Center for Business and Economic Research. Samuel Addy, Ahmad Ijaz, Carolyn Trent, Kathleen Gabler Authors. Carolyn Trent Project Manager

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1 Samuel Addy, Ahmad Ijaz, Carolyn Trent, Kathleen Gabler Authors Carolyn Trent Project Manager Sherry Lang Graphic Designer Center for Business and Economic Research

2 Contributors to the Alabama Economic Outlook 2013 and Economic Outlook Conference Center for Business and Economic Research Samuel Addy, Director and Research Economist Deborah Hamilton, Associate Director Ahmad Ijaz, Director of Economic Forecasting Carolyn Trent, Socioeconomic Analyst Kathleen Gabler, Socioeconomic Research Associate Sherry Lang, Senior Graphic Designer Gale Pritchett, Office Assistant Terri Reed, Accounting Specialist Junsheng Guo, Accounting Assistant Arben Skivjani, Economic Forecaster Sarah Cover, Economic Forecaster Kilungu Nzaku, Assistant Research Economist The Alabama Economic Outlook 2013 is a product of the Alabama Econometric Model which was developed and is maintained by the Center for Business and Economic Research, The University of Alabama. The Alabama forecast is updated quarterly and posted on our website at For information on the Alabama Econometric Model or its products, contact: Center for Business and Economic Research The University of Alabama Box Tuscaloosa, Alabama or uacber@cba.ua.edu The Alabama Economic Outlook 2013 is supported in part by grants from the Alabama Department of Economic and Community Affairs, Alabama International Trade Center, Alabama Power, Alabama SBDC Network, BlueCross BlueShield of Alabama, Boeing Company, Hyundai Motor Manufacturing Alabama, Lockheed Martin Space Systems, PowerSouth Energy Cooperative, ServisFirst Bank, Sterne Agee, and Vulcan Materials Company. Photographs used for the cover composition are courtesy of the Honda Manufacturing of Alabama, Hyundai Motor Manufacturing Alabama, Mercedes Benz U.S. International, Navistar, and Toyota corporate websites. The Alabama Economic Outlook 2013 reflects the opinions of the authors, but not necessarily those of the faculty and staff of the Culverhouse College of Commerce and Business Administration or the administrative officials of The University of Alabama. January 2013 Board of Trustees, The University of Alabama ii Alabama Economic Outlook

3 Contents United States Economic Outlook... 1 Review of Forecast... 1 Outlook for Consumer Spending... 2 Investment Spending... 3 International Trade... 4 Employment... 4 Alabama Economic Outlook... 5 Review of Forecast... 5 Outlook for Major Sectors of the Alabama Economy... 7 Manufacturing... 7 Nondurable Goods Manufacturing... 8 Durable Goods Manufacturing... 9 Construction Wholesale Trade Retail Trade Information Financial Activities Professional and Business Services Educational and Health Services Leisure and Hospitality Natural Resources and Mining Transportation, Warehousing, and Public Utilities Government Agricultural Services, Forestry, and Fisheries and Farming Alabama Gross Domestic Product Alabama Employment Alabama Revenue Forecasts Alabama s Automotive Industry: Accelerating into Alabama Metropolitan Areas Alabama Economic Outlook iii

4 Selected U.S. Economic Indicators Gross Domestic Product and Nonfarm Employment Annual Percent Change Gross Domestic Product Nonfarm Employment Source: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, and IHS Global Insight. U.S. Manufacturing Employment Annual Percent Change Total Durable Goods Nondurable Goods Source: U.S. Bureau of Labor Statistics and IHS Global Insight. Consumer Expenditures Annual Percent Change Total 6 Durable Goods 8 Nondurable Goods Source: U.S. Bureau of Economic Analysis and IHS Global Insight. U.S. Employment in Selected Services Annual Percent Change Source: U.S. Bureau of Labor Statistics and IHS Global Insight. Professional and Business Services Education and Health Services Consumer Sentiment Index (1966=100) Source: Thomson Reuters/University of Michigan and IHS Global Insight. U.S. Employment in Sectors Hit Hardest by Recession Annual Percent Change Source: U.S. Bureau of Labor Statistics and IHS Global Insight. Construction Finance Leisure and Hospitality Retail iv

5 United States Economic Outlook Review of 2012 Real U.S. Gross Domestic Product (GDP) increased 2.1 percent in 2012, marking three years of expansion at about 2 percent annually, following declines in 2008 and On a quarterly basis, real GDP growth slipped from 2.0 percent in the first quarter of 2012 to 1.3 percent in the second. A stronger 2.7 percent increase in the third quarter was primarily due to an accumulation of business inventories. Manufacturing, an important engine for growth coming out of the recovery, showed signs of weakening toward the end of the year. The Institute for Supply Management s Manufacturing Index fell to its lowest level in three years in November, indicating a slight contraction with a reading of Business spending on equipment and software and on industrial and transportation equipment was the largest contributor to output growth during Exports were an important factor in the first half of the year, while consumer spending picked up during the second half. However, uncertainty over the Eurozone crises, slowing emerging market growth, and domestic fiscal policy continued to constrain the rate of economic expansion. For 2012 as a whole, business spending increased 7.3 percent a strong showing, but below last year s gain of 8.6 percent. Despite a relatively weak dollar, challenges in the economies of the country s trading partners held export growth at 3.3 percent; exports rose 6.7 percent in Credit conditions are gradually easing and households feel more confident as shown by improving consumer confidence and sentiment indexes, yet hurdles including high debt levels, low home prices, and sluggish job growth continue to constrain spending. The 1.9 percent increase in consumer spending seen during 2012 did not keep pace with the 2.5 percent rate of growth in Housing and Construction. There are positive signs that housing is finally beginning to recover, although the sector has a long way to go to recoup the losses experienced during the recession. Single family housing starts totaled 532,000 for the year, up 22.6 percent from the 434,000 starts recorded in Sales of existing single family homes rose from 3.8 million in 2011 to 4.1 million in 2012, while sales of new houses climbed from 307,000 to 374,000, a 21.8 percent gain. The value of residential construction increased by almost 13 percent in 2012, to about $358 billion. New home prices rose from an average of $263,400 in 2011 to $281,500 during the past year, an increase of approximately 7 percent. Average existing home prices increased 4.7 percent to $222,800 in 2012, compared to a decrease of 3.3 percent in the previous year. Residential fixed investment, which includes home construction and sales, climbed almost 12.5 percent in 2013 Forecast The U.S. economy is expected to expand moderately in 2013, with real GDP growth of around 1.9 percent. Nonfarm employment could increase a modest 1.5 percent. Residential investment is forecasted to climb 15.2 percent as the housing recovery accelerates. Annual Percent Change * Real GDP Consumer Spending Residential Investment Nonresidential Fixed Investment Exports Imports Payroll Employment Unemployment Rate Industrial Production CPI Inflation Rate year Fixed Mortgage Rate year Treasury Note Yield * Preliminary forecast Source: IHS Global Insight, November its first annual increase after six consecutive years of decline. In October overall construction spending reached a 37 month high of $872 billion, a 9.6 percent increase from levels a year ago. Private residential construction spending rose by 21 percent from October 2011 to October 2012 and construction spending on single family homes was up 29 percent. Low vacancy rates are an important factor in the uptick in housing seen during Vacancy rates fell to a seven year low of 1.9 percent at the end of the third quarter, indicating that most of the excess construction built during the boom years has been worked off. An increase in household formation, together with rising rents and a low inventory of houses, is contributing to rising home prices. Employment. Following the loss of more than 8 million jobs in the Great Recession, 2012 marked the second year of recovery in payrolls. Although the pace of job growth remains sluggish, more than 1.8 million jobs were added during the past year. Employment of million in the fourth quarter of 2012 was 4.43 million above a fourth quarter low in 2009; still, about 4 million jobs need to be created to bring U.S. payroll employment back to its level of million in the fourth quarter of Job gains during 2012 were mainly in professional and business services (567,000); education and health services (443,000), largely in healthcare and social assistance; the leisure and hospitality sector (319,000), almost entirely in food and accommodation services; manufacturing (192,000), with most jobs added early in the year; and retailing (139,000). Job losses in 2012 were concentrated in state and local government (76,000), the federal government (46,000), and the construction sector (35,000). United States Outlook 1

6 With almost 12 million people out of work, the nation s unemployment rate averaged 8.1 percent in 2012, although unemployment fell to 7.7 percent in November. The broadest measure of labor underutilization showed almost 8.3 million people working part time, often because their hours have been cut or they cannot find full time employment. If these workers are included, the effective U.S. unemployment rate would be around 14.5 percent. Employment in low wage and temporary or part time jobs is now increasing at a more rapid pace than other payroll jobs; these jobs usually offer few if any benefits. Despite employment gains, the rate of job growth is not keeping pace with increases in the population and labor force, much less replacing positions that were lost. Income. Nominal personal income grew 3.5 percent in 2012, below the 5.1 percent increase seen in With the slow pace of income growth, the savings rate dropped from 4.3 percent in 2011 to 3.7 percent in As a share of disposable income, outstanding nonmortgage consumer debt stood at 22.9 percent, about the same as its 2011 level of 22.8 percent. However, outstanding mortgage debt obligations fell to 83.6 percent of income, below the 2011 level of 88.0 percent. Overall, households were slightly better off financially in 2012 their net worth increased from $60.1 trillion in 2011 to $63.9 trillion in 2012, while the value of financial assets held rose from $42.8 trillion to $45.1 trillion. Consumer Spending. Overall consumer spending increased by 1.9 percent in 2012, below the 2011 gain of 2.5 percent, and accounted for slightly above 72 percent of GDP. That s far below its prerecession GDP share of 90 percent in Spending on durable goods grew 7.5 percent (up from a 7.2 percent increase in 2011), purchases of nondurables increased 1.2 percent (compared to 2.3 percent in 2011), and spending on services was up 1.3 percent (down from 1.9 percent in 2011). Motor vehicles and parts sales rose 6.1 percent. Sales of new autos grew 11.0 percent, while incentives and rebates helped boost new truck sales by 6.4 percent. Although used auto sales declined 1.5 percent, sales of used trucks climbed around 1.0 percent. Consumer spending for other big ticket items also grew in 2012 spending rose 6.5 percent for furnishings and durable household equipment (versus 5.8 percent in 2011), over 11 percent for recreational goods and vehicles, and about 4.5 percent for other durable goods. Purchases shot up by more than 18 percent for computers and peripheral equipment and nearly 11 percent for software and accessories. On the nondurable goods side, spending rose by only 0.4 percent for off premises food and beverages and 1.5 percent for clothing and footwear, both increases significantly below their 2011 growth rates. Nonresidential Fixed Investment. Business spending rose 7.3 percent in 2012, modestly below the 8.6 percent rate of growth seen in Uncertainty in domestic markets together with a slowdown in the global economy made most businesses cautious about their investment decisions. Expenditures on equipment and software grew 6.9 percent, following an 11 percent increase in Strongest gains were seen in expenditures for transportation equipment (up 18.4 percent), manufacturing related structures (16.0 percent), and power and communication structures (15.6 percent). After declining for four consecutive years, investment in commercial and healthcare related structures rose 5.8 percent. However, spending on computers and peripherals increased by just 2.8 percent in 2012, well below the 12.3 percent rate of increase seen in the previous year. Outlook for 2013 The U.S. economy continues to show signs of modest, but significantly below potential, growth going into 2013, especially for consumer and business spending. Although improving, weak residential and commercial real estate markets; tight credit, particularly for small businesses; and limited job growth will continue to slow the recovery. Risk of another recession, due to domestic policies or external factors, is slightly higher in 2013 than previously expected. Consumer Spending Total real (inflation adjusted) consumer spending on all durable goods, nondurable goods, and services is expected to rise by 2.3 percent to $9.6 trillion in 2013, with a 2.8 percent increase to $9.8 trillion in Stagnant wages, slow job growth, still subpar home values, and high consumer debt will continue to have a strong influence on the pace of consumer spending. Consumer confidence and sentiment indexes will remain at levels associated with cautious spending. Consumption could be boosted above this forecast by relatively stronger job growth and stimulating fiscal policy. Personal income should increase about 4 percent in 2013, with real disposable income rising 2.1 percent to $10.5 trillion. Consumers are expected to save and reduce debt at a more modest rate than in recent years; household financial assets will grow 3.6 percent to $46.7 trillion, with net worth totaling $66.6 trillion. However, as consumers begin taking on more debt, liabilities are expected to increase from $13.5 to $13.6 trillion. As a share of disposable income, the savings rate is likely to inch down from 3.7 percent in 2012 to 3.6 percent in Still, outstanding nonmortgage consumer debt will drop slightly from 22.9 percent of disposable income to 22.6 percent and outstanding mortgage debt could fall to 80.8 percent of disposable income in 2013, down from 83.6 percent. Real net worth is likely to rise 3.0 percent as debt reduction and tight lending practices gradually improve household finances. Durable Goods. Roughly $1.4 trillion in consumer purchases of durable goods (products that last more than three years) accounted for 14.1 percent of total consumer spending in 2012 and approximately 10 percent of real GDP. A 5.7 percent increase in consumer expenditures for durable 2 United States Outlook

7 goods is expected in 2013, a good pace, but slower than the 7.4 percent increase seen in Spending on motor vehicles and parts, which accounts for almost 27 percent of all consumer durables expenditures, is set to rise 4.4 percent. However, an increase of 5.2 percent in new vehicle purchases during 2013 and a 1.7 percent rise in expenditures for parts and accessories will be partially offset by an expected 2.3 percent decline in spending on used automobiles. Spending on new trucks is forecasted to rise 5.6 percent during the year, while purchases of new automobiles could increase 4.6 percent. Sales of information processing equipment are likely to jump 11.8 percent in 2013, including a 12.8 percent increase for computers and peripherals and over 10 percent for software and accessories. Spending is expected to rise about 6 percent for household furnishings and equipment, 8.7 percent for recreational goods and vehicles, and 2.7 percent for all other durable goods. Nondurable Goods. Spending on nondurable goods (e.g., clothing, food, gasoline, and other daily essentials) grew 1.2 percent to $2.1 trillion in 2012; these expenditures accounted for 21.8 percent of total consumer spending and 15.5 percent of real GDP. Purchases of food and beverages were up just 0.4 percent during the past year, while spending on clothing and footwear increased 1.5 percent. Total nondurables spending is expected to grow by 2.2 percent in 2013, with a 1.4 percent rise for food and beverages and an approximately 2 percent increase for clothing and footwear. After slipping 0.5 percent in 2012, consumer purchases of gasoline and other energy products are expected to rise by 2.7 percent. Spending on other nondurable goods (e.g., pharmaceutical and other medical products) should increase by around 3 percent. Services. Consumer expenditures on services rose 1.3 percent to $6.2 trillion in 2012, accounting for 64 percent of total consumer spending and about 45 percent of real GDP. The largest components of this spending were for housing and utilities ($1.7 trillion, up 0.3 percent, with housing alone at $1.4 trillion) and healthcare ($1.5 trillion, up 1.2 percent). Consumer spending on services as a whole should rise 1.7 percent in Increases will vary by category, with spending on housing and utilities expected to increase 0.5 percent, healthcare (1.1 percent), transportation (2.4 percent, including an 11.2 percent jump for motor vehicle leasing), recreation services (5.0 percent), food services and accommodations (1.5 percent), financial services and insurance (2.0 percent), and other services (2.5 percent, including 2.5 percent for telecommunications expenditures). Investment Spending Investment spending, which is comprised of both nonresidential and residential components, rose from $1.9 trillion in 2011 to $2.0 trillion in 2012 and accounted for around 14 percent of real GDP. The change in inventories in 2012 amounted to $39.7 billion. Nonresidential fixed investment grew by 7.3 percent to roughly $1.5 trillion. After declining for six consecutive years, residential fixed investment rose 12.4 percent during 2012 to around $368 billion. In 2013 nonresidential investment spending is expected to increase 4.3 percent, while residential investment rises about 15 percent. Nonresidential Fixed Investment. Often referred to as business investment spending, nonresidential fixed investment is expected to rise 4.3 percent in 2013, a slower pace than the 7.3 percent gain seen in Total spending for equipment and software should increase 6.0 percent, while overall spending on structures is likely to be relatively flat. After four consecutive years of decline, investment in commercial and healthcare related structures could begin to rebound in 2013, despite continuing problems of high delinquency rates, excess retail space, frozen securitization markets, high vacancy rates, and tight lending practices. Investment in commercial structures and healthcare facilities is expected to increase 5.0 percent, while spending on manufacturing facilities should rise 4.9 percent during the year. However, investment in power and communication related structures is expected to be 12.9 percent lower than the amount invested in Spending on information processing equipment should rise 6.6 percent, including growth of about 8.9 percent for computers and peripherals and 8.2 percent for communications equipment. Businesses are expected to spend 6.4 percent more for industrial equipment than they did in 2012, while spending on transportation equipment (e.g., light vehicles, aircraft, etc.) will increase 6.5 percent. Residential Fixed Investment. After falling for the six consecutive years from 2006 to 2011, residential fixed investment began to rebound in 2012; forecasted growth of over 15 percent in 2013 would boost investment to $424 billion slightly more than half the annual peak of over $800 billion seen during the housing boom. Investment in equipment (furniture and appliances purchased by rental landlords) is expected to increase 7.1 percent to $11.0 billion. Construction spending on single family homes could rise by over 20 percent to around $160 billion, with singlefamily housing starts climbing from 532,000 in 2012 to Investment Spending Annual Percent Change Residential Nonresidential Business Spending on Equipment and Software Source: U.S. Bureau of Economic Analysis and IHS Global Insight. United States Outlook 3

