital spending. While Alabama firms in wholesale and retail trade, manufacturing, and construction expect to curtail capital spending, businesses in professional, scientific, technical, and other services, as well as those in TIPU plan to increase investment during the first quarter of Strong Moderate No Moderate Strong Decrease Decrease Change Increase Increase

5 Topical Question Series: Revisiting Alabama Compensation Issues age of Alabama Workers Seeing Compensation Gains Could Slip Among panelists completing the first quarter 8 BLCI survey, 76.2 percent expect employee compensation (excluding benefits) at their firm to increase during 8. This is the weakest report of the last three years 83.7 percent of respondents forecasted gains in 7 and 81 percent anticipated increasing wages and salaries in 6. In the face of a stretched consumer and with little pricing power, companies are more likely to be conservative with regards to pay increases in 8. Survey results indicate that, for employees who receive a raise, the average amount will be around 3 percent, modestly above projected inflation of approximately 2.2 percent for the year. The 41.1 percent of businesses surveyed in the fourth quarter of 7 that expect compensation increases to average 3 percent or more during the coming year is down from 46.4 percent on last year s survey. And the 18.2 percent of firms anticipating that their employee compensation will be the same as in 7 compares to 12.5 percent expecting compensation to be flat last year. Over the next year do you expect employee compensation* in your firm to: Decrease 3.3 Stay the same 18.2 Increase %.9 Increase % Increase % Increase % 11.6 Increase 5% or more 7.3 Don t know * Compensation excludes benefits. What portion of the change in total compensation will each of these categories comprise? Cost of living adjustment 41.4% Merit/performance increase 41.9% Other 2.1% Granting of stock options 1.6% 7 year-end bonus 12.9% Merit Increases Barely Beat Cost of Living Adjustments Merit or performance-based increases as a share of the change in employee compensation slipped from 43.2 percent for 7 to an anticipated 41.9 percent for 8. At the same time, cost of living adjustments rose from.5 percent of average total compensation gains in 7 to a projected 41.4 percent in 8. With the current economic environment negatively impacting profits at many companies, it appears that more firms are trying to make certain that employee wages and salaries at least keep up with inflation. A year-end bonus is of growing importance in compensation packages 12.9 percent of the total increase in the coming year will come from bonuses, up from.1 percent last year. Stock options will contribute just 1.6 percent of the gains in 8. Sixty-eight percent of businesses responding to the BLCI survey planned to use more than one form of compensation in their total package. Use of Bonuses Increases About two-thirds of Alabama panelists report that their firm offered a bonus to employees at year-end 7, a sizeable jump from the 39 percent awarding bonuses at the end of 6. This increase supports findings by benefits consulting firm Hewitt Associates that businesses are increasingly using pay (in the form of bonuses) to reward and retain, as well as motivate, employees. Bonuses were generally larger in percent of firms indicated that bonuses averaged 9 percent or more of employee wages, up from 21.6 percent in 6. And the share of companies where bonuses averaged 5 to 8.99 percent of wages rose from 19.1 percent in 6 to 26.4 percent in 7. During the same period, the percentage of businesses giving employee bonuses of less than 1 percent fell from 23.2 to 11.9 percent. If your firm offers a year-end bonus, what percentage of employee wages does it average? Less than 1% % % % % % or more Center for Business and Economic Research, The University of Alabama 3

6 Alabama BLCI by Component and Area Expectations for the national and Alabama economies both dropped by more than 5 points in the first quarter 8 survey. While the forecast indicates a larger probability of recession in the U.S. economy, the state s economy should remain on a steady course. Panelists are much less optimistic now than they were on the BLCI survey a year ago the BLCI is down 6.4 points from its first quarter 7 reading, while expectations for the U.S. economy have fallen.7 points, and the Alabama outlook is down 6 points. Among industry indicators, only the sales component index managed to stay above this quarter at 51.4, the index portends a modest increase in sales overall. Profits came in as the lowest of the four industry indicators, falling 3.2 points to Sliding profits and weaker sales growth contribute to the declines in both the hiring and capital expenditure component indexes. Panelists in the Mobile metro area are the most upbeat coming into 8; a BLCI of 54.4 forecasts a moderate uptick in economic activity. Construction of the ThyssenKrupp steel plant should get underway during the first quarter of 8, while business at the Alabama State Docks and in the area s aerospace and shipbuilding industries is strong. Mobile is expected to see good growth in capital spending in the first three months of 8. Huntsville panelists are also optimistic, with a BLCI reading of 53.3, indicating that economic growth