8 650,000 in Still, the number of housing starts will be less than half the number seen in the years leading up to the recession. Average prices for existing homes are expected to stay flat in 2013 at about $174,600, while prices for new homes will increase to $284,200, up from $281,500 in Single Family Homes Sold Annual Percent Change Source: U.S. Bureau of Census and IHS Global Insight. International Trade Exports increased 3.3 percent to $1.8 trillion in 2012, while imports grew 2.9 percent to $2.2 trillion. Although the relatively lower value of the U.S. dollar during the year improved the competitiveness of domestic producers, gloomy global economic conditions kept exports from growing more strongly. The U.S. real trade deficit increased from $408 billion in 2011 to $412 billion in Expected growth of 3.0 percent for exports, coupled with a 4.2 percent increase in imports, will further widen the trade deficit to around $450 billion in Export categories seeing the fastest growth will include aircraft (8.8 percent); computers, peripherals, and parts (6.6 percent); capital goods, excluding automobiles (5.9 percent); and consumer goods (3.7 percent). Fastest growing imports are expected to include aircraft (9.8 percent); industrial machinery and supplies (8.1 percent); other goods (6.5 percent); and consumer goods (6.1 percent). Note that there is significant cross hauling U.S. Exports and Imports Annual Percent Change (2005 Chained Dollars) Exports Imports Source: U.S. Bureau of Economic Analysis and IHS Global Insight. New Single Family Homes Existing Single Family Homes Forecast Assumptions Federal Spending: Real nondefense spending on goods and services will fall 0.5 percent in 2012 and 2.6 percent in Defense spending falls 2.4 percent in 2012 and 2.9 percent in Automatic spending cuts scheduled for January 2013 do not take effect. Taxes and Benefits: The two percent payroll tax cut, emergency unemployment benefits, and Bush era tax cuts are extended for Fifty percent bonus depreciation incentive ends in Some combination of spending cuts and tax hikes on upper income earners begins in Consumer Prices: Consumer food price inflation will rise to 2.9 percent in 2013, up from 2.7 percent in 2012 due to the U.S. drought. Weak global growth will hold oil prices in check. Global Growth: GDP growth among the United States major currency trading partners will slip from 1.2 percent in 2012 to 1.1 percent during Output growth for other significant trading partners will inch up from 4.1 percent in 2012 to 4.2 percent for The dollar will gain on the euro, while the Chinese renminbi will be unchanged. of goods because of category definitions. The largest U.S. export markets in 2011 included Canada ($281 billion), Mexico ($198 billion), China ($104 billion), Japan ($66 billion), and the United Kingdom ($56 billion). Employment The slow pace of economic growth continues to hamper the nation s ability to add significant numbers of new jobs. A substantial portion of job gains in 2012 have been for temporary and part time positions and were largely in service providing firms. Employment is not expected to reach its 2007 peak of million until 2014 or later. Total nonfarm payrolls are forecasted to rise 1.5 percent in 2013, just slightly better than the 1.4 percent increase seen during After 13 consecutive years of job losses, U.S. manufacturing employment grew 1.8 percent in both 2011 and 2012, and should rise by 1.0 percent in Construction, which has been one of the hardest hit sectors of the economy, will see its workforce expand by 2.4 percent in 2013, following a 0.6 percent increase in Other sectors expected to add jobs during 2013 include retail trade (1.2 percent increase), professional and business services (3.7 percent), education and health services (1.6 percent), and leisure and hospitality (2.1 percent). 4 United States Outlook

9 Alabama Economic Outlook Review of 2012 Alabama GDP. Alabama Gross Domestic Product (ALGDP) or output is the total value of goods and services produced in the state, a concept similar to U.S. GDP. ALGDP rose 1.9 percent in 2012 to $156.3 billion in inflation adjusted 2005 dollars, a slightly slower rate of expansion than the 2.0 percent increase seen in The only industries where output increased more than 5.0 percent during the year were fabricated metals, machinery manufacturing, and motor vehicle and parts manufacturing. Alabama GDP and Nonfarm Employment Annual Percent Change Alabama GDP Nonfarm Employment Source: U.S. Bureau of Economic Analysis, Alabama Department of Labor, and Center for Business and Economic Research, The University of Alabama. Total Nonfarm Employment. For the 12 month period ending in October 2012, Alabama nonfarm employment rose 0.7 percent (13,700 jobs) to 1,887,900. Sectors that posted significant job gains were manufacturing (6,900 durable goods 5,100 and nondurable goods 1,800), professional and business services (5,700), leisure and hospitality (4,700), other services (3,300), educational and health services (2,200), retail trade (1,800), and financial activities (1,700). There were sizeable job losses in state government (5,700), the information sector (2,400), general merchandise stores (2,300), construction (1,800), federal government (1,300), local government (1,200), and insurance carriers and related activity (700). The state s 11 metro areas, traditionally the largest source of job creation, saw nonfarm employment increase by only 400 between October 2011 and October In contrast, Alabama s nonmetro counties added 13,300 jobs during the same period. Among the 11 metro areas, Tuscaloosa recorded the largest loss during the 12 month period at 2,700 jobs; Auburn Opelika shed 2,100 jobs and Dothan lost 200. Seven metro areas gained jobs Mobile added 2,200, Anniston Oxford (900), Decatur (900), Florence Muscle Shoals (700), Huntsville (400), Birmingham 2013 Forecast The Alabama economy is expected to expand by 1.9 percent in 2013, about the same rate of GDP growth as in After increasing by 0.7 percent from October 2011 to October 2012, nonfarm employment should rise 1.0 percent in However, manufacturing job growth could slow from its 3.4 percent pace during the 12 months ending in October 2012 to 0.5 percent in For the fiscal year ending in September 2012 (FY2012), state tax receipts rose by about $408 million (3.8 percent). Tax revenues are projected to grow 3.0 to 4.0 percent in FY2013. Hoover (200), and Montgomery (100). Gadsden saw no change in nonfarm employment from October 2011 to October Manufacturing. Real output among the state s manufacturers rose 3.4 percent to $24.1 billion in 2012, with most industries posting an increase. Output grew at a faster pace among manufacturers of motor vehicles and parts (10.3 percent), fabricated metals (8.4 percent), and petroleum and coal products (4.7 percent). Both productivity and payroll gains contributed to output growth. Manufacturing employment rose 2.9 percent, with the addition of 6,900 jobs between October 2011 and October Demand from exports and inventory rebuilding drove production increases during the first half of the year. As of November 2012, manufacturing firms were operating at 78.4 percent of capacity nationwide, just slightly above the 77.7 percent capacity utilization rate seen in 2011 but still below the sector s long term average of 80.3 percent. Construction. Weakness in both residential and commercial real estate markets continued to be a drag on the construction sector in 2012, although there was some improvement over the previous year. Real output rose 1.2 percent to $6.8 billion, but employment shrank 2.3 percent (1,800 jobs) during the 12 months ending in October 2012 to total 75,700. Building construction shed 1,000 jobs and heavy and civil engineering construction lost 1,800, while specialty trade contractors added 1,000 jobs. Wholesale and Retail Trade. Real output from wholesale trade activity climbed 2.7 percent to $8.5 billion in This was accompanied by a 0.3 percent increase in employment over the October 2011 to October 2012 period; Nonfarm Employment 1,887,900 (Oct. 2012) 13, ,500 18, % -6.2% 1.0% Since Oct Since Oct Projected 2013 Alabama Economic Outlook 5

10 most of the job growth was due to durable goods wholesalers. During the 12 months ending in October, retail trade employment increased 0.8 percent, with the addition of 1,800 jobs. Motor vehicle and parts dealers added 700 workers while general merchandise stores lost 2,300, including 1,400 positions in department stores. Food and beverage stores shed 600 jobs. Inflation adjusted output among the state s retailers rose 1.1 percent to $12.8 billion in Professional and Business Services. During 2012 real output from professional and business services increased 2.2 percent to $10.3 billion. The sector had 221,300 employees in October 2012, up 2.6 percent (5,700) from a year earlier. Job gains were concentrated in administrative support and waste management and remediation services, which added 5,400 positions between October 2011 and October Employment in professional, scientific, and technical services increased by just 100, despite a loss of 100 jobs in architectural and engineering services. Two hundred jobs were added in management of companies and enterprises, while payrolls at computer systems design and related services firms were flat. Alabama: #4 Top State for Doing Business Area Development #6 Top Business Climate Site Selection Educational and Health Services. The sector s real output increased to around $12.5 billion in 2012; educational services saw a 1.6 percent rise in output, while health services businesses saw a relatively weaker 1.3 percent increase. There were 220,500 educational and health services workers in October 2012, up 1.0 percent (2,200 employees) since October Healthcare concerns and social assistance added 1,700 jobs during the year. Hospitals lost 300 jobs, while physicians offices gained 1,900. Entities providing educational services added 500 workers. Leisure and Hospitality. After suffering through declining business and consumer spending during the recession, the leisure and hospitality sector experienced relatively strong job growth in From October 2011 to October 2012 employment at leisure and hospitality related businesses increased by 2.8 percent (4,700 workers) to 172,400; 142,200 of these jobs were in food services and drinking places. In 2012 real output of the sector was about $4.5 billion, an increase of 1.4 percent over Government. Real output of Alabama s government sector rose 0.5 percent to $24.3 billion in The loss of 8,200 jobs over the 12 months ending in October 2012 dropped the sector s total employment to 371,200, including about 101,900 workers in state government, 213,100 with local governments, and 56,200 federal government employees. During this period, federal government entities lost 1,300 jobs while the state shed 5,700 workers and local governments lost 1,200. Exports. According to the U.S. Department of Commerce s International Trade Administration, Alabama exports rose 15.2 percent in 2011 to $17.9 billion. At that level, exports accounted for 11.5 percent of the state s GDP, up from a 10.2 percent share in Exports to Canada, Alabama s largest trade partner, increased from $3.2 billion in 2010 to $3.3 billion (4.4 percent) for 2011, and were up by about 21 percent for the first nine months of 2012 at $2.9 billion. Other major destinations for Alabama exports in 2011 were China ($2.3 billion), Germany (almost $2 billion), Mexico ($1.7 billion), Japan ($716 million), Brazil ($659 million), and the United Kingdom ($594 million). Transportation equipment was the state s top export product in 2011, with shipments rising 14.2 percent to $6.0 billion. Other major exports for 2011 were chemicals ($2.3 billion), minerals and ores ($2.2 billion), machinery ($1.2 billion), paper products ($1 billion), primary metals ($1 billion), and computer and electronic products ($630 million). For the first nine months of 2012 compared to the same period in 2011, Alabama exports climbed from $13.2 billion to $14.8 billion, a gain of 12.1 percent. Transportation equipment exports increased 31.9 percent to $5.7 billion and accounted for 38 percent of all exports during this period. Shipments of chemicals climbed 10.1 percent, while primary metals exports jumped 43.0 percent. However, exports of minerals and ores fell 13.7 through September in comparison with the first nine months of Tax Receipts. For the fiscal year ending in September 2012 (FY2012), the gradual recovery in both business and consumer spending contributed to a 3.8 percent ($325 million) increase in state tax revenues, boosting the total to $8.9 billion. Individual income tax receipts rose 4.7 percent to $3.5 billion and corporate income tax revenues increased 14.4 percent to $422 million. Sales tax receipts grew 4.3 percent to total about $2 billion. Appropriations to the Alabama Education Trust Fund rose 7.0 percent ($369 million) during FY2012 to $5.7 billion. FY2012 appropriations to the state s General Fund were up 9.8 percent, increasing by $147 million to $1.6 billion Exports Per Capita All Merchandise Transportation Equipment U.S. $4,751 U.S. $699 Alabama $3,717 Alabama $1,255 Business Confidence. Alabama business executives started off 2012 generally upbeat about trends in the business environment and prospects for their industries, but that confidence diminished in the second half of the year. The Center for Business and Economic Research s Alabama Business Confidence Index (ABCI) climbed from 50.8 in the first quarter of 2012 to 56.8 in the second quarter as panelists felt moderately optimistic about how the U.S. and Alabama economies and their own industry would fare. However, confidence flattened as the third quarter approached and pessimism about the national 6 Alabama Economic Outlook

11 Index ABCI TM 56.8 economy grew. The third quarter ABCI registered 50.2 and only industry sales were expected to post moderate gains with other indicators almost flat. Continued concerns about the global economy as well as a high level of uncertainty about domestic fiscal policy drove confidence down to 48.3 on the fourth quarter ABCI survey. A value above 50 indicates expansion or improvement in the business environment and industry performance generally, while a value below 50 forecasts contraction relative to the previous quarter. Survey panelists were particularly gloomy about the U.S. economy, with an index reading of Indexes for the Alabama economy, profits, hiring, and capital expenditures were all modestly below 50. Only sales were expected to show slight improvement in the fourth quarter Q4 Q1 Q2 Q3 Q Source: Center for Business and Economic Research, The University of Alabama. Alabama Population July 1, ,822, % ( ) #30 State Growth Rank Outlook for 2013 Manufacturing and services employers will be the state s major economic drivers in These include firms in industries such as automotive manufacturing, ship building, aerospace, tourism, healthcare, and biotechnology. However, until uncertainties about federal budgets and spending priorities as well as deficit reduction plans are resolved, Alabama s many private contractors and government facilities engaged in defense related projects will be cautious in hiring and investment. Federal civilian employment is expected to decline again in 2013, although output should increase by around 2 percent, mostly due to productivity gains. Uncertainties in both domestic and international markets continue to hamper business spending and job creation. Alabama GDP. Real Alabama GDP should grow moderately in 2013, increasing by a forecasted 1.9 percent to around $159 billion. Gains in output could be substantially higher than this average for manufacturers of motor vehicles and parts and other transportation equipment, nonmetallic minerals, computer and other electronic products, and wood products. Among service providing sectors, output gains will be strongest among professional and business services firms, particularly those engaged in the management of companies and enterprises and in administrative, support, and waste management services. Employment. Nonfarm employment is forecasted to rise by 1.0 percent during 2013, with about 18,500 jobs added across the state. The strongest percentage increases in employment are likely to be with motor vehicle and parts and other transportation equipment manufacturers. However, most new jobs will be in services, where broad based gains could result in around 13,300 positions. Businesses in retail trade as well as transportation equipment manufacturers are also expected to create a significant number of jobs. Local governments are likely to add a modest number of workers during 2013, although state and federal civilian employment will continue to decline, albeit at a slower rate than in However, the unemployment rate will remain relatively high during the year, as continuing gradual but modest improvement in the employment picture encourages more Alabamians to enter or reenter the labor force. Tax Receipts. With the state s economy expected to grow at about the same rate in 2013 as in 2012, an increase of about 3 percent in tax revenues is forecasted for FY2013. Total revenue should rise from $8.9 billion to $9.1 billion. Individual income tax receipts could increase 3.3 percent ($116 million), with sales tax collections up 3.5 percent ($70 million). Considering the economic forecasts, appropriations to the Education Trust Fund are expected to rise 4.0 percent to about $5.9 billion. The General Fund could see appropriations of approximately $1.7 billion in FY2013, representing an increase of 1.0 percent. Major Sectors of the Alabama Economy This section presents forecasts and reviews for the major sectors of the Alabama economy. Employment and output activities are covered for each sector. Output is the value of goods produced and services provided, which for sectors is their contribution to Alabama Gross Domestic Product (ALGDP). Output is expressed in real (inflation adjusted) year 2005 chained dollars. On this basis, ALGDP is forecasted to be $159 billion in 2013, with total nonfarm employment at 1,887,700 workers. Manufacturing As of October 2012, Alabama s manufacturing sector employed 245,000 workers, up by 6,900 (2.9 percent) from October At this level, jobs in manufacturing accounted for 13 percent of the state s total nonfarm employment. Nondurable goods producing industries as a whole added 1,800 jobs during the 12 months ending in October, while durable goods producers created 5,100 positions. Industries reporting job gains included transportation equipment manufacturing (3,200), with 3,000 new positions in motor vehicle and parts; primary and fabricated metals (400); food manufacturing (200); and paper and machinery manufacturing (100 jobs each). However, some industries experienced job losses apparel manufacturers Alabama Economic Outlook 7

12 shed 700 workers, textiles and textile product mills (400), furniture and related products (400), aerospace products and parts producers (300), computer and electronic products manufacturers (300), wood products manufacturers (100), and plastic and rubber products (100). Technological and productivity improvements enabled the sector s real GDP to grow 3.4 percent in 2012; 5.0 percent for durable goods and 1.0 percent for nondurable goods. Structural changes due to productivity enhancements, plant relocations, and successful economic development and to recessions have resulted in generally declining shares of manufacturing employment over the last three decades for both the United States and Alabama. This shift is expected to continue, particularly in labor intensive nondurable goods producing industries where numerous jobs have been lost through plant closures and relocations. Productivity improvements in manufacturing continue to enable firms to produce more with fewer workers. Alabama Manufacturing Employment Annual Percent Change Total Durable Goods Nondurable Goods Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. Manufacturing s share of Alabama nonfarm jobs slid from over 22 percent in 1990 when employment stood at 363,750 to 12.9 percent in But in recent years manufacturing has bucked long term trends to emerge as a key sector leading the state out of recession. The automotive industry s strong postrecession rebound and expansion has been the primary factor in this turnaround. Manufacturing employment, which stood at 12.6 percent of the nonfarm total in 2010, is expected to reach 13.0 percent by Alabama manufacturing real GDP is forecasted to rise by 2.4 percent in 2013, largely due to anticipated output growth of over 9 percent in motor vehicle and parts production and 3.9 percent for computer and electronic products. However, employment is expected to rise by only 0.5 percent during the year. The state s manufacturing jobs are increasingly in capital intensive industries such as transportation equipment. While capital intensive production can result in lower prices for consumers, it generates fewer, although higher paying, higher skilled jobs. Workforce development is crucial for continuing to grow the state s existing manufacturing firms and for attracting new industry Alabama Economic Outlook Nondurable Goods Manufacturing Nondurable goods such as food, paper, and chemicals have a limited lifespan. The nationwide capacity utilization rate for firms producing nondurable goods was 77.9 percent in November 2012, below the long term average of 80.9 percent. Alabama s nondurables producers generated real output of over $9.3 billion in 2012, up 1.0 percent from Employment totaled 89,600 in October, less than half the peak of over 190,000 in During the 12 months ending in October 2012, employment rose by 1,800 textile, apparel, and plastics and rubber manufacturers all lost jobs, while the food and paper Industries added a modest number of positions. For the first three quarters of 2012, exports of Alabama nondurables totaled more than $3.7 billion; major exports were chemicals, paper products, plastic and rubber products, textiles and fabrics, apparel, and processed foods. Real output of the state s nondurable goods manufacturers is expected to rise 0.6 percent in 2013 with employment shrinking by 1.4 percent. These industries as a whole will continue to see job losses in the face of strong international competition influenced by trade agreements, off shoring and outsourcing, plant relocations to lower wage countries, and shifts to more capital intensive technologies. Textile and Apparel Products Most basic textile and apparel operations have been relocated overseas to the point that Alabama firms in these industries had just 13,400 workers as of October 2012, down from 14,500 a year earlier. Job losses during the 12 months amounted to 400 for textile mills and 700 for apparel; payrolls in textile product mills were flat. The industry has shed about 81,300 jobs since Alabama textile and apparel employment has been falling sharply since the passage of NAFTA (the free trade agreement with Mexico and Canada), CAFTA (the free trade agreement with Central American countries), recent free trade agreements with individual countries that have relatively lower labor and production costs, and China s admittance to the World Trade Organization (WTO) in November Currently, China is the largest exporter of textiles and apparel in the world and the United States is the largest importer. Textile manufacturers saw real GDP decline 2.0 percent in 2012, while output among apparel manufacturers fell 1.0 percent. For the first three quarters of 2012 compared to the same period in 2011, exports of textiles and fabrics rose 0.4 percent to $223.5 million, but apparel exports declined from almost $22 million to $10.5 million. Capacity utilizetion stood at 70.6 percent for textile and textile product mills and 67.6 percent for apparel manufacturers as of November 2012, far below their long term averages of 80.3 and 78.0 percent, respectively. The 2013 forecast is for real output to decline 2.0 percent for textiles and slide 0.7 percent for apparel. Employment could shrink 5.9 percent in textile mills, 0.3 percent for textile product mills, and 16.0 percent in apparel. Textile and apparel manufacturers will continue

13 to deal with intense pressure to reduce prices from large discounters who are themselves facing weak consumer demand, competition among retailers in general, and from global overcapacity. Expectations are for more plant closures and overseas relocations, with prices at the wholesale level expected to decline a slight 0.1 percent in Paper Paper manufacturing is one of Alabama s largest exporters and also one of its highest paying industries. Real output produced by the paper industry in 2012 rose 1.2 percent to $2.3 billion. Exports for the first nine months of the year totaled $686 million, down from $811 million for the same period in Employment in paper and related products manufacturing stood at 12,600 in October 2012, up by 100 from a year earlier, although pulp, paper, and paperboard mills shed 100 jobs. Nationwide the industry was operating at 81.4 percent of capacity in November 2012, below the 86.9 percent long term average. Employment is expected to rise by 0.4 percent during 2013 with real output growing 1.2 percent. Pulp and paper prices at the producer level are forecasted to increase 0.6 percent in 2013, after declining by 0.6 percent in Chemicals and Allied Products Alabama s second largest exporter, behind transportation equipment, the chemicals and allied products industry saw strong export gains during the first nine months of Shipments valued at almost $2.0 billion were up 10.3 percent compared to the same period in That increase follows a 16.2 percent jump in chemicals exports during As of November 2012, the industry s capacity utilization nationwide was at 76.2 percent, modestly below its long term average of 77.7 percent. Real output for the chemicals industry, which declined a slight 0.2 percent to $2.1 billion in 2012, is forecasted to rise 0.6 percent in Producer prices for chemicals and allied products increased 0.7 percent in 2012 and are forecasted to rise about the same amount in Rubber and Plastic Products Real output of Alabama s rubber and plastic products manufacturers grew 1.8 percent to $1.1 billion in Exports for the first three quarters of 2012 totaled $335 million, up 29.8 percent from the first three quarters of Industry employment of 13,500 workers in October 2012 was 0.7 percent (100 jobs) below the October 2011 level. Nationally, the capacity utilization rate for the industry in November 2012 was 79.3 percent, moderately below the 82.2 percent long term average. The industry s real GDP is forecasted to grow 1.6 percent in 2013 with employment about the same as in Producer prices for rubber and plastic products are expected to inch up by 0.2 percent in 2013 after rising 2.2 percent in 2012, mainly due to weakness in demand across both domestic and international markets. Durable Goods Manufacturing Durable goods are products that last for more than three years (e.g., automobiles, metals, machinery, and furniture). The manufacturing process is typically capital intensive, involving significant technology and automation, and requiring highly skilled workers. Many durable goods firms are large and multinational, making them Alabama Motor Vehicle Manufacturing Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. vulnerable to both national and global economic cycles, changes in interest rates, and fluctuations in consumer and business spending. As of October 2012, Alabama s durable goods industries employed 155,400 workers, up 3.4 percent (5,100 jobs) from October Durable goods industries accounted for 8.2 percent of total state nonfarm employment and 63 percent of the state s manufacturing employment. With motor vehicle sales rebounding, transportation equipment manufacturers had the majority of the job gains (3,200). Industries with job losses between October 2011 and October 2012 included manufacturers of computer and electronic products (300), furniture and related products (400), aerospace products and parts (300), and wood products (100). In 2012 durable goods real output grew 5.0 percent to $14.8 billion and accounted for 9.5 percent of Alabama GDP. The forecast for 2013 calls for a 3.6 percent increase in durable goods real GDP with employment rising 1.6 percent. Wood Products Weakness in residential and commercial construction and limited investment spending on structures continued to challenge wood products manufacturers in During the 12 months ending in October, industry employment declined by a slight 0.8 percent (100 jobs) to 12,700. Exports helped drive real output up 1.4 percent to $1.2 billion for For the first nine months of 2012, exports totaled $146.5 million, up 2.7 percent from the same period in That follows a 1.9 percent decline in industry exports from 2010 to International demand helped drive wood products producer prices 3.4 percent higher in With housing markets in the United States showing signs of gradual revival, prices for wood products are expected to increase by 3.6 percent in Industry capacity utilization was at 69.3 percent nationwide in November 2012, well below its long term average of 77.6 percent, but well above the bottom of 46.8 percent seen amidst the housing slump during the Great Recession. Real output is forecasted to rise by 4.0 percent in 2013 as the housing sector continues to recover. Employment could increase 2.4 percent (about 300 workers) in anticipation of a pick up in domestic demand as the inventory of existing homes dwindles. Wood products manufacturers in Alabama have shed 8,000 workers over the last six years. Alabama Economic Outlook 9

14 Primary and Fabricated Metals In 2012 real GDP of Alabama s primary metals industry rose 1.8 percent to slightly over $2.0 billion, while fabricated metals output climbed 8.4 percent to about $2.0 billion. Combined primary and fabricated metals employment totaled 41,000 in October 2012, up 1.0 percent (400 jobs) from the previous October. Exports of both industries posted strong gains in 2011 and Primary metals exports rose from $703 million in 2010 to over $1.0 billion in 2011 for a 49.0 percent increase; $1.1 billion in exports during the first three quarters of 2012 was 43.0 percent higher than for the same period in Fabricated metals exports rose 73.3 percent to $527 million in 2011, and were up by 11.8 percent to $388 million in the first nine months of As of November 2012, capacity utilization nationwide of 72.9 percent for primary metals was well below the industry s long term average of 79.2 percent. However, with 83.7 percent capacity utilization, fabricated metals manufacturers were operating above their 77.3 percent historical average. Currently, steel mills worldwide have the capacity to produce 1.8 billion tons annually, although orders in 2012 will only total around 1.5 billion tons. Furthermore, steel mills continue to add capacity; by one estimate, capacity could increase by 350 million tons through Growth in the state s primary and fabricated metals industries is likely to weaken in 2013 as demand in international markets slows. Real output is forecasted to rise 1.8 percent for primary metals and 1.4 percent for fabricated metals. Employment in the combined industries will grow by 0.4 percent during Producer level steel prices dropped 2.9 percent in 2012, and excess supply should reduce prices by about 2 percent in High capital intensity, commodity price swings, international competition (especially with India and China), and domestic regulation compliance costs continue to present challenges. 10 Alabama Economic Outlook Foreign Direct Investment: Alabama had 411 foreign owned firms from 30 countries in Machinery Machinery manufacturing, one of the state s large exporters, saw shipments climb 6.6 percent to over $1.2 billion in However, industry exports of $802 million are down by almost 10 percent for the first nine months of 2012 compared to the same period in Real output of Alabama s machinery producers rose 7.4 percent in 2012 to almost $1.1 billion. Employment of 10,600 in October 2012 was about 1.0 percent (100 jobs) above the year ago level. Capacity utilization for U.S. machinery manufacturers was at 81.2 percent in November 2012, above the long term average of 78.1 percent. In 2013 machinery manufacturing real output growth is forecasted to slow to 0.4 percent with employment increasing almost 0.5 percent. Increases in demand and the need to replace workers laid off during the recession will keep employment growing modestly. Electrical Equipment and Appliances As of October 2012, electrical equipment and appliance manufacturing nationwide was operating at 84.7 percent of capacity, higher than the 82.6 percent long term average. Overseas industry relocation continues mainly to China, but also to Vietnam and other lower cost countries. In 2012 Alabama s electrical equipment and appliance industry s real output rose 3.6 percent to $459 million. Employment of 4,800 in October 2012 was the same as in October After falling 18.1 percent to $162 million in 2011, industry exports were up $73 million (54.7 percent) to almost $205 million for the first three quarters of 2012 compared to the same period in The 2013 forecast is for real output from the state s electrical equipment and appliance manufacturers to rise 2.9 percent. However, employment is expected to increase by just over 1.0 percent due to the relatively capital intensive nature of the industry. Computer and Electronic Products After rallying in 2010, exports of Alabama s computer and electronic products industry declined 9.6 percent to about $630 million during In the face of intense global competition, exports continued to slide in 2012, falling 6.5 percent to $444 million for the first nine months of the year compared to the same period in As of November 2012, the industry nationwide was operating at 74.2 percent of capacity, below from its long term average of 78.2 percent. Despite declining exports, real output of the state s computer and electronic products manufacturers jumped 4.5 percent to nearly $2.3 billion during For the 12 month period ending in October, industry employment fell 2.9 percent (300 jobs) to 9,900 workers. Increases in consumer and business spending in 2013 are expected to result in real output growth of 3.9 percent, although employment could decline a slight 0.2 percent. Motor Vehicles and All Other Transportation Equipment In addition to producing motor vehicles and related equipment, Alabama s transportation sector includes firms manufacturing aircraft engines and parts, guided missiles, space and defense related equipment, ships and boats, railroad equipment, and other miscellaneous transportation equipment. The entire industry is sensitive to economic and business cycles, federal government spending, business spending on transportation, and consumer spending on motor vehicles and parts. As of November 2012, motor vehicle and parts producers nationwide were operating at 76.4 percent of capacity, above the long term average of 75.0 percent. Unlike the nation as a whole, the industry in Alabama was very close to full capacity in Transportation equipment and related industries are Alabama s largest exporters; $6.0 billion in exports during 2011 accounted for almost 35 percent of total state exports and were up 14.2 percent from The industry did

15 exceptionally well in 2012, with exports of $5.7 billion for the first three quarters of the year up almost 32 percent compared to $4.3 billion in the same period of The motor vehicles and transportation equipment industry pays some of the highest manufacturing sector wages in the state, averaging $50,000 to $70,000 annually. Employment across the state s transportation equipment manufacturing industry rose 6.6 percent (3,200 jobs) for the 12 month period ending in October 2012 to total 51,700. Companies engaged in motor vehicle production added 1,400 jobs and motor vehicle and parts manufacturers gained 1,600 positions. Real output increased 10.3 percent in 2012 to $2.1 billion for motor vehicle and parts manufacturers and 4.8 percent to $1.9 billion for other transportation equipment manufacturers. In 2013 real output of motor vehicles and parts firms is forecasted to grow 9.4 percent, with employment up 4.1 percent. Other transportation equipment manufacturers are expected to see growth in real output of 4.6 percent and employment gains averaging 3.1 percent. Nationwide, motor vehicle and parts sales are expected to rise 4.4 percent in New motor vehicle sales will increase 5.2 percent, with new car sales up 4.6 percent and sales of new light trucks rising by 5.5 percent. Construction This construction sector includes residential, nonresidential, and industrial construction, as well as heavy construction such as highways, bridges, and roads. Some specialty trade contractors (plumbing, insulation, roofing workers, electricians, etc.) are also included in the sector. Employment of 75,700 in October 2012 was down by 1,800 (2.3 percent) from October Firms in building construction shed 1,000 jobs during the 12 months and heavy and civil engineering related Alabama Construction Employment businesses lost 1,800, but Annual Percent Change specialty trade contractors 10 added 1,000 to payrolls. 5 Alabama employment in 0 construction has now 5 declined for five consecutive 10 years; the last annual increase 15 was in Real output of the construction sector rose Source: Alabama Department of Labor and 1.2 percent in 2012 to $6.8 Center for Business and Economic Research, billion and accounted for The University of Alabama. 4.3 percent of Alabama GDP. According to the Alabama Center for Real Estate (ACRE), home sales statewide rose 9.8 percent to 3,197 in October 2012 from the 2,968 sold in October The average home price was 9.1 percent higher at $150,467 and the median price rose from $115,829 to $127,137 during the 12 months. There were a total of 32,902 homes listed for sale in October 2012, down from 39,920 in October Housing starts statewide for October 2012 totaled 751, an increase from 645 a year earlier. A total of 773 building permits were issued in October 2012 compared to 606 in October Despite recent improvement in residential markets, both residential and commercial real estate markets remain relatively weak compared to prerecession levels, as tight lending conditions and lackluster demand for office and commercial space continues. Construction employment is expected to decline by 4.8 percent in 2013, but real output should rise 1.6 percent. In some areas of the state, commercial real estate markets are not expected to fully recover until 2014 or later. Wholesale Trade Wholesale trade, which covers all wholesale merchants and suppliers, had 73,300 workers statewide in October 2012, up 0.3 percent (200 jobs) from October Durable goods wholesalers including agents and brokers added 900 jobs, but nondurable goods wholesalers shed 700. Real output for the sector grew 2.7 percent in 2012 to $8.5 billion; wholesale prices rose 0.5 percent for the year. The 2013 forecast is for an increase of 3.1 percent in real output and 0.9 percent in employment. Overall price levels are expected to be flat in Retail Trade As of October 2012, Alabama s retail trade sector employed 230,300 and accounted for 12.2 percent of total nonfarm employment. Retail employment grew 0.8 percent (1,800 workers) from October 2011 to October Motor vehicle and parts dealers added 700 jobs during the 12 months, while payrolls in health and personal care stores were flat. However, general merchandise stores lost 2,300 jobs and food and beverage stores shed 600. The sector s overall real output rose 1.1 percent in 2012 to $12.8 billion, about 8 percent of Alabama GDP. In 2013 retail sales of durable goods are expected to increase 5.7 percent, with sales of furniture and household equipment up around 6 percent. Sales of food and beverages should increase 1.4 percent, while sales of clothing and footwear could rise by about 2 percent. This will contribute to a 1.3 percent rise in real output of the retail trade sector during 2013, as employment rises by 1.4 percent. Alabama Wholesale and Retail Trade Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. Retail Wholesale Alabama Economic Outlook 11

16 Alabama Information Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. Alabama Financial Activities Employment Annual Percent Change Information The information sector is largely comprised of communications related services such as publishers, broadcasters, and telecommunications and internet services providers. As of October 2012, these industries employed 21,400 across Alabama, down 10.1 percent (2,400 jobs) from October Real output for the sector rose 2.1 percent to $4.1 billion in Consumers and businesses continue to receive better services and lower prices as a Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. 12 Alabama Economic Outlook result of competition among internet service providers, but the industry is losing jobs because of competitioninduced innovation and higher productivity. Real output of the state s information related businesses is forecasted to grow 2.5 percent in 2013, while employment will shrink by 4.4 percent. Financial Activities The financial activities sector in Alabama includes finance and insurance, real estate, and rental and leasing firms. In 2012 higher productivity enabled real output to grow by 2.4 percent to $9.9 billion for finance and insurance and by 1.0 percent to $15.3 billion for real estate and rental and leasing. Employment across businesses engaged in financial activities rose 1.8 percent (1,700 jobs) to 94,500 between October 2011 and October 2012; 82.4 percent of job gains were in finance and insurance related firms. Exposure of Alabama s banking sector to commercial development and consumer loans still poses a threat for these institutions. In 2013 real output of the finance and insurance industry is expected to grow by 2.8 percent, while output of real estate and rental and leasing concerns will increase by around 1.0 percent. Employment in the state s financial activity sector is forecasted to rise by 0.7 percent during Professional and Business Services This sector includes professional, scientific, and technical services (PST), management of companies and enterprises (MCE), and administrative support, waste management and remediation services (ASWMRS). Before the Great Recession, professional and business services was one of the fastest growing sectors in Alabama. A relatively strong rebound in 2012 had real output rising 2.2 percent to $10.3 billion for PST, 3.7 percent to $1.3 billion for MCE, and 4.4 percent to $4.2 billion for ASWMRS. Professional and business services employment was 221,300 in October 2012, up 2.6 percent (5,700 jobs) from October Most job gains were in ASWMRS, which added 5,400 positions during the 12 months. Another 100 net jobs were created in PST and 200 in MCE. The 2013 forecast calls for real output growth of 3.0 Alabama Professional and Business Services Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. percent for PST, 3.5 percent for MCE, and 3.9 percent for ASWMRS. Total employment in the sector is expected to rise by 2.1 percent. Educational and Health Services Educational services and healthcare and social assistance businesses employed 220,500 in October 2012, up 2,200 or 1.0 percent from October Educational services had 20,800 workers in October 2012, while healthcare related industries employed 199,700. The relatively slow job growth in recent months is somewhat of a concern as the sector consistently showed employment gains during the recession. Businesses providing educational services added 500 positions during the 12 months. Job gains were seen in ambulatory healthcare services (1,500), while hospitals shed 300 workers. Nursing and residential care facilities added 400 workers to their payrolls. Real GDP grew 1.6 percent in 2012 to $770 million for educational services and 1.3 percent to over $11.7 billion for healthcare and social assistance. In 2013 real output among healthcare and social assistance concerns is forecasted to rise 1.2 percent, while educational services businesses could see a 1.6 percent gain. Employment in the entire sector will increase by around 1.0 percent. Alabama Education and Health Services Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. Leisure and Hospitality The leisure and hospitality sector includes arts, entertainment, and recreation services, as well as accommodation and food services, and employed 172,400 workers as of October About 4,700 jobs were added over the 12 month period ending in October 2012, a 2.8 percent increase. Most of the gains were in food services and drinking places (4,900), particularly in limited services eating places. In 2012 real output rose 1.5 percent to $3.9 billion for accommodation and food services and 0.6 percent to $541 million for arts, entertainment, and recreation. The