will increase from the already healthy pace seen during the past year. BRAC construction and job moves are ongoing, while national defense work at area companies is increasing. Aerospace initiatives are bringing new firms and contracts to the area. Profit gains should be robust among Huntsville businesses. Respondents in both Mobile and Huntsville are forecasting strong growth in sales and moderate increases in hiring during the first quarter. Forecasts of economic activity slipped farther into negative territory for both the Birmingham and the Montgomery metropolitan areas in the first quarter 8 BLCI survey. The Birmingham metro area s BLCI index value of 45.9 was down 3.9 points from the previous quarter. While sales growth in Birmingham is expected to be flat during the quarter, profits, hiring, and capital expenditures are all forecasted to decline. The area s sizeable construction and FIRE industries contribute to a 6.3 point drop in profit expectations; 46 percent of panelists forecast lower profits during the first quarter. Montgomery s BLCI is the lowest among the four major metro areas at 44.5, with panelists particularly pessimistic about hiring and capital spending trends. Component Index by Area, Q1 8 Alabama MSA Q1 8 Change from Q4 7 Birmingham Huntsville Mobile Montgomery National Economy Alabama Economy Industry Sales Industry Profits Industry Hiring Capital Expenditures BLCI BLCI Survey Enters Seventh Year The first quarter of 8 marks the 25th quarter that Alabama panelists have recorded their opinions in the online Business Leaders Confidence Index survey. Expectations for the U.S. and Alabama economies and for industry sales, profits, hiring, and capital expenditures are equally weighted in the composite BLCI index. Six years of forecasts have been prescient in indicating both slowing and accelerating trends in economic activity. BLCI values consistently above the neutral point of from the first quarter of 2 through the fourth quarter of 7 have correctly forecast six years of expansion. With the index falling to 47.2 on the first quarter 8 survey, panelists predict the strong possibility of recession. Thank you to the more than Alabama business leaders who completed the first quarter 8 BLCI survey during the first two weeks of December 7. Please join us in the first two weeks of March for the second quarter 8 survey at Alabama BLCI History 47.2 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Analysis provided by Carolyn Trent, Socioeconomic Analyst, Center for Business and Economic Research, The University of Alabama. The BLCI is a Compass on Business initiative created in collaboration with: For more details on the Alabama Business Leaders Confidence Index, visit For more details on the Center for Business and Economic Research, visit cber.cba.ua.edu.

7 Order your copy of the Alabama Economic Outlook 8 now at (continued from page 2) jobs added in the Birmingham-Hoover area were in retailing; professional, scientific, and technical services; food services and drinking places; and local government entities. Strongest sectors for job growth in the Huntsville metro area were professional, scientific and technical services; local government entities; educational and health services; and information. About 52 percent, or 1,, of the new jobs in Montgomery were in retailing, with another 8 in professional and business services. Payroll gains in the Mobile metro area were strongest in educational and health services and at food services and drinking places. Tuscaloosa added jobs in state and local government entities. From December 6 to December 7, the largest statewide payroll gains were in construction (2,8); retail trade (2,); professional and business services (5,); educational and health services (3,); food services and drinking places (3,); and local government institutions (4,). Manufacturing suffered a net loss of 1,8 jobs. While durable goods manufacturing gained workers, nondurable goods manufacturing lost 1,9. Within durable goods manufacturing, the only industries that gained jobs were transportation equipment manufacturing which includes motor vehicle and parts manufacturing and aerospace products and parts manufacturing with 1, new jobs, and primary and fabricated metals, which added. Among nondurable goods manufacturing industries, gains of 1, jobs in plastics and rubber products manufacturing and in animal slaughtering and processing were negated by losses in all other industries. Textiles and apparel manufacturers saw 2, jobs disappear during the year. For the first quarter of the current fiscal year compared to the first quarter a year ago, total state tax revenues increased 4.3 percent to $2.1 billion. Individual and corporate income tax receipts rose 1.9 and 12.1 percent, respectively. For September through December 7, sales tax receipts totaled $512.7 million, up 1.9 percent over the first quarter a year ago. First quarter appropriations to the state s General Fund increased 21.5 percent to a total of $487.6 million. Appropriations to the Alabama Education Trust Fund climbed 4.2 percent, compared to the first quarter of the previous fiscal year, to $1.4 billion. The state is faring much better than the nation when it comes to the housing market crisis. One major reason is that home prices in Alabama have