17 Alabama Leisure and Hospitality Services Employment Annual Percent Change Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama. leisure and hospitality sector, which was hit particularly hard by weak consumer and business demand during the recession, should continue to rebound at a relatively stronger pace in Arts and recreation services real output is expected to increase by 0.8 percent in 2013, while accommodation and food services output rises 1.8 percent. Sector employment is forecasted to increase by 2.8 percent during the year. Natural Resources and Mining Natural resources and mining encompasses coal mining, oil and gas extraction, and mining of metals and nonmetallic minerals such as stone, sand, and gravel. The sector s employment of 12,000 (with 6,400 in mining) in October 2012 was 500 less than in October 2011; mining accounted for 300 of the jobs lost. Real output rose 2.2 percent to $2.2 billion in 2012, primarily due to productivity gains achieved through technological improvements. Mining industry capacity utilization nationwide as of November 2012 was 91.1 percent, higher than its long term average rate of 87.3 percent. Alabama mining exports rose from $2.0 billion in 2010 to $2.3 billion in Relatively weaker world economies in 2012 resulted in Alabama exports of approximately $1.5 billion for the first three quarters of the year, down 13.7 percent from $1.7 billion in exports for the same period in The sector s real output is expected to rise 0.5 percent in 2013, while employment declines 2.5 percent. Crude oil prices are estimated to average $90 per barrel in The nationwide demand for coal is expected to be around 1.5 quadrillion Btu, about the same as in Wholesale coal prices will rise at about the same 1.0 percent rate as in Transportation, Warehousing, and Public Utilities This sector includes public utilities, warehousing, and transportation, including rail, water, and truck transportation. Employment stood at 66,600 in October 2012, up 0.2 percent (100 jobs) from the previous year. Real output of the state s utilities industry grew 1.4 percent to $4.2 billion in 2012 and is forecasted to rise at approximately the same rate in The nationwide capacity utilization rate in November 2012 was 75.3 percent, significantly below the 86.3 percent long term average. Real output of transportation and warehousing was up 4.4 percent in 2012 to $4.6 billion and should grow 2.1 percent in Total employment among transportation, warehousing, and public utilities firms is forecasted to rise 0.4 percent in $38.5 billion FY2012 Federal Contract and Assistance Awards in Alabama Government As of October 2012, federal, state, and local governments employed 371,200 workers in Alabama, accounting for about 20 percent of total state nonfarm employment. Jobs were down 8,200 from October 2011 as all levels of government continued to face budget constraints. Federal government employment in Alabama declined by 2.3 percent (1,300) to 56,200; state government employment shrank by 5,700 to 101,900; and local governments shed 1,200 jobs to employ 213,100. In 2012 real output of the government sector rose 0.5 percent to $24.3 billion and accounted for about 15 percent of Alabama GDP. Real output rose 2.2 percent to $6.3 billion for the federal civilian segment, 2.1 percent to $2.4 billion for the federal military segment, and dropped 0.4 percent to $15.7 billion for state and local governments. The 2013 forecast is for real output to increase by 1.4 percent for the government sector as a whole; growing 2.1 percent for federal civilian and 1.0 percent for federal military, and rising by 1.2 percent for state and local governments. Employment is not generally expected to rebound in 2013 forecasts call for a drop of 1.8 percent in federal government payrolls and a decline of 1.3 percent in state government employment; however, local government entities could see employment increase 0.4 percent. Agricultural Services, Forestry, and Fisheries and Farming This sector includes agricultural services such as farm labor and management services, landscaping, soil preparation, forestry and logging services, and fishing, hunting, and trapping services. Total real output rose 1.7 percent to $1.9 billion in 2012, with crop and animal production accounting for almost 75 percent of output. The sector employs approximately 15,000 workers, mostly in forestry and logging (around 7,000), fishing, hunting, and trapping (about 2,000), and agricultural and forest support activities. Alabama s agricultural products exports decreased from $515 million in 2010 to about $262 million in 2011, a 49.0 percent drop. For the first nine months of 2012, exports fell to approximately $90 million from about $198 million for the same period in the previous year. In 2013 real output for the sector is forecasted to grow 1.6 percent. Alabama Agriculture 47,500 farms 2011 (188 acre average) 700 Soybean production 2012 (14.5 mil. bushels) 49.1 % Peanut production 2012 (774 mil. pounds) 58.1% Broiler Production 2011 (1.04 bil. birds) 1.2% Alabama Economic Outlook 13

18 Alabama Gross Domestic Product (Millions of Chained 2005 Dollars) Alabama Gross Domestic Product 154, , , , , , , ,758 Agriculture, Forestry, Fishing, and Hunting 1,825 1,936 2,195 1,888 1,902 1,936 1,966 2,013 Mining 2,434 2,134 2,274 2,098 2,154 2,202 2,212 2,220 Utilities 4,158 4,347 3,874 4,110 4,188 4,248 4,308 4,367 Construction 7,192 7,162 6,443 6,578 6,714 6,792 6,899 7,056 Manufacturing 27,315 25,611 21,764 22,728 23,346 24,149 24,737 25,798 Nondurable Goods 11,023 9,301 9,356 9,146 9,239 9,336 9,392 9,579 Food Products 2,083 1,854 1,746 1,705 1,678 1,691 1,713 1,737 Textiles and Product Mills Apparel Paper 2,688 2,294 2,386 2,252 2,230 2,257 2,283 2,320 Printing and Related Activities Petroleum and Coal Products ,054 1,227 1,285 1,281 1,327 Chemicals 2,331 1,791 2,099 2,074 2,064 2,060 2,073 2,165 Rubber, Plastics 1, ,161 1,064 1,098 1,118 1,136 1,153 Durable Goods 16,292 16,310 12,408 13,582 14,107 14,813 15,345 16,219 Wood Products 1,224 1, ,119 1,136 1,152 1,198 1,295 Nonmetallic Mineral Products Primary Metals 2,053 2,930 2,451 1,972 2,013 2,049 2,086 2,122 Fabricated Metals 2,203 2,235 1,660 1,753 1,883 2,041 2,070 2,147 Machinery 1, ,071 1,075 1,125 Computer and Electronic Products 1,546 1,392 1,549 2,127 2,193 2,291 2,381 2,614 Electrical Equipment and Appliances Motor Vehicle Body, Trailers and Parts 3,669 3, ,780 1,904 2,101 2,297 2,493 Other Transportation Equipment 1,818 2,003 2,125 1,676 1,778 1,863 1,948 2,033 Furniture and Related Products Miscellaneous Wholesale Trade 9,317 9,240 7,995 8,123 8,286 8,505 8,771 9,104 Retail Trade 12,377 11,924 11,478 12,535 12,670 12,804 12,967 13,170 Transportation and Warehousing 4,458 4,577 3,891 4,163 4,437 4,630 4,727 4,881 Information 4,293 4,402 4,130 4,090 4,051 4,136 4,239 4,368 Finance and Insurance 8,284 8,593 8,559 9,232 9,695 9,924 10,202 10,550 Real Estate, Rental, and Leasing 14,789 15,651 15,318 14,604 15,120 15,272 15,425 15,577 Professional and Technical Services 9,226 9,850 9,687 9,859 10,054 10,274 10,579 11,057 Management of Companies 1,210 1,206 1,293 1,272 1,299 1,346 1,394 1,441 Administration and Waste Services 3,758 3,869 3,504 3,933 4,053 4,230 4,395 4,641 Educational Services Healthcare and Social Assistance 10,555 10,965 10,949 11,310 11,567 11,721 11,859 12,389 Arts, Entertainment, and Recreation Accommodations and Food Services 3,879 3,784 3,570 3,802 3,871 3,928 3,997 4,083 Other Services 4,496 4,436 4,255 4,424 4,495 4,547 4,600 4,650 Government 24,564 24,613 25,043 25,118 24,218 24,345 24,693 25,053 Federal Civilian 5,682 5,566 5,745 6,026 6,160 6,295 6,430 6,565 Federal Military 2,257 2,191 2,398 2,357 2,327 2,375 2,399 2,423 State and Local 16,625 16,856 16,900 16,735 15,731 15,675 15,863 16,066 Source: U.S. Department of Commerce and Center for Business and Economic Research, The University of Alabama, January Alabama Economic Outlook

19 Alabama Employment Total Nonfarm Employment 2,005,675 1,992,117 1,886,500 1,870,775 1,866,533 1,869,144 1,887,695 1,920,799 Manufacturing 296, , , , , , , ,323 Nondurable Goods 109, ,842 93,733 90,775 89,117 88,611 87,344 87,270 Food 34,108 34,450 32,858 32,175 31,583 31,311 31,518 32,292 Textiles Mills 8,550 7,850 6,425 6,608 6,308 5,844 5,499 5,147 Textile Product Mills 8,100 5,775 4,542 4,692 4,642 4,556 4,544 4,499 Apparel 11,025 9,783 7,408 5,700 4,200 3,511 2,950 2,732 Paper 14,067 13,758 12,767 12,500 12,475 12,489 12,543 12,703 Plastics and Rubber Products 14,625 14,533 13,350 13,167 13,550 13,511 13,502 13,518 Other Nondurable 19,433 18,692 16,383 15,933 16,358 17,389 16,789 16,379 Durable Goods 186, , , , , , , ,052 Wood Products 20,325 17,983 13,042 12,667 12,842 12,622 12,921 17,154 Primary and Fabricated Metals 47,433 47,125 41,050 39,583 40,358 41,489 41,904 42,904 Machinery 13,300 12,667 10,658 10,058 10,517 10,478 10,526 10,683 Computer and Electronic Products 15,325 14,733 12,942 11,258 10,192 10,033 9,803 9,733 Electrical Equip., Appliances and Components 5,533 5,350 4,892 4,800 4,725 4,800 4,851 4,915 Transportation Equipment 52,642 52,725 47,083 45,650 47,575 50,322 51,987 53,257 Motor Vehicle Manufacturing 12,125 11,950 10,850 10,217 10,175 10,811 11,258 11,914 Other Transportation 40,517 40,775 36,233 35,433 37,400 39,511 40,729 41,343 Furniture and Related Products 14,358 12,592 9,650 8,750 8,267 7,889 7,826 7,935 Other Durable 17,483 16,267 13,725 12,758 13,692 15,022 15,322 15,473 Wholesale Trade 82,167 80,633 74,442 71,817 71,767 71,811 72,472 73,367 Retail Trade 241, , , , , , , ,141 Natural Resources 12,867 12,558 11,808 12,008 12,350 12,344 12,032 11,926 Construction 112, ,475 91,733 87,200 78,883 73,589 70,069 73,676 Transportation, Warehousing, Utilities 71,392 70,958 66,392 66,342 66,792 66,189 66,480 67,737 Information 28,025 26,875 25,117 24,025 23,317 22,456 21,467 21,685 Financial Activities 99,825 99,125 95,775 92,042 92,508 93,333 93,967 95,558 Professional and Business Services 220, , , , , , , ,783 Educational and Health Services 208, , , , , , , ,706 Leisure and Hospitality 173, , , , , , , ,214 Other Services 81,067 81,658 80,075 79,925 79,917 82,178 83,900 85,197 Government 376, , , , , , , ,485 State 107, , , , , ,467 99, ,254 Federal Civilian 51,883 52,467 53,992 58,483 57,533 56,356 55,613 55,642 Local 217, , , , , , , ,589 Source: Alabama Department of Labor and Center for Business and Economic Research, The University of Alabama, January Alabama Revenue Forecasts (Millions of Current Dollars) Forecasts FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Total Tax Revenues $8,403.3 $8,197.1 $8,605.3 $8,930.9 $9,197.9 $9,491.3 $9,870.6 $10,245.1 Percent Change Sales Tax Revenues 1, , , , , , , ,310.7 Percent Change Individual Income Tax Revenues 3, , , , , , , ,136.7 Percent Change Corporate Income Tax Revenues Percent Change Other Tax Revenues 2, , , , , , , ,317.5 Percent Change Alabama Education Trust Fund 5, , , , , , , ,430.3 Percent Change Alabama General Fund 1, , , , , , , ,805.3 Percent Change Source: Alabama Department of Revenue and Center for Business and Economic Research, The University of Alabama, December Alabama Economic Outlook 15

20 Alabama s Automotive Industry: Accelerating into 2013 Alabama s automotive industry is expanding amid strong demand for the cars and light trucks built in the state by Honda, Hyundai, and Mercedes Benz. Production, which got off the ground when the first Mercedes M Class rolled off the line in 1997, climbed to more than 743,000 vehicles in 2011 moving Alabama past Kentucky to rank fourth in U.S. light vehicle production, behind Michigan, Ohio, and Indiana. The almost 810,000 vehicles built in the state by November 2012 was already an annual record. A total of 660,964 Alabama made vehicles were sold in the first 11 months of 2012, up 6.1 percent from a year earlier. Suppliers of parts, including engines, are also rising to meet the challenge of the increasing demand for their products. The automotive industry s rebound has helped propel manufacturing to the forefront of Alabama s recovery from the Great Recession. Alabama Car and Light Truck Production Source: Alabama OEM reports. 467, , , , , , , , , , , ,000 1,000,000 Ramping Up Production All three Original Equipment Manufacturers (OEMs) are in the process of adding to their already sizeable Alabama investments. Following on the heels of a $290 million body shop expansion, a $1 billion investment will bring production of the C Class sedan to Mercedes Benz U.S. International s Tuscaloosa County plant in The plant is temporarily running three shifts to maintain capacity as one assembly line is prepared for the new arrival. About 1,000 employees will be added to the current workforce of around 2,800. An additional $350 million investment and 400 hires will be needed for a new model to be produced beginning in Honda Manufacturing of Alabama s more than 4,000 associates began working two 10 hour shifts Monday to Thursday in January 2013 to free up Fridays for overtime. Almost 300 jobs have been created and $390 million invested since Fall 2011, as the plant added a new Honda Engineering facility, onsite consolidation center, and steel blanking operation. This investment will increase annual capacity to 340,000 vehicles and engines and bring production of the Acura MDX SUV to the Talladega County plant during After two years of running two 10 hour Monday through Friday shifts plus overtime, Hyundai Motor Manufacturing Alabama hired 877 employees for a third shift that started up in September. The new shift boosts employment to around 4,000 and production capacity to more than 345,000 vehicles per year. A $173 million expansion of Hyundai s engine plant, completed in Spring 2012, added around 200 jobs as the facility began producing Nu engines for the Hyundai Elantra. Toyota Motor Manufacturing Alabama announced an $88.3 million expansion of its Huntsville engine plant for additional V6 engine production beginning in Spring Plant capacity for 4 cylinder, V6, and V8 engines will increase to about 650,000, while employment rises by 125 to around 1,150. Navistar s two Huntsville factories employ over 300, with capacity for 150,000 diesel engines. With Honda and Hyundai building all their engines onsite, engine production in the state could top 1.5 million in Fueling an Expanding Supplier Network Over 350 automotive related manufacturers have plants in Alabama. This total includes 45 Mercedes suppliers; 42 Honda suppliers; and 52 Hyundai suppliers, with very little overlap. As demand for cars and light trucks has picked up, existing suppliers at first used overtime to add capacity, but are now increasingly setting their sights on expansion. Stronger demand is also improving the bottom line for many automotive parts producers who have been able to negotiate price pass throughs for raw materials. By mid November 2012, 17 existing Alabama suppliers had announced expansions that will create more than 1,300 jobs. The year also saw 10 new company announcements, with plans for 1,265 automotive industry positions. Growing Manufacturing Employment with Good Wages Alabama s auto industry growth accelerated in the mid 2000s, as the state s historically strong textiles and apparel industries withered. From 2000 to a prerecession peak in 2007, motor vehicle and parts manufacturers created 13,500 jobs, while manufacturers of textiles and apparel lost Transformation in Alabama Manufacturing Employment 35,000 Motor Vehicles 30,000 Motor Vehicle Parts Textiles 25,000 Apparel 20,000 15,000 10,000 5, Source: U.S. Bureau of Labor Statistics. 16 Alabama Automotive Industry

21 33,200. Motor vehicle manufacturing jobs have rebounded from their recent lows and jobs in textiles have declined just slightly, but the steep drop in apparel manufacturing has continued to the point that fewer than 3,500 jobs remained in Employment in motor vehicle and parts manufacturing averaged 27,500 for the first 10 months of 2012, while textiles and apparel employed 13,900. Total employment related to motor vehicle manufacturing is much higher than the direct industry jobs when related logistics and transportation businesses and firms supplying plastics and rubber products are included. The industry s high level of productivity and relatively high skill demands are reflected in the earnings of its workers. Weekly wages in motor vehicle manufacturing averaged $1,437 in 2011, amounting to annual pay of $74,625. That s the highest of the state s manufacturing industries, coming in just above wages in aerospace products and parts ($1,435), paper ($1,420), and chemical manufacturing ($1,392). Among all motor vehicles parts manufacturers in Alabama, the average wage amounted to $878, with the gasoline engine manufacturing segment higher at $1,013 per week. By comparison, 2011 wages across all industries averaged $792 and in manufacturing as a whole amounted to $945. At the same time, textile mills paid average weekly wages of $688, textile product mills $571, and apparel manufacturers $514. Alabama Average Weekly Wage 2011 All industries Manufacturing industries Motor vehicles Motor vehicle parts Motor vehicle bodies & trailers $792 $822 $945 $878 $1,437 $0 $400 $800 $1,200 $1,600 Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages. Increasing Foreign Direct Investment and Exports Since Mercedes Benz selected Alabama for its first passenger vehicle in 1993, foreign direct investment has played a major role in job creation and economic growth. From 2000 to 2010, FDI of $19 billion created around 65,000 jobs. A total of 426 foreign companies had investments in Alabama in Countries with the largest number of firms include Germany (68), Japan (67), and South Korea (59). Not surprisingly, these are the home countries of the state s OEMs and around half of these 194 companies are involved in auto and parts manufacturing or logistics. As the state s largest exporter, automotive manufacturing has been a major factor in export growth. This dominance has been increasing, with transportation equipment s share of total merchandise exports rising from 21.5 percent in 2000 to 38.1 percent during the first nine months of Canada receives the largest share of our vehicle exports, followed by Germany and China. After a sharp drop in 2009, Alabama s transportation equipment exports have posted strong gains; shipments totaling $5.66 billion through September 2012 are up 31.9 percent from the same period in $ Billions Alabama Export Trends Total Transportation Equipment Source: U.S. Department of Commerce, International Trade Administration. Mercedes Benz recent introduction of SKD (Semi Knock Down kit) shipments to India, Thailand, and Indonesia is opening up new markets for Alabama s automotive exports. Raising the Bar on Workforce Preparation Increasing skill demands of today s high tech automotive industry coupled with rising employment have Alabama s workforce development agencies and educational institutions focused on increasing and improving targeted training for jobs in the industry. In particular, employers are challenged to find enough qualified applicants to work as industrial maintenance technicians. The community college system is key to preparing these workers, offering specialized training programs for various automotive positions, often working with local OEMs and suppliers to design the curriculum. Apprenticeship and co op programs have been set up with local plants to pair hands on experience with classroom knowledge. And high schools are establishing technical training programs to engage students in the industry early on. Failure to provide the workforce needed by the automotive industry will ultimately limit its growth in the state. Looking to the Future Industry reports in 2012 put the average age of vehicles in the United States at 11 years and the average age of trade ins on a new vehicle at six years. Replacement needs portend well for the future of Alabama s automotive Millions U.S. Light Vehicle Sales by Category 10 Cars Source: IHS Global Insight. manufacturing industry. Forecasts for car sales out to 2020 from IHS Global Insight show average annual sales nationwide picking up from 7.3 million in 2012 to 8.87 million in 2020, a 21.5 percent increase. Sales of light trucks, including pick ups, minivans, and SUVs, are expected to increase from 7.06 million in 2012 to 8.05 million in 2016, before tapering off to a forecasted 7.89 million in Industry analysts note that exchange rates encourage foreign automakers to aim for North American production of around 85 percent of their vehicles sold in the United States. Light Trucks Alabama Automotive Industry 17

22 Alabama Metropolitan Areas Alabama Nonfarm Employment (Thousands) 2,015 1,960 1,905 1, Source: U.S. Bureau of Labor Statistics. The recovery began to strengthen across Alabama s 11 metropolitan areas during While only 400 metro jobs were added between October 2011 and October 2012, employment in most areas was increasing or flat during the 12 months. Declines in Auburn Opelika and Tuscaloosa s sizeable state and local government sectors accounted for most of the job losses. However, the state s metro areas still need to add around 97,700 jobs to boost employment back to the October 2007 prerecession level of 1,535,100. New and expanding industry announcements picked up in most areas during 2012, with manufacturing projects concentrated in the automotive, aerospace, shipbuilding, and primary and fabricated metals industries. Diversification was a focus and metros added jobs in fields including information technology, biotechnology, healthcare, professional and scientific services, and warehousing and logistics. Retail development activity increased as household income improved. Alabama s metro areas provide an ample workforce for new and expanding businesses. Using underemployment estimates from a 2011 survey by the Center for Business and Economic Research and October 2012 employment data, the available labor pool of unemployed and underemployed metro residents was around 474,000. Partnerships between the business community and secondary and higher education institutions are key to ensuring that this potential workforce has the skills area employers need. Anniston Oxford Although the Anniston Nonfarm Employment (Thousands) Oxford economy had 54 challenges arise in 2012, the overall picture for the 51 calendar year was a positive 48 one. Total nonfarm employment in the area was 48, in October 2012, a percent increase from Source: U.S. Bureau of Labor Statistics. October The trade, transportation, warehousing, and utilities sector, along with the government sector each added 300 jobs. Three other sectors had job gains of 100 each. The local labor force expanded in 2012, up 1.3 percent to 54,085, and total employment of local residents increased 1.8 percent to 49,670. This increase in employment caused the unemployment rate to inch downward, from 8.6 percent in October 2011 to 8.2 percent in October The Anniston Oxford metro area had an underemployment rate of 19.7 percent based on a 2011 CBER survey. Applying this rate to October 2012 employment data gives an estimated 9,785 underemployed workers. Added to 4,415 unemployed, there was an available labor pool of 14,200 for the metro area; 3.2 times the number of unemployed. Employment forecasts suggest improvement in 2013 with an anticipated growth rate of 1.8 percent. GDP growth of 2.4 percent is expected in the coming year. With 13,800 nonfarm jobs, government remained the largest employer in Anniston Oxford in Most growth in this sector was in state and local government, which increased employment by 500 to 8,800 in the past year. Jobs in the area s federal government sector decreased by 200 to total 5,000. After news at the beginning of the year that 562 civilian employees would be laid off at the Anniston Army Depot, it was announced that the Depot would keep 386 of those employees through March Employment cuts were not as steep as anticipated, however, and overall 172 employees were laid off or retired, with a few moving into vacant positions. Some additional layoffs were due to the closure of the Anniston Chemical Incinerator. The Depot saw some positive activity this year when it opened a new $18 million small arms repair facility. Other bright spots were the city of Anniston constructing a new LEED certified justice center, and increased revenues from the new 10 cent sales tax rate. The underemployment rate is based on 2011 underemployment data collected by The University of Alabama s Center for Business and Economic Research. Applying this rate to October 2012 labor force data results in an estimated number of employed residents who were underemployed. Totaling unemployed and underemployed residents gives a more realistic measure of the available labor pool in a metro area. Prospective employers must be able to offer the underemployed higher wages, better benefits or terms of employment, or some other incentives to induce them to change jobs. 18 Alabama Metropolitan Areas

23 Manufacturing employment remained steady at 5,700, or 11.7 percent of nonfarm employment as of October BAE Systems closed one of its Anniston facilities dedicated to vehicle upgrade and overhaul at the end of 2012 and all of its 145 employees were released from their contracts. The layoffs are a part of a national trend of military cutbacks. Toward the end of the year BAE Systems received a $37.6 million U.S. Army vehicle upgrade contract to provide spare parts and kits needed to convert 250 RG33 Mine Resistant Ambush Protected Vehicles into Medium Mine Protected Vehicles (MMPV). This did not restore any of the 145 jobs that were cut, but it kept projected layoffs from being greater. General Dynamics, which has a public private partnership with the Anniston Army Depot, announced layoffs of 98 in January 2013 as part of a normal step down in production. In Oxford, Associated Metal Cast and FabArc Steel Supply created 35 jobs with two new metal manufacturing facilities. The auto supplier Bridgewater Interiors is completing a $5.5 million expansion in Oxford, adding 60 jobs in 2012 with another 27 on the way in New and established local businesses were bolstered by developments in the Anniston Oxford metro, causing retail sector employment to expand by 100 to 5,800. Patriot Joe s Ales at Heroes in Weaver is the first in the area to serve beer brewed at the eatery and bar. Cheaha Brewing Company followed not long after when they requested zoning approval needed to open a restaurant and brewery at the site of the former Louisville & Nashville rail depot. Oxford s retail offerings will increase when Publix opens in the new Oxford Commons in 2013; tenants include Panera Bread and Academy Sports and Outdoors. Tourism dollars poured into the metro area as the Sunny King Criterium, the Noble Street Festival, and the Woodstock 5k at Wig s Wheels attracted thousands. Other area developments will continue to attract tourists in the coming years. Coldwater Mountain Trail, which developed an 11 mile segment in 2012, has about $300,000 in grants for use Services on its next phase of development and plans to add 20 miles to the trail in Anniston received a $50,000 grant to extend the Chief Ladiga Trail, which goes through town and eventually on to Atlanta. The Alabama Scenic River Trail organization hopes to draw more interest by placing signs on Terrapin Creek that show a map of the river trail and its nearby attractions. A new splash pad, funded through a $100,000 Community Development Block Grant, replaced the pool at the former Hamilton Boys and Girls club. Renovations and investments were made in Anniston Oxford area buildings during the year. The Oxford Board of Education approved $29.8 million in construction and renovation projects for Oxford schools, including a career Change from October 2011 October Total Professional Educational Leisure and 2012 Services and Business and Health Hospitality Alabama 697,900 15,900 5,700 2,200 4,700 Anniston Oxford 17, Auburn Opelika 17, Birmingham Hoover 195,100 4,100 1, ,000 Decatur 18, Dothan 21, Florence Muscle Shoals 20, Gadsden 15, Huntsville 91,100 2,500 1, Mobile 71, Montgomery 60, Tuscaloosa 28, Source: Alabama Department of Labor. Nonfarm Employment Total October Change from October Number Percent Alabama 1,887,900 13, Anniston Oxford 48, Auburn Opelika 53,000 2, Birmingham Hoover 489, Decatur 55, Dothan 57, Florence Muscle Shoals 56, Gadsden 35, Huntsville 207, Mobile 177,000 2, Montgomery 165, Tuscaloosa 91,200 2, Net Jobs in Metropolitan Areas 400 Net Jobs in Nonmetro Counties 13,300 Note: Nonfarm employment (jobs) is by place of work. Source: Alabama Department of Labor. Manufacturing October Change from Percent of 2012 October 2011 Area Jobs Alabama 245,000 6, Anniston Oxford 5, Auburn Opelika 5, Birmingham Hoover 36,300 1, Decatur 12, Dothan 5, Florence Muscle Shoals 7, Gadsden 5, Huntsville 20,800 1, Mobile 15, Montgomery 18,000 1, Tuscaloosa 13, Source: Alabama Department of Labor. Alabama Metropolitan Areas 19

24 technology building at Oxford High School and $1.6 million in renovations to Coldwater Elementary. Anniston High School underwent renovation to create a space for the new two year cosmetology program, the 10th career and technical education program at the school. Anniston s streets received a visual upgrade by way of a 90 foot mural on the corner of West 15th Street and Glen Addie Avenue, a stop on the Anniston Civil Rights and Heritage Trail which depicts scenes from the street s historical center of black trade. The Anniston Oxford metro was one of only two metro areas in the state to shrink in size in 2011; its population of 117,797 in July 2011 was down 0.5 percent from one year earlier. Area housing markets were only mildly active in The Anniston Oxford FHFA House Price Index in the third quarter was flat for the first nine months of the year, but was still better than the 0.5 percent drop statewide. Just 35 single family units and no multi family units were permitted in the area through the first three quarters of Home sales fared better; the 832 homes sold over the first three quarters was a 5.6 percent increase from the same period in In spite of mixed employment numbers, median family income in Anniston Oxford grew 1.4 percent to $52,200 in FY2012 but was still just 94.2 percent of the statewide median. Per capita income in 2011 increased 3.2 percent to $31,758, slightly lagging the statewide gain of 3.5 percent. Total bank deposits rose 2.5 percent from 2011 to $1.65 billion as of June 30, Auburn Opelika Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. Manufacturing dominated the news in the Auburn Opelika metro area during 2012, with new and expanding companies primarily in the automotive and medical products industries. Still, after posting a relatively strong increase of 1,100 jobs in 2011, nonfarm employment averaged just 52,400 for the first 10 months of 2012, down about 1,000 from the same period in Looking at October 2012 compared to October 2011, employment fell by a steeper 2,100. A 1,300 job decline among state and local government entities accounted for most of the losses; no sectors added jobs. Both the area s labor force and the number of employed residents fell by about 1,500 during this 12 month period, leaving the unemployment rate little changed from a year ago at 6.7 percent tied for lowest among Alabama s 11 metros. Despite a dip in employment in 2012, Auburn Opelika is well positioned for growth. A 2011 CBER survey found an underemployment rate of 20.9 percent for the metro area. Applying this rate to October 2012 employment data gives an estimate of 13,174 underemployed residents. Combined with 4,556 unemployed, the area s available pool was around 17,730, 3.9 times the number of unemployed. Forecasts for 2013 from the Center for Business and Economic Research have employment rebounding with an increase of 1.2 percent. Area GDP is expected to rise 2.1 percent during the year. Activity was strong in Auburn Opelika s manufacturing sector during 2012, although employment declined by 100 between October 2011 and October Manufacturing accounted for 10.9 percent of nonfarm jobs; below the 13.0 percent statewide. A number of new industries and expansions set for completion in 2013 will more than make up for the 250 positions that Briggs and Stratton will phase out as it moves production of horizontal shaft engines to China. The $30 million GE Aviation plant, scheduled to open in March in Auburn s West Tech Park, will hire 300 to 400 as production ramps up and will emphasize employing military veterans. SiO2, a manufacturer of products for the biological drugs industry, broke ground in Auburn for a $90 million facility that should be complete early in 2013 and will create around 300 jobs; SiO2 supplier Capitol Medical Technologies will also locate in the area. The Auburn Opelika area s automotive supplier cluster continues to grow. With the opening of ARKAL Automotive s $7.2 million facility that will employ 25 in Auburn s Technology Park West, the metro has 22 manufacturing facilities of foreign based companies. Seung Chang Airtek (SCA) s new plant expanded its operations in Auburn; Daewon America is investing more than $13 million and hiring 32 as it opens a new production line in 2013 at its Opelika facility. Opelika s Mando America is also adding a production line at its North American corporate headquarters, with an investment of $24.3 million that will add 30 jobs when complete this spring. German auto supplier Rausch & Pausch LP (RAPA) announced plans for an $18 million U.S. headquarters and production facility in Auburn Technology Park West that will open in the fall and create 105 jobs over five years. Other automotive supplier expansions in 2012 included Wiedmann Plastics $15 million investment in its Opelika plant with 40 jobs and Hanwha s $4.2 million investment that added around 30 positions. Among other developments, Aluminum Technology Schmid NA is investing $3 million and hiring 15; German precision metal works company Wuerz Precision Technologies will open its first U.S. operation in the Schmid plant with a $2.8 million investment and 12 employees. Medical device maker MDVice plans to create 18 jobs after a $1.2 million expansion. MasterBrand Cabinets held a job fair in October as it looked to hire about 125 production employees for a new third shift at its Auburn facility. Opelika approved an addition to automotive engineering and customization company APR, which plans to hire 25 workers. A grant to KD Bearings will help with training and facilities improvement. Services employment, which fell by 400 in the 12 months ending in October 2012, was boosted late in the year by the addition of around 175 web chat customer service and sales representatives at Afni Inc. s Opelika 20 Alabama Metropolitan Areas

25 operations center. Earlier in August, the Goodwill Career Center hired for 400 full and part time positions in security, ticket taking, guest services, and other functions related to event operations. In healthcare developments, an American Family Care Clinic opened in the TigerTown shopping center. Auburn University reached an agreement with Edward Via College of Osteopathic Medicine for a campus in Auburn, with plans for collaborative biomedical research and other healthcare projects. The first class of 150 students is expected to enter in the fall of However, the plan drew opposition from the Alabama Osteopathic Medical Association due to potential conflicts in areas including student recruitment with Dothan s Alabama College of Osteopathic Medicine which is set to open in In other services related developments, Jo Ann Stores undertook a $2 million expansion of its Opelika distribution center. Bank deposits in the Auburn Opelika metro were up a strong 5.2 percent during the year ending June 30, 2012 to total $2.1 billion. As the presence of Auburn University is a major influence in the metro area, Auburn Opelika had 30.9 percent of its workforce in state and local government employment in October 2012, well above the state s 16.7 percent share. The university, which enrolled 25,134 students in Fall 2012, had a number of construction projects ongoing during the year, including renovations to the Lowder Business Building, construction of a $47 million small animal hospital, a new $53 million Wellness and Recreation Center, a $51 million student residence hall, a Department of Kinesiology facility, and the Center for Advanced Science Innovation and Commerce. Many of these projects will be completed in Auburn s Cyber and Security Center opened at Auburn Regional Airport late in 2012, with the University s new senior counsel for national security programs, Lt. General Ron Burgess, overseeing the center s programs. A new research facility to develop and test poultry feed is a joint venture with the poultry industry. With a growing South Korean industrial and cultural presence in the area, Auburn opened a Korea Center, offering noncredit language and culture classes in partnership with Keimyung University. The Auburn Opelika metro saw a number of new retail stores and restaurants open during Publix opened in Auburn s The Shoppes at Cary Creek, with Nail Boutique, Urgent Care, and Louie s Chicken Fingers among other tenants. Opelika s TigerTown added a Shoe Station; outdoor sporting goods retailer Gander Mountain is building a store nearby. A 13 screen Carmike Cinema planned for Opelika is expected to open late in Demolition of the Heart of Auburn Inn early in 2013 will make way for The Shoppes at the Heart of Auburn which will be anchored by CVS. Both Auburn s Kmart and Sears stores closed in 2012; a smaller Sears Hometown Store is locating in Opelika s Midway Plaza. Strong population growth continued in the Auburn Opelika metro during 2011, adding almost 2,700 residents during the year ending July 1 for a 1.9 percent gain, compared to a 0.4 percent increase statewide. Housing Labor Force Civilian Labor Force Change from October October Number Percent Alabama 2,182,838 5, Anniston Oxford 54, Auburn Opelika 67,650 1, Birmingham Hoover 528, Decatur 74, Dothan 65, Florence Muscle Shoals 71, Gadsden 45, Huntsville 213, Mobile 193,953 1, Montgomery 170, Tuscaloosa 99,208 1, Source: Alabama Department of Labor. Total Employment Change from October October Number Percent Alabama 2,011,638 5, Anniston Oxford 49, Auburn Opelika 63,094 1, Birmingham Hoover 491,124 2, Decatur 68, Dothan 60, Florence Muscle Shoals 66, Gadsden 42, Huntsville 199,055 1, Mobile 177,069 3, Montgomery 156, Tuscaloosa 91,506 1, Note: Total employment is by place of residence. Source: Alabama Department of Labor. Unemployment Rate United States Alabama Anniston Oxford Auburn Opelika Birmingham Hoover Decatur Dothan Florence Muscle Shoals Gadsden Huntsville 7.1 Mobile Montgomery 8.5 Tuscaloosa October 2012 October 2011 Source: Alabama Department of Labor. Alabama Metropolitan Areas 21