historically risen at a pace below the national average. Over the years from the third quarter of 1997 through the third quarter of 7, the OFHEO (Office of Federal Housing Enterprise Oversight) House Price Index shows Alabama s house prices increasing.3 percent compared to a U.S. average.8 percent gain. House prices held up much better in the state than the nation during the year ending in the third quarter of 7 the state s index increased by 5.3 percent, while the U.S. index rose only 1.8 percent. Although the state s economy is not immune to national economic conditions and the slump in housing markets is being felt in Alabama, the effect will be more moderate than the severe downturn in many parts of the nation. Home sales were down just 5 percent for 7, according to the Alabama Center for Real Estate, with 57,83 units sold the third highest recorded annual total. However, building permits for single-family homes totaled 16,793 in 7, down 5,73 (-25.4 percent) from 6. While the housing inventory was declining at yearend, the December inventory to sales ratio of 11.1 months remained well above the 2 through 6 average of 6.5 months supply. Outlook. The state s economy is forecasted to grow by 2.2 percent in 8, close to the pace of 7. Nonfarm employment is expected to increase by 1. percent, with the addition of approximately 21, jobs. In terms of payroll employment, the fastest growing segments of the state s economy are OFHEO House Price Index through Q3 7 ( Change) 1-year -year United States Alabama Anniston-Oxford Auburn-Opelika Birmingham-Hoover Decatur Dothan Florence-Muscle Shoals Gadsden Huntsville Mobile Montgomery Tuscaloosa Source: Office of Federal Housing Enterprise Oversight. expected to be motor vehicle and motor vehicle parts manufacturing (11.8 percent increase in jobs); other transportation equipment manufacturing (3.9 percent); professional and business services (1.9 percent); educational and health services (1.4 percent); and leisure and hospitality services (1.3 percent). The Alabama economy will face the same challenges as the rest of the nation in 8 high energy prices, a credit crunch, more cautious consumer and business spending, and the housing market recession. It should, however, weather these challenges better than many state economies. Recent diversification, continuing job gains, and ongoing industry recruitment and workforce development will complement more solid fundamentals in housing and credit conditions than are seen in many states. Cuts in short term interest rates should take upward pressure off long term rates, and provide some stability in the state s financial and housing markets. Ahmad Ijaz aijaz@cba.ua.edu Samuel Addy saddy@cba.ua.edu Articles reflect the opinions of the authors but not necessarily those of the staff of the Center, the faculty of the Culverhouse College of Commerce, or the administrative officials of The University of Alabama. Alabama Business 7

8 alabama.business cber.cba.ua.edu About Alabama From the Census Bureau: Around 67, Alabama businesses received 7 Economic Census questionnaires during December. That s 1.4 percent of the approximately 4,7, forms mailed out nationwide, with a February 12 deadline. The economic census, conducted every five years, provides a wealth of industry detail about the U.S. and state economies and is the official measure of output for industries and geographic areas. Data on many industries are broken down by metro areas, counties, and places of 2,+ population. Results from the 2 Economic Census are available at Data can be mined for detailed rankings did you know that Alabama led all states in the value of shipments of reproducing magnetic and optical media per capita in 2 and was second in total value at $667.5 million? We also were first in manufactured value of asphalt shingle and coating materials and of perishable prepared foods per capita! Make the right decision. The quality of one s decisions grows from the quality of the information upon which they are based. The Alabama Business Leaders Confidence Index (BLCI), a collaborative effort by Compass Bank and The University of Alabama s Center for Business and Economic Research, provides executives like you with valuable perspectives on the latest economic news and business trends. Please log on at and register to become a BLCI panelist. It only takes a few minutes and you ll be notified by when the next survey opens on March 1st. With increased participation from business leaders like you, the BLCI will become a more valuable planning tool for the Alabama business community. Plus, when you participate, you receive an exclusive preview of survey results and access to the new Panelist Roundtable. Join today! The Center for Business and Economic Research gratefully acknowledges the financial support of Compass Bank. Copies of this publication as well as other socioeconomic data resources are available on the Center website: The University of Alabama Center for Business and Economic Research Box Tuscaloosa, Alabama Nonprofit Organization U.S. Postage Paid Tuscaloosa, AL 351 Permit No. 16 Address service requested. Alabama Business is sponsored in part by Compass On Business, a partnership between Compass Bank and The University of Alabama. THE UNIVERSITY OF ALABAMA CENTER FOR BUSINESS & ECONOMIC RESEARCH