26 activity picked up in 2012, with 1,074 homes sold in the first 10 months of the year up 8.8 percent from the same period in However, prices did not recover; the FHFA House Price Index for third quarter 2012 was 0.5 percent lower than a year earlier and 11 percent lower than five years ago. There were 510 single family homes permitted during the first three quarters of 2012, about 100 more than a year earlier, but just 56 multi family building permits were issued. The area continued to develop its infrastructure during Auburn issued warrants for construction of a new elementary school and to purchase land for a new high school, Opelika broke ground on a $40 million high school that will be completed in 2014, and the Lee County Board of Education awarded a contract for construction and renovations at Beauregard High School. New Exit 50 on I 85 in Auburn opened, providing quicker access to Auburn Technology Park, and work continued on Cary Creek Parkway. A $200,000 Appalachian Regional Commission grant to Notasulga will improve public water services. Opelika Power Services new $3.7 million facility is integral to the fiber optic network being built throughout the city. Ongoing streetscaping and other developments in Opelika s downtown earned the American Planning Association s Outstanding Small Town or Rural Plan award. Outdoor opportunities for area residents will increase due to funding to create mountain bike trails in Auburn s Chewacla State Park and to develop trails and other facilities in Opelika s Siddique Nature Park. Auburn voters approved a bond issue for parking improvements downtown and for work at the Frank Brown Recreation Center. Both 2011 per capita income of $29,208 and average annual wages of $37,670 were below statewide averages due to the large percentage of students in the area. However, FY2012 median family of $61,400 was higher than Alabama s and ranked third highest among the 11 metros. Birmingham Hoover Progress on projects in Nonfarm Employment (thousands) downtown Birmingham, 540 growth in the area s transportation and 520 logistics sectors, and continuing healthcare 500 developments were sources of strength in the Birmingham Hoover metro Source: U.S. Bureau of Labor Statistics. area during Services businesses drove employment growth, adding 4,100 jobs during the 12 months ending in October About 400 of these positions were in ambulatory healthcare, while professional, scientific, and technical services and management of companies and enterprises each contributed 200 net jobs during the period. But the large share of the area s job gains, including 900 in administrative support and waste management and 2,100 at food services and drinking places, as well as 2,600 among retail trade businesses, were in sectors where wages are generally relatively low. This emphasizes the importance of area initiatives to attract high tech and other high wage employment. Job losses during the year were concentrated in the metro s construction and government sectors. Across all industries, the Birmingham Hoover metro added 200 jobs between October 2011 and October This increase, albeit modest, was a positive change from the previous four years when October to October employment declined. Sentiment among area business executives, measured by the Center for Business and Economic Research (CBER) s Alabama Business Confidence Index (ABCI) showed confidence that the Birmingham Hoover economy was expanding through the first three quarters of 2012; the fourth quarter reading was flat as uncertainty about the national economy depressed expectations. Birmingham Hoover ABCI panelists generally expected sales, profits, hiring, and capital expenditures at area businesses to be flat or improving throughout CBER forecasts have nonfarm employment in the Birmingham Hoover metro growing by 0.4 percent in Area GDP could increase by a larger 1.6 percent during the year. Total employment of area residents rose to 491,124 in October 2012, up 2,610 from a year earlier for a 0.5 percent increase. Birmingham Hoover s labor force contracted by a slight 431; employment growth and fewer residents looking for work combined to lower unemployment from 7.6 percent in October 2011 to 7.0 percent in October 2012, third lowest among the state s 11 metro areas. According to a 2011 CBER survey, an estimated 26.9 percent of employed residents of the seven county metro area felt that they were underemployed, above the statewide underemployment rate of 24.0 percent and second highest among the metros. Applying this rate to October 2012 labor force data indicates that an estimated 132,201 Birmingham Hoover residents were underemployed. Adding in the 37,243 unemployed in October, the area s available labor pool was around 169,400 residents, 4.5 times the number of unemployed. Businesses that are considering locating in the Birmingham Hoover metro or are hiring for expansion or replacement can view underemployment as an opportunity, although prospective employers will need to offer these workers some incentive to change jobs in the form of higher wages, better benefits or terms of employment, etc. Manufacturing was a growth sector for the Birmingham Hoover metro, with 1,100 durable goods manufacturing jobs added between October 2011 and October Still, with 36,300 workers, manufacturing accounted for just 7.4 percent of total nonfarm employment in October lowest among the state s metro areas. Close proximity to both the Mercedes Benz and Honda plants has helped the Birmingham Hoover metro attract automotive suppliers as well as provide jobs for area residents who are willing to commute to the OEMs. The addition of Mercedes C Class production will bring about 1,000 new jobs at the plant and new and expanding suppliers during 2013, providing new opportunities for the metro area. Kamtek, 22 Alabama Metropolitan Areas

27 which continued work on a $310 million expansion that will create around 400 jobs, also purchased the former Del Monte distribution warehouse in Pinson Valley. G & B Global is a new supplier in Jefferson County, investing $4.8 million and hiring 75. Expansions were announced at Walker County manufacturer Fontaine Trailer, which is adding 100 workers, and auto suppliers Hayashi Telempu NA (75 jobs), which opened as Amtex early in 2012, and Vistech Manufacturing Solutions (10 jobs). In St. Clair County, Eissmann Automotive is expanding and adding 35 jobs, while a $13.5 million project at Yachiyo Manufacturing will boost employment by 66. Birmingham motorcycle manufacturers Motus, which is relocating to the former Barber Motorsports Museum downtown, and Confederate Motors, both planned expansions during the past year. Other industrial developments included a planned $2.8 million expansion and 50 new jobs at conveyor belt manufacturer Dayjon in Bessemer. Birmingham s O Neal Industries is growing its metal products and processing services and hiring 15. New industry Nufab Rebar is investing $7 million and bringing 75 jobs to Riverside in St. Clair County. Boatright Railroad Products $55 million railroad crosstie plant in Chilton County will begin operations in the first quarter of 2013; employment should reach 100 by the end of the year. Prospects are looking up for Kaiser Aircraft Industries, which purchased the assets of the former Alabama Aircraft Industries in 2011; the company received a five year contract to build helicopter parts for the U.S. Army. Birmingham Fastener expanded its Pratt City operation, while outdoor furniture manufacturer Summer Classics consolidated its operations at the old Moore Handley building in Pelham. However, Vulcan Materials laid off personnel and Rock Mountain Mining idled 124 workers early in Completion of Norfolk Southern s $97.5 million Birmingham Regional Intermodal Facility late in 2012 gives a big boost to the area s transportation, warehousing, and distribution clusters. While the facility will employ about 200 directly, it is expected to spur growth among businesses that use its services. The Norfolk Southern facility and other area railroads attracted Memphis Intermodal Cartage to open an area office; employment is expected to reach 30 in An expansion at logistics company Access America Transport will create 45 jobs. CSX s proposed railroad line and overpass near Elmwood Cemetery could add about 50 Birmingham jobs. In Bibb County, ThyssenKrupp Materials new $13 million processing and distribution center will ramp up from 20 to 45 jobs over five years. Sporting goods company Hibbett s purchased the former CVS Caremark building for its new headquarters, planning to add about 50 jobs; Hibbett s is also building a warehouse and distribution center in Alabaster where a $16 million facility for Alabama Crown beverage distributor will employ 70. Teasy Tea moved the headquarters for its wholesale division to Birmingham. However, Birmingham based Adams Produce filed for bankruptcy and laid off all its workers. Gross Domestic Product 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Tuscaloosa, 5.1 Dothan, 2.7 Decatur, 2.8 Auburn Opelika, 2.1 Rest of state, 20.0 Montgomery, 8.7 Mobile, 9.2 Huntsville, 12.1 Birmingham Hoover, 32.0 Metro Percent of State GDP, 2010 Source: U.S. Bureau of Economic Analysis. Gadsden, 1.5 Florence Muscle Shoals, 2.4 Anniston Oxford, 2.2 Dedication of the Benjamin Russell Hospital for Children in June culminated a $400 million plus project to provide expanded, state of the art facilities for children s medical care. A $57 million expansion at Princeton Baptist Medical Center, completed in November, includes a new lobby and chapel and enlarged and upgraded operating rooms. UAB s Comprehensive Cancer Center received a grant to investigate ways to reduce cancer care costs and will add 50 jobs. The university s anesthesiology department moved into new offices at its Women and Infants Center/Radiation Oncology facility. While Cardiovascular Associates of the Southeast occupied a new $21 million building at the Colonnade. However, the fate of several potential projects was unresolved in 2012, as Brookwood Hospital sought state approval for a freestanding Emergency Room, HealthSouth worked toward establishing a new physical rehabilitation hospital in Shelby County, and objections to Trinity s plan to occupy the unfinished HealthSouth hospital on U.S. Hwy. 280 continued. Jefferson County converted its Cooper Green Mercy Hospital to an urgent and primary care facility at the start of 2013, discontinuing inpatient care and adding 210 layoffs to the 100 jobs cut at the hospital earlier in With over 80 tenants, Innovation Depot continued to spur development of technology related businesses. Several of the area s biotechnology companies, including Soluble Therapeutics and Vaxin, received NIH grants for their work during the year. Vivo Biosciences had one of the top 10 innovations of 2012, according to Scientist. And Agenta Biotechnologies spun off Magenta Medical to market a new surgical membrane. However, the area will have to work to keep its biotech firms, as Vaxin moved outof state. The National Business Incubator Association recognized Innovation Depot for helping international entrepreneurs and companies find their way into U.S. markets. Expanding its research capabilities, Southern Alabama Metropolitan Areas 23

28 Research Institute (SRI) opened an expanded facility with high bay labs capable of testing rocket components and aircraft sections, adding 24 jobs. The health of Birmingham Hoover metro area banks generally improved in 2012, with 300 jobs added during the 12 months ending in October and deposits up 1.1 percent to $29.4 billion for the year ending June 30, Regions Bank completed the $1.2 billion sale of Morgan Keegan and repaid $3.5 billion in TARP money and repurchased warrants during the year. The bank was hiring for 100 openings early in 2012 and could add up to 100 employees due to its new relationship with PrimeVest Financial Services. BBVA Compass, which completed a $362 million computer system upgrade, added about 30 employees as it expanded its Birmingham mortgage operations center. Although employment in the area s insurance industry was flat, Proassurance was adding about 40 jobs in Birmingham with a new processing center. Protective Life undertook a $15 million rebranding campaign and invested $10 million in a customer call center. In other services related developments, Pell City s $48 million Alabama Department of Veterans Affairs seniors facility opened in late spring, creating over 250 jobs. Work got underway on a $6.1 million Alabama Department of Human Resources facility in Pell City. Birmingham saw a new Disability Rights Resource Center and a new headquarters for Independent Living Resources. Work progressed on the $201 million makeover of Birmingham Shuttlesworth International Airport, with the new Concourse B nearing completion. The Dwyer Group, with several service franchises, added 55 area jobs. New ownership brought new features to the former Alabama Adventure, now named Alabama s Splash Adventure Waterpark. Two managers hired by the City of Hoover will work to attract events to the former home of the Birmingham Barons; Hoover High School football games and the Southeastern Conference baseball tournament are on the schedule. The Barber Vintage Motorsports Museum, recognized as one of the must see private museums by Four Seasons, will experience expansion in will be an exciting year for the City of Birmingham as the many projects under construction and the plans laid during 2012 are realized. Regions Field, the new home of the Birmingham Barons baseball team on the city s Southside, broke ground early in 2012; the $64 million, 8,500 seat stadium project will be ready for the first home game of 2013 on April 10. Also slated for the site are a Negro League Museum, family fun area, banquet hall, a private club area, and luxury suites, which are sold out. A partnership between the Barons and Children s of Alabama will make three surface lots available for game parking, bringing to 2,500 the number of spaces within a five minute walk of the stadium. The adjoining Railroad Park, a catalyst for development in the area, received the Urban Land Institute s Urban Open Space Award for Development near the park is increasing, with the adjacent Avondale commercial district seeing locally sourced Freshfully, Painted Shovel Mercantile, and Saw s Soul Kitchen join anchor Avondale Brewing Company. Hiring began in the fall at the Westin Birmingham Hotel, a 294 room, $50 million project that will anchor the Uptown entertainment district at the Birmingham Jefferson Convention Complex when it opens January 31. With Octane Coffee, Todd English P.U.B., and Texas de Brazil steakhouse committed to the development, four to six spaces retail spaces were still available late in Planning continued for development of downtown Birmingham s Theater District; current efforts to restore the Lyric Theater were boosted by a $500,000 commitment from the City of Birmingham. The new Dorothy Jemison Day Theater at the Alabama School of Fine Arts provides a 500 seat performance venue and student laboratory, which is being used by area arts groups. Other areas in the downtown vicinity also saw activity pick up in In the Lakeview district, completion of 29 Seven added 54 apartments and retail to the area. New entertainment venues and restaurants in Five Points South included Black Market Bar and Grill and Infinity Bar. World of Beer joined Pepper Place s Hop City Craft Beer and Wine in the craft beer market. Waffle House will open in Plans moved forward for a Homewood Suites at the former Five Points Music Hall site. Birmingham s office market, which was generally relatively stable in 2011 and saw modest development in 2012, should experience moderate absorption during 2013, particularly in the downtown area. Although Merrill Lynch moved its offices from downtown Birmingham to Homewood, more companies moved into the city in 2012 than moved out. Firms making or planning a move downtown included Big Communications, Harbert Management, and Dunn Building. Among other companies renovating and moving into existing buildings in the downtown Birmingham area were Cadence Bank, which relocated to the Concord Center; web design firm Kinetic Communications, moving into the former Zen nightclub building; Seal Hanson LLC in the Birmingham Realty building; and the Birmingham School of Law, consolidating its facilities in the former German Auto Building. The federal government office presence downtown will grow with a $19 million U.S. Treasury building, set to start construction early in A $41 million project to modernize the federal building and courthouse will be complete in the fall. The former Regions Plaza will see new life as the home of Viva Health and UAB administrative offices. City incentives are helping turn the closed McRae s store into a Planet Fitness and retail shops. A public/private partnership in the newly designated Sloss Business District has Integrated Medical Systems International renovating a facility as a wellness center and relocating more than 150 employees from Homewood following refurbishment of its existing building next door. 24 Alabama Metropolitan Areas

29 Retail activity picked up across the Birmingham Hoover metro as the area s recovery from the recent recession continued. A $60 million redevelopment of Hoover s Galleria got underway with updates to parking decks, entrances, and restrooms; a Von Maur department store will open in the former Macy s space this fall. New mall stores included Pandora, Destination Maternity, Rainbow and Torrid; outparcel developments included Jared Jewelry and Earth Fare. The Galleria s Wynfrey Hotel will be rebranded as the Hyatt Regency Birmingham when renovations are completed this spring. New stores at the Summit in 2012 included Michael Kors, Vineyard Vines, a new prototype Ann Taylor Loft, and North Face. Eateries opening at the Summit during the year focused on fast dining options and included Seasons 52 and Lime Fresh Mexican Grill. Work progressed on Target at Colonial Brookville Village; the store will open in March and employ around 200. A Nordstrom Rack store is slated for the River Ridge Shopping Center on U.S. Hwy Crestwood (formerly Eastwood) Festival Center was revitalized by new owners who signed new tenants including Elaine s Boutique, Bella s Fashions, Flavor Fashion Jewelry, Earth Garden Naturals, and a number of services businesses. The Outlet Shops of Grand River added Loft, Motherhood & Maternity, Fossil, and a Johnston & Murphy factory store. Boutique retailer Festivity opened a Homewood store. Among other retailers and restaurant chains opening stores in the Birmingham Hoover area were Family Dollar, Steak n Shake, Dunkin Donuts, Bojangles, and Mooyah burger. Grocery options increased with an Aldi store in Shelby County, Hoover s Earth Fare, and a renovated Winn Dixie on Montevallo Road; privately owned Belle Foods purchased and rebranded stores including Bruno s and Food World. Gardendale saw significant retail and restaurant development during Abbey Carpet opened its first Birmingham area showroom in Roebuck Marketplace. However, Cotton s in Ensley closed after 90 years in business. Cash strapped Jefferson County struggled to maintain essential services during 2012, with no replacement for the occupational tax that was struck down in The county continued to lay off personnel, cutting 180 jobs permanently early in the year. More than a year out from the November 9, 2011 $4.23 billion bankruptcy filing, Jefferson County had not reached agreement on a plan of adjustment. One creditor, Bank of America, sold $225.7 million of the county s bonds and dropped out of the case. Sewer rates in the county will go up 2.7 percent, the first rate hike in years. With the economy improving, other area municipalities began to get postponed projects back on track. Alabaster moved forward with scaled back plans for a new city hall complex; Fultondale made progress on initiatives including a new fire station, library, tennis courts, and a rebuilt Black Creek Park; and Trussville undertook road improvements and refurbishing Jack Wood Stadium. Gardendale s former Caulfield Square is being redesigned as Gardendale City Center with a new city hall, retail, and restaurants. Income and Wages Per Capita Income 2011 Per Capita Percent Change Income from 2010 United States $41, Alabama 34, Anniston Oxford 31, Auburn Opelika 29, Birmingham Hoover 40, Decatur 32, Dothan 34, Florence Muscle Shoals 32, Gadsden 31, Huntsville 40, Mobile 32, Montgomery 36, Tuscaloosa 34, Source: U.S. Bureau of Economic Analysis. Average Annual Wage 2011 All Industries Average Percent Wage of State United States $45, Alabama 39, Anniston Oxford 35, Auburn Opelika 37, Birmingham Hoover 41, Decatur 37, Dothan 34, Florence Muscle Shoals 34, Gadsden 33, Huntsville 49, Mobile 39, Montgomery 39, Tuscaloosa 38, Source: U.S. Bureau of Labor Statistics, Division of Occupational Employment Statistics, May Median Family Income FY2012 United States Alabama Anniston Oxford Auburn Opelika Birmingham Hoover Decatur Dothan Florence Muscle Shoals Gadsden Huntsville Mobile Montgomery Tuscaloosa $65,000 $55,400 $52,200 $61,400 $62,800 $55,900 $51,900 $53,700 $47,600 $71,700 $51,900 $60,100 $56,500 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: HUD Office of Economic Affairs, Economic and Market Analysis Division. Alabama Metropolitan Areas 25

30 Montevallo made substantial progress on its Main Street project, with streetscaping and roadways linking the city s downtown and the University of Montevallo campus. The university s new bookstore and promenade will open in 2013; Alabama Power s former building downtown will be redeveloped for university classroom space. The process of recovering from the April 2011 tornadoes and from a January 2012 tornado continued. Voters in the City of Birmingham approved Mayor William Bell s plan for a $150 million bond initiative that will be used to fund infrastructure improvements and other initiatives. Projects completed in the City during the year included renovation of Crestwood Park and construction of Oxmoor Valley Community Center. The first of four planned recreation centers was under construction off 15th Avenue North. Red Diamond Inc. donated its former Vanderbilt Road headquarters to the YMCA of Greater Birmingham for the first facility serving the Norwood and North Birmingham area. The City Council is funding redevelopment of the historic 10 story Ramsay McCormick building in Ensley saw the opening of the new Huffman High School, a new Hayes K 8 school, and Charles A. Brown Elementary in Belview Heights. However, with the state takeover of the Birmingham City Schools due to the system s finances, as many as eight to 10 schools may be closed in 2013 and a number of buildings put up for sale, including the Board of Education building, since the Board is consolidating its offices in the former Wells Fargo building. Population in the Birmingham Hoover metro reached 1,132,264 in July 2011, up 0.3 percent from a year earlier. Area residents fared well in terms of income and wages relative to other Alabama metro areas 2011 average annual wages of $41,690 and FY2012 median family income of $62,800 ranked second among the metros, while 2011 per capita income ranked first and was up a strong 4.4 percent from Real estate activity picked up across the metro during A total of 9,374 homes were sold during the first 10 months of the year, a 10.8 percent increase from the same period in Prices were up slightly in third quarter 2012 compared to a year earlier, although they remained 8.2 percent below five years earlier, according to the FHFA House Price Index. Single family building permits during the first nine months of the year were up by 120 from Area homebuilders see positive trends, but report being selective in price range and location. After years of growth in single family homes and very little multi family construction, apartment development picked up strongly in A total of 926 multi family units were permitted during the first three quarters of 2012, compared to around 200 a year earlier. Occupancy reported at close to 95 percent by Rock Apartment Advisors indicates the need for new apartment space. Construction of the Parc at Grandview was completed, with 334 apartments leasing. The first apartments in the 250 unit Ashby at Ross Bridge were ready in Fall 2012; units in the 223 apartment Tapestry Park off Montclair Road were also coming on the market in the fall. Other apartments under construction included 122 units at The Hill on Oxmoor Road and 135 in Moretti at Vulcan Park. Construction finally got underway on the Lane Park project, which will bring a Grand Bohemian Hotel and 276 apartments to Mountain Brook. Inland American is planning a 245 unit development by Railroad Park. Decatur Nonfarm Employment Job gains in the Decatur (thousands) area s sizeable 59 manufacturing sector contributed to positive 57 trends in nonfarm employment over the past 55 year. Between October 2011 and October total payroll employment Source: U.S. Bureau of Labor Statistics. rose by 900 to 55,600; goods producing industries added 300 jobs, with service providing industries contributing 600. Forecasts for the metro s employment during the coming year are positive; UA s CBER expects about 1.5 percent employment expansion. GDP forecasts are also encouraging, with output growth of 2.3 percent expected in With total employment of 68,812 and a lesser 55,600 nonfarm jobs, the Decatur metro continues to be a net exporter of workers to nearby Huntsville. The area s labor force expanded by a slight 0.6 percent in the 12 month period ending in October 2012, while total employment grew by 1.3 percent. This caused unemployment to decrease from 8.1 percent in October of 2011 to 7.5 percent a year later. A 2011 survey by the Center for Business and Economic Research found an underemployment rate of 24.1 percent among workers in the Decatur metro. Applying this percentage to October 2012 labor force data gives an estimated 6,590 underemployed workers. Combined with 5,587 unemployed, there was an available labor pool of 22,177 for the metro area, 4.0 times the number of unemployed. Manufacturing held a 22.5 percent employment share in October 2012, higher than in any other metro area. Employment increased from the previous year with the addition of 200 jobs in durable goods and 100 in nondurable goods manufacturing. Area industries were very active in 2012 expanding and preparing for future growth opportunities. Some of the year s highlights included United Launch Alliance (ULA) announcing its hiring of 75 to assemble 13 rockets in 2012, up from nine the previous year. ULA won a $398 million contract for construction of two satellites a GPS satellite aboard a Delta IV rocket and an Air Force Mobile User Objective System 4 satellite that will be put into orbit on an Atlas V rocket. The company is also designing commercial spacecraft to launch astronauts to the International Space Station in collaboration with Boeing, SpaceX, and Sierra Nevada. Other big news in 2012 was Hexcel Corp. acquiring 74 acres for expansion of its Decatur plant and announcing it 26 Alabama Metropolitan Areas

31 would spend $150.5 million to build a new acrylic fiber line which will add 35 employees to its current 150. Nucor recently received the Steel Manufacturers Association Achievement in Community Involvement Award for its response to the tornadoes of 2011; the company also expanded by eight employees when they added a steel mini mill. In other expansions, Daikin America will add 50 employees with a $75 million expansion. The company was selected as the Manufacturer of the Year by the Business Council of Alabama and Alabama Technology Network and fortified its status as the biggest maker of residential heating, ventilating, and air conditioning systems with its plans to purchase Goodman Global Group. Decatur GE added 30 jobs and an assembly line for top freezer refrigerators and plans to invest $432 million in green jobs by Feralloy Corporation invested nearly $8 million creating 13 new jobs, Gavilion increased an ongoing expansion by $6 million, and Toray Carbon Fibers America began a $97 million expansion adding 43 new employees. New manufacturing companies in the area made plans to break ground. Yates Industries, which repairs hydraulic and pneumatic cylinders, is building a $2.9 million facility on Refreshment Place and will hire 11. Jim N Nick s Bar B Q acquired the former emu plant in Eva which will process their restaurant s pork. Jemison Demsey announced it will bring 28 jobs with a $28 million metal processing plant. Brown Foreman Corporation is opening its second Alabama facility in Mallard Fox West and will create 125 jobs by The year closed with the announcement that BUSCHE would be coming to Hartselle s old Copeland Corporation plant site with the intent of created over 200 jobs as an after market automotive parts supplier. Service providing sectors added 600 jobs in the Decatur metro during the 12 months ending in October The biggest gain was seen in transportation, warehousing, and utilities (200). Employment was bolstered by gains of 100 jobs in each of the following sectors: financial activity, professional and business services, leisure and hospitality, and state and local government. Area healthcare entities worked together this year as the Healthcare Authority of Morgan County, Lawrence Medical Center, Decatur General Hospital, and Parkway Medical Center all partnered with the Huntsville Hospital system. Both North Alabama Regional Hospital and Encore Rehabilitation will remain open despite threats to close them in Decatur Utilities (DU) extended natural gas and other services this year, even as the Morgan County Commission, Northeast Morgan County Water and Sewer Authority, and Hartselle utilities aligned to create an alternative source to DU. Other infrastructure developments included Rational Energies moving forward on a $23 million facility at the Decatur Morgan County Regional Landfill to convert plastics into fuel. Retail in the metro area was active with closings and openings; as a result retail employment remained flat for the year. New eateries included Mellow Mushroom pizza Housing Industry Residential Building Permits Single Family Multi Family Change Change 2012 from from 2011 Alabama 6, ,567 1,455 Anniston Oxford Auburn Opelika Birmingham Hoover 1, Decatur Dothan Florence Muscle Shoals Gadsden Huntsville 1, Mobile Montgomery Tuscaloosa Note: Data are for permit issuing places only. Data for 2011 and 2012 cover the period January through September. Source: U.S. Census Bureau, Building Permits Survey. Total Homes Sold Percent Change 2012 from 2011 Alabama 33, Anniston Oxford Auburn Opelika 1, Birmingham Hoover 9, Decatur Dothan Florence Muscle Shoals 1, Gadsden Huntsville 4, Mobile 2, Montgomery 2, Tuscaloosa 1, Note: Data for both 2011 and 2012 cover the period January through October. Source: Alabama Center for Real Estate, The University of Alabama. Percent Change in FHFA House Price Index Q Q to Q to Q United States Alabama Anniston Oxford Auburn Opelika Birmingham Hoover Decatur Dothan Florence Muscle Shoals Gadsden Huntsville Mobile Montgomery Tuscaloosa Source: Federal Housing Finance Agency. Alabama Metropolitan Areas 27

32 downtown, an Olive Garden on Beltline Road, and a Jack s restaurant which employs 45. In the Market Shoppes an ULTA Salon opened and a Kohl s will open in Spring Electronic Express is moving into the former Dillards in the Decatur Mall. Garrison Investment Group, the owner of Decatur Mall, purchased The Crossings and Walmart purchased land on Sixth Avenue for a Walmart Neighborhood Market and gas station. Developments completed in 2012 and planned for the coming year will improve the quality of life in Decatur. New outdoor recreation opportunities included 5.8 miles of new walking trails, the Pickwick Belle, and the beginning stages of an outdoor amphitheater in Founders Park. The new $40 million Hartselle high school neared completion as the year closed, but had already resulted in rising home sales in the area. The Decatur Arts Center, an $8.5 million partnership of Calhoun Community College and Athens State University, opened in August. These growing amenities, plus a new $3.4 million aquatic center being built next to the Sparkman Civic Center, a planned restoration of the 112 year old L&N railroad depot, the Veterans Memorial Team Bass Tournament at Ingalls Harbor, and the Alabama Ducks Unlimited event on the Tennessee River contributed to Decatur being named No. 1 nationally among metropolitan areas with population below 200,000 by Site Selection Magazine. Population growth in the Decatur metro was below the state average, with a 0.1 percent increase and an estimated 136 new residents for the year ending July 1, A total of 59 building permits were reported for single family homes during the first nine months of 2012, up by 5 from the same period in There were no multi family units permitted through September. The number of homes sold rose by 5.2 percent for the first nine months of Despite some positive indicators, home prices in the third quarter of 2012 as measured by the FHFA House Price Index fell 1.1 percent from the previous year; prices were down 1.6 percent since the beginning of the recession in Deposits in FDIC insured banks also decreased with a drop of 1.8 percent during the year ending June 30, Per capita income grew 2.7 percent for 2011 to $32,071. FY2012 median family income increased by only 1.3 percent over the previous year. Decatur s median family income of $55,900 was 101 percent of the Alabama median. At $37,630 the Decatur area s 2011 average annual wage was 96.0 percent of the Alabama average. Dothan The slide in Dothan metro area employment moderated during 2012, as the economy continues to struggle with the effects of the recession. Nonfarm employment in October 2012 was 57,600, a drop of 200 jobs from the previous October. Job losses were Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. concentrated in only two sectors, wholesale and retail trade. While most other sectors were unchanged, manufacturing added 100 jobs. Positive growth is forecasted for 2013, with employment expected to in crease 0.3 percent. The area s economy is expected to expand modestly; GDP growth is forecasted at 1.2 percent. The area labor force saw some indications of improvement during the year. Unemployment was down slightly to 7.5 percent in October, a decrease of 0.1 percentage points from the previous year. In contrast, the civilian labor force and total employment both contracted by 0.1 percent, to 65,300 and 60,377, respectively. The decrease in labor force participation and employment, compounded by lagging job creation are all signs the metro area needs a boost through local development. The Dothan metro area had an underemployment rate of 19.8 percent in Applying this rate to October 2012 employment numbers shows an estimated 11,926 underemployed. Adding the unemployed, there was an available labor pool of 16,849 for the metro area, 3.4 times the number of unemployed. Dothan s manufacturing sector was a bright spot, adding 100 jobs during the year, with employment rising to 5,000 in October Yura Corporation, a new manufacturer to the area that will supply wiring harnesses and spark plugs to Hyundai and Kia, hired 70. Multiple manufacturers in the area expanded or planned expansion, but only 25 other net jobs were added. KFH Industries added 20 jobs at its corporate headquarters and invested $2 million in additional equipment. Pioneer Telephone Directories Corporation added five jobs to their typesetting and telephone directory business. Panhandle Scrap & Iron, an industrial ferrous metals recycler, and Panhandle Converters, a catalytic converter recycler, both expanded but added no jobs. A significant loss of jobs occurred when Earthgrains Baking in Dothan closed their doors in May, eliminating 124 jobs. The trade, transportation, warehousing, and utilities sector, an important factor in the local economy, shed 300 jobs in the year leading up to October 2012, but still accounts for nearly 27 percent of local employment. Within this larger sector, wholesale trade lost 100 jobs during the year. New additions to the Dothan area s warehousing and distribution cluster during 2012 included a Hornsby Tire distribution center. Distribution and warehouse facilities for Mingledorff s Inc. are under construction. Retail trade provided 16 percent of area employment with 9,100 workers in October Though the sector lost 200 jobs during the year, several new developments took place. Main Street in Dothan was home to several new openings. Walgreen s pharmacy opened downtown in the summer, followed by Five Guys Burgers & Fries, Bradshaw s Jewelers, and the formal wear store Bridal Elegance & Pageant Perfect. Restaurant openings were numerous on Montgomery Highway in Dothan. The restaurants Buffalo Wild Wings, Chili s Grill and Bar, and Momma Goldbergs all opened, along with the discount store Big Lots. Other openings around Dothan during 2012 included Chill Yogurt 28 Alabama Metropolitan Areas

33 Café, Zaki s Mediterranean Grill, Karma women s clothing store, and a Chick fil A at Wiregrass Commons Mall. In other service sector developments, the Alabama College of Osteopathic Medicine in Dothan broke ground for a new facility. Its initial class of 150 students will begin in August Prospective students are being brought to Dothan for interviews; priority for admission is being given to qualified Alabama residents. The college should create 67 jobs next year and about 400 by The county should see a gain of about $800,000 in tax revenue from the college next year. Additions to area healthcare facilities in 2012 included a Wound Care Center at Flowers Hospital and completion of a $31 million Heart and Vascular Care Center at Southeast Alabama Medical Center. Houston Love Memorial Library broke ground for two new libraries in The projects will cost $7.5 million overall, with the city contributing $2.5 million. The rest of the funding will come from the county, the Wiregrass Foundation, Downtown Dothan Redevelopment Authority, the Convention and Visitors Bureau, and private donations. Vantage Sourcing added 200 customer associates at its Dothan call center during the past year. Service provider PEMCO World Air Services, an aircraft maintenance company, had expected to rehire many previously laid off workers, assuming increased business with the military. Instead, the company filed for bankruptcy and caused a loss of 230 jobs. Finally, after much struggle, the former Country Crossings electronic bingo and entertainment venue continues its existence only as the Center Stage Inn and RV Park. Housing market activity was lagging in the Dothan area in Total home sales through the first three quarters of the year fell 11.0 percent to 792. Construction of new units remained somewhat slow as well. There were 137 singlefamily units permitted in the metro area for the same time frame, 30 fewer than last year. Permits were issued for a total of 319 multi family units, up from none during the first nine months of Prices continued to fall; the FHFA House Price Index dropped 1.7 percent between October 2011 and October The decrease was the third highest among the state s metro areas. The Dothan area s population grew slightly faster than the state s and totaled 146,562 in July of 2011, a 0.5 percent increase from 2010 estimates. Median family income stayed below that of the state in FY2012, growing to $51,900. Local per capita income for 2012 rose 3.2 percent to $34,654 and ranked fourth among the state s 11 metro areas. Bank deposits increased a slight 0.3 percent from 2011 to total $2.8 billion as of June 30, Florence Muscle Shoals The Florence Muscle Shoals metro area showed improvement across all of its economic indicators in The Shoals saw job gains of 700 over the 12 month period from October 2011 to October Total nonfarm employment of 56,100 in October was up 1.3 percent compared to October The manufacturing sector expanded by 200 in 2012, one of seven metro areas to post Florence-Muscle Shoals Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. such growth. On the service providing side, retail trade businesses added 200 jobs. Education and health services gained 100, while financial activity, professional and business services, other services, and state and local government expanded by 100 jobs each since October Forecasts for the metro s employment over the coming year are positive, with the expectation of a 1.3 percent gain. GDP forecasts are also encouraging, with output growth of 2.1 percent expected during Total employment of Shoals area residents increased by 739 between October 2011 and October 2012, for a 1.1 percent gain that was above the state s 0.3 percent. Only about 390 workers entered the labor force during the year, a 0.5 percent increase that was still among the top five metros. Unemployment dropped 0.5 percentage points from the previous year to 7.3 percent in October With nearly 10,000 more employed residents than jobs, the area continues to be a net exporter of workers. The Florence Muscle Shoals area had an underemployment rate of 14.1 percent, according to a 2011 CBER survey, the lowest of the state s metros. This means there were an estimated 9,303 underemployed workers in October 2012, added to 5,185 unemployed, for an estimated available labor pool of 14,488 in the metro area, 2.8 times the number of unemployed. Manufacturing contributed a 14.1 percent share of area jobs in October 2012, above the state average of 13.0 percent. Some big commitments were made to the metro area this year. After Navistar took over the plant in Barton Riverfront Industrial Park on the first of the year, it began gearing up to produce a newly created work truck at the Colbert County plant. However, full production of the International LoadStar truck was delayed, although fabrication operations continued, pending resolution of truck engine issues. Wise Metals Group opened a new facility in Muscle Shoals. The beverage can maker added around 45 employees in the beginning of 2012, then another 50 late in the summer. As the year closed, the United Steelworkers at Wise Alloys approved a five year labor agreement with base pay at $22 per hour. Firestone Building Products also announced the addition of 40 jobs at its Tuscumbia plant as part of a $40 million expansion. Local economic development entities made way for the possibility of new jobs and industries in the area through incentives and regional planning practices. The Shoals Industrial Development Committee approved a program that would offer $1,500 to companies for each new hire; the board also made moves toward purchasing $7.6 million worth of available land in public industrial parks to ease negotiations for new industries closed with the Alabama Metropolitan Areas 29

34 biggest announcement of the year for the area. Japanbased TASUS Corporation, an automotive plastic component firm, began construction on a $19 million facility in Florence which will create 135 jobs. The services sector accounted for 36.5 percent of area jobs in October 2012, as area hospitals moved forward with developments. Private RegionalCare Hospital partners secured 25 acres for purchase in east Florence, with plans to build a 300 bed replacement hospital for Eliza Coffee Memorial. However, several publicly owned hospitals are opposing the project, which is contingent on receiving a Certificate of Need. Nearby Shoals Hospital will be bringing up to 125 jobs as Priority Ambulance Service begins providing their services to the hospital. Other service sector improvements came in varied forms. Walgreens announced an expansion that will bring 350 jobs to the customer care center in Muscle Shoals. A new senior center was completed in Muscle Shoals over the summer and the Cypress Creek water treatment plant was chosen for a $15.2 million upgrade to its aging equipment. The Florence Lauderdale Tourism board chose the former golf pro shop in McFarland Park as the location for a new visitor center and tourism bureau. One of the ways Florence Muscle Shoals hopes tourism dollars will come into the area is through the new commuter air carrier, Silver Airways, which had its inaugural flight in the fall. The air service will fly 12 nonstop flights per week to the Hartsfield Jackson Atlanta International Airport on a 34 seat turboprop aircraft. The area s retail sector had its ups and downs throughout the year. There were numerous openings and new development happening in the area. Books A Million opened a new location in Renaissance City Center, downtown Florence got a new sushi bar, and Alabama Outdoors and Publix Super Market opened. Grogan Jewelers moved forward on a new store on Cox Creek Parkway, and the outdoors specialty store, Gander Mountain, opened a 45,000 square foot store next to Kohl s in the fall. Construction began in Florence on a new Walmart Neighborhood Market. There were also several closings in the area. O Charley s, Smokehouse Billiards, Demo s Italian Restaurant, and Crocodile Ed s Grill & Fish market all closed this year. Population growth in the metro area was a modest 0.1 percent for the year ending July 1, 2011, with an estimated 75 new residents. Area colleges were active; the University of North Alabama (UNA) added a Center for Integrative Health to give students the opportunity to study holistic health care while they obtain a master s degree in health and human performance. The University s Department of Entertainment Industry moved into NoiseBlock Studio in downtown Florence and will use the building for classroom space, offices, and a live performance venue. The construction of a new student commons and academic center began in 2012 and will feature student services, a bookstore, and eateries on UNA s campus. Deposits in FDIC insured institutions in the Florence Muscle Shoals metro grew by 2.9 percent during the year ending June 30, Per capita personal income growth of 3.1 percent during 2011 was positive but still lower than the state s average gain of 3.5 percent. Median family income increased by 1.3 percent to $53,700 in However, the 2011 average wage across all industries of $34,320 was the still the second lowest among the 11 metros at 87.6 percent of the state average. Residential real estate in 2012 was moderately positive for the metro area. Single family building permit activity grew by 15 units through October compared to the same period in 2011 to total 118 single family home permits. Permits for multi family homes increased by 174, up from zero in the first nine months of As measured by the FHFA House Price Index, Florence Muscle Shoals outdid the state s drop of 0.5 percent, with an increase of 1.1 percent in home prices in the first nine months of the year, ranking first among the state s metros. Gadsden Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. Nonfarm jobs in Gadsden remained flat between October 2011 and October 2012, compared to the statewide increase of 0.7 percent. Goods producing industries lost 100 jobs in the natural resources, mining, and construction sector, but gained 100 in manufacturing. Retail trade and professional and business services added a total of 300 jobs, while education and health services, federal government, and other services were responsible for a loss of 300. All other sectors were flat. The employment forecast for the Gadsden metro over the coming year is positive, with the expectation of 0.3 percent growth. GDP forecasts are also encouraging, with output growth of 1.1 percent anticipated during With a total of 42,048 Gadsden area residents employed in October 2012 versus 35,800 nonfarm jobs located in Etowah County, the metro is a net exporter of workers. Total employment was up by 0.2 percent for the preceding 12 months. The labor force expanded by 141 people, keeping unemployment flat at 8.5 percent in October The Gadsden metro area had an underemployment rate of 22.7 percent in 2011, according to a CBER survey. Applying this rate to October 2012 labor force data, there were an estimated 9,588 underemployed workers and 3,913 unemployed residents for an available labor pool of 13,471 in the metro area, 3.4 times the number of unemployed. Manufacturing contributed 14.5 percent of area jobs in October 2012, 1.5 percentage points above the state average. Goodyear Tire and Rubber Co. s Gadsden plant received praise when it was named one of 14 finalists in the large manufacturer division for the 2012 Manufacturer of the Year award by the Business Council of Alabama and the 30 Alabama Metropolitan Areas

35 Alabama Technology Network. The plant s employment has increased to about 1,700 from 1,400 in Ten jobs were added in 2012 when Gadsden Fabrication invested $550,000 into new markets. Decatur Plastics Products started an expansion that will result in 25 to 50 additional jobs. The services sector remained steady from the previous year, with a few new developments. The Halifax Group, which owns The Gadsden Times expanded its reach when it purchased Freedom Communications properties in Florida and North Carolina. Area health care saw improvements this year with Gadsden Regional Medical Center acquiring Outpatient Open MRI, now called Gadsden Regional Imaging, and Riverview Regional Medical Center s Sleep Disorders Center being granted reaccreditation. Area clinics received 12 new hemodialysis stations for more convenient treatment. Public services made some equipment improvements throughout the year. Rainbow City Police Department obtained three Humvees from the Alabama National Guard along with their acquisition of a LifeSaver helicopter ambulance. East Gadsden s Fire Station No. 9 upgraded to a new ladder truck in April. The Etowah County Commission added to their assets when they purchased the 82 acres of land adjacent to their industrial park property at Little Canoe Creek. Local public services lost 34 employees to retirement. In a cost saving move, the federal government decided to close Gadsden s federal courthouse. Several small businesses in the area received honors during Advanced Imaging of Gadsden was named Small Business of the Year with 25 or fewer employees and Devan Lowe Cadillac GMC Lincoln received the same award for businesses with 25 to 50 employees. Retail employment saw a gain of 100 jobs for the 12 months ending in October as retail developments surged in the area, though the leisure and hospitality sector remained flat for the year despite local activity. It was all openings this year across the retail markets. Eatery options increased with a new Jack s in East Gadsden, a Super Hibachi Buffet and Grill, Dale s BBQ in Attalla, Sky s Warehouse restaurant, Deorio s Pizzeria, and a new scenic location for the Fish Market Restaurant overlooking the Coosa River. Other openings included Gadsden Pickers a home accessories store, Amanda s Pool Supply, Uptown Antiques in downtown Attalla, and a Dollar General Plus in Sardis City. Farmers markets in Gadsden, Attalla, Glencoe, and Rainbow City all offered residents fresh produce and local wares through the warmer months of Area recreation was emphasized in 2012 with efforts focused on the unique aspects of the county. Local events included Attalla s Black History Celebration in February, along with First Saturdays throughout the summer. Other highlights of the year were the beer garden at Gadsden s Riverfest, Glencoe s 10th Annual Celebration in the Park, and the 29th annual Noccalula Road Run which enticed thousands to the region. Construction began on the Patriots Museum at Ola Lee Mize Patriots Park, and the new Glencoe Public Library opened for business. Gadsden State Community College made strides towards alleviating traffic by embarking on a $1.5 million gateway project that will connect the East Broad and Wallace Drive campuses. The East Broad campus is also creating outdoor study spaces with outdoor furniture and new landscaping by way of a $10,000 grant from Home Depot. Population in the Gadsden metro area declined by 0.1 percent for the 12 month period ending in July 2011 to an estimated 104,303 residents. New residential construction picked up during the first nine months of 2012 compared to The 47 single family units permitted were up 20 from the same period in 2011; no multi family units were permitted. A total of 566 homes were sold through October 2012, a rise of 7.4 percent from the same period in Home prices were flat for the year, with the area s FHFA House Price Index posting no change in the third quarter of 2012 from a year earlier. Gadsden saw a sharp decline in bank deposits for the year ending June 30, 2012; total deposits in FDIC insured institutions dropped 9.7 percent, the largest percent change compared to all other metro areas in the state. However, a positive gain of 1.5 percent from FY2011 pushed median family income to $47,600. An annual increase of 2.9 percent raised 2011 per capita income to $31,844, ranking ninth among the metros. At $33,330 Gadsden s average annual wage for all industries in 2011 amounted to 85.1 percent of the state average. Huntsville Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. Despite a cloud of uncertainty concerning cutbacks in U.S. defense spending and NASA funding during 2012, the Huntsville metro saw numerous developments in its defense and aerospace research and development and support clusters. Firms opened new offices in the area to support the many military installations now at Redstone Arsenal and the ongoing initiatives at NASA s Marshall Space Flight Center (MSFC). Although some existing companies added employees, a cautious attitude in the business community generally restrained job growth and investment during the year. Business optimism in the Huntsville area, measured by the Center for Business and Economic Research (CBER) s Alabama Business Confidence Index (ABCI) was below that of the state and other major metro areas during all four quarters of Gloominess about prospects for the national economy clearly dampened the confidence of Huntsville business executives throughout the year. The weakest area ABCI reading for 2012 was 44.3 on the fourth quarter survey, when respondents expected sales, profits, Alabama Metropolitan Areas 31

36 hiring, and capital spending all to trend lower than in the previous quarter. The Huntsville area s economy was resilient nonfarm employment grew by 4,300 between January and October 2012 to total 207,300. However, job growth over the 12 months ending in October was a more muted 400 positions and the metro still needs to add 7,200 jobs to bring nonfarm employment up to the 214,500 seen in October Most of the net job gains since October 2011 were in service industries, particularly professional and business services which added 1,500 workers through October 2012, including 900 at professional, scientific, and technical services firms. Education and health services and the leisure and hospitality industry each added 400 jobs, while businesses in the other services category created 200. Job losses were concentrated in manufacturing (1,100), particularly computer and electronic products which shed 700, and retail trade (600). Federal government employment declined by only 100 during the 12 months. Total employment of Huntsville metro area residents rose to 199,055 in October, with the addition of almost 1,250 workers amounting to a 0.6 percent increase. Since the civilian labor force expanded by only about 300, the unemployment rate fell from 7.1 percent in October 2011 to 6.7 percent in October 2012, tied for lowest among the state s 11 metros. A CBER survey found 24.8 percent of area workers to be underemployed in Applying this to October 2012 labor force data indicates that an estimated 49,411 Huntsville workers were underemployed. Adding in the 14,219 unemployed in October, the area s available labor pool was around 63,630 residents a sizeable number of potential employees for new and expanding businesses. CBER forecasts have nonfarm employment in the Huntsville metro growing by 0.8 percent in 2013 with area GDP increasing 2.2 percent. Recognizing the unique economic strengths of the area, fdi picked Huntsville as its #5 top North American Small City of the Future for At 20,800 manufacturing employment in the Huntsville metro accounted for 10.0 percent of nonfarm jobs in October; below the statewide average of 13.0 percent. Among major developments during 2012, Carpenter Technology broke ground on its $500 million specialty alloys manufacturing facility in Limestone County. The plant could employ around 200 when complete late in Another new industry in Limestone County, aviation parts producer Advanced Technical Manufacturing, planned to invest almost $1 million and hire 35. Existing manufacturers Steelcase and Federal Mogul added jobs, while Electricfil undertook a $9.2 million expansion that will create about 200 jobs. And plans moved forward during the year for a $32 million oil re refining operation by Alabama Green Lubricants LLC. While the large industrial site near Tanner considered by Volkswagen no longer has TVA megasite status, Huntsville area development officials have been working toward having the 1,500 acre Sewell farm in Limestone County declared a megasite. Major developments in Madison County s manufacturing industry in 2012 included an $80 million expansion for V6 engine production by Toyota Motor Manufacturing Alabama that will create 125 jobs. Raytheon s over $75 million Missile Integration Facility and Test facility on Redstone Arsenal opened in late November. The company saw several successful tests of the Standard Missile 3 (SM 3) Block 1B interceptor and was awarded a $925 million contract by the Missile Defense Agency (MDA) for the SM 3 Block IIA missile as well as a $230 million contract for several versions of the SM 3; these and the SM 6 will be produced in Huntsville. The first missiles from the plant are expected to be delivered early in Futaba Corp. s $8.7 million expansion of its electronic circuit assembly plant will create 40 jobs. However, local soft drink producer Big Springs discontinued production in late summer, idling 87. But the sale of DVD manufacturer Cinram to a private investment firm should help preserve 1,600 jobs. According to Graham & Company, industrial vacancies in the Huntsville market area rose to 12.3 percent in 2011 with several large buildings for sale, including the former Continental Automotive plant. Although all BRAC mandated moves to Redstone Arsenal were completed in 2011, development at the base continued during The new Redstone Tactical Test Center was completed during the year. Ground was broken in mid 2012 for the FBI s Terrorist Explosive Devices Analytical Center that will be moving from Quantico, Virginia to join other antiterrorism agencies at Redstone. The former home of the 59th Ordnance Brigade and School is being repurposed as the Logistics Support Activity Lead Army Materiel Command Integration Support Office. Currently under construction, the $59 million fourth wing of the Von Braun IV complex will house about 850 MDA employees when it opens in the fall of Huntsville s Cummings Research Park, now the nation s second largest, turned 50 in Area professional, scientific, and technical services businesses managed to add a modest number of jobs during the 12 months ending in October 2012, despite uncertainty about federal budgets and potential defense spending cuts that remained unresolved until yearend. Foreign military sales, which included more than $17 billion in orders for missiles through 2015, are helping companies continue research and development activities. Large aerospace and defense contractors with offices in Huntsville saw a number of contract awards for new and continuing projects. Boeing, which celebrated 50 years in Huntsville, continues to develop and sustain the Ground based Midcourse Defense (GMD) System with its Northrop Grumman partner following a $3.48 billion contract award at the close of Other Boeing contracts during 2012 with work in Huntsville included a renewed agreement for work on Israel s Arrow missile defense system; as well as research and development in competition with SpaceX, Sierra Nevada, and Blue Origin to lead NASA s commercial space taxi project. Boeing will relocate its Huntsville workforce to the first three 32 Alabama Metropolitan Areas

37 buildings in the new Redstone Gateway, moving into the first building by Spring 2013 and into the next two early in Lockheed Martin, which added 100 jobs with the concentration of its Targets and Countermeasures division in North Alabama and relocation of a development lab from Denver, received a contract for the Extended Technology Development Phase of the Joint Air to Ground Missile. Further workforce additions are possible pending successful competition for MDA s Medium Range Ballistic Missile Targets contract. However, a potential decision by the United States not to complete their obligation to the Medium Extended Air Defense System (MEADS) could impact Lockheed Martin employees in Huntsville. Northrop Grumman received a $122 million contract as part of the Counter Rocket Artillery and Mortar (C RAM) project run through Redstone Arsenal. The Dynetics Solutions Complex that opened in the spring increases the Huntsville based company s capabilities for research, development, and production for aerospace, cyber, and defense products as well as high tech protyping, including work on the Stratolaunch aircraft launch system. Dynetics also unveiled its new airport surveillance sensor and plans to add 250 to 300 jobs through Huntsville s Torch Technologies was awarded a Navy SeaPort Enhanced prime contract valued at over $48 billion and five competetive task orders for $46.7 million under the Missile Defense Agency s Engineering and Support Services. An Army Sustainment Command EAGLE agreement with LogiCore offers a task order valued at up to $23 billion for logistics, materials maintenance, supply services, and transportation support services. Other defense related awards to local firms included a $300 million Air Force cyber security contract with Radiance Technologies, Qualis receipt of part of a $77 million five year contract for services with the Air Force operational test and evaluation center, and a contract of up to $120 million for radar testing by decibel Research. Johnson Controls BAS is part of a 10 contractor team sharing a $375 million contract for security and control systems; a $31 million contract will support Aegis Technologies upgrade of helicopter simulators at Fort Campbell, KY. NASA and its Marshall Space Flight Center continue to work on the next generation of space flight. A basically flat budget was good news as the agency moved ahead on projects including a new space launch system, partnerships with commercial space companies, and a strategy to explore MARS. Connections between Huntsville s defense and aerospace research initiatives are exemplified by the Space and Missile Defense Command and the growing needs of a smaller Army for space and cyberspace capabilities. As it moves into new frontiers, NASA was taking proposals for up to $200 million for research on reducing the risks associated with new heavy lift rocket boosters. During 2012 the Space Launch System program was approved to move to the preliminary design phase ATK will work on testing parts of the system at MSFC under a $50 million contract award, Population 2010 to 2011 Number Percent 7/1/2011 Change Change United States 311,591,917 2,261, Alabama 4,802,740 17, Anniston Oxford 117, Auburn Opelika 143,468 2, Birmingham Hoover 1,132,264 3, Decatur 154, Dothan 146, Florence Muscle Shoals 147, Gadsden 104, Huntsville 425,480 6, Mobile 412, Montgomery 378,608 3, Tuscaloosa 221,553 1, Source: U.S. Census Bureau. while Dynetics $73.3 million award involves testing for the F 1 rocket engine. United Launch Alliance (ULA) moved closer to having its Atlas V rocket qualified to transport astronauts both Boeing and Sierra Nevada are proposing to use the Atlas V as the launch vehicle for crew carrying. Huntsville s Teledyne Brown Engineering received a cooperative agreement for work with NASA on growing commercial utilization of the International Space Station and to provide a commercial imaging system onboard. Companies new to the Huntsville area during 2012 included Sierra Nevada, which provides services to NASA, the Army, and the Space and Missile Defense Command, and is vying to provide space taxis for astronauts to the International Space Station. The emphasis of USfalcon s Huntsville office will be work on a Missile Defense Data Center contract, while Intelligent Decisions is now positioned in Huntsville to better serve defense needs for technology systems integration. Cleveland based Alphaport opened an engineering services office; EnGenius Consulting Group moved its corporate headquarters from Atlanta; GeoCent will create about 100 jobs with the establishment of its Engineering Service Sector in Huntsville; and LMI, which purchased local company Belzon, is setting up headquarters for its new Southeast region. Other companies moved or expanded. AAI and Bell Helicopter opened the Textron Systems Integration and Collaboration Lab, Systems Products and Solutions moved into a new headquarters, MJLM added a new site in Jetplex Industrial Park, and Krotos Defense and Security Solutions opened its second building in Cummings Research Park. Also during 2012, Science and Engineering Services (SES) expanded into a new hangar facility at the Huntsville airport, while SAIC opened a facility in Alabama Robotics and Technology Park. Both Sentar and PPT Solutions announced expansion plans during the year. Among area companies planning new facilities, Integraph will build a $58 million headquarters on its current campus and Wyle s CAS Group is working on an $18.7 million building in Cummings. Alabama Metropolitan Areas 33

38 A growing biotech research and development cluster is helping diversify the defense and aerospace heavy focus of research and development in the Huntsville area. The HudsonAlpha Institute for Biotechnology broke ground on its third building in a continuing partnership with the state of Alabama as it expands to keep up with interested new companies. Companies moving into the Institute during 2012 included Transomic, providing next generation genetic tools; and Kirchner Food Security Group and Kirchner Private Capital Group, using genetics in agricultural research. Other areas of emphasis in the Huntsville area include cyber security, clean energy, geospatial technology, robotics, and the contract management and logistics focuses of the Army Materiel Command. The University of Alabama in Huntsville (UAH) was re designated as a national center of information systems security education, in partnership with the National Security Agency and the Department of Homeland Security. And Geo Huntsville is encouraging cooperation among around 50 private companies, 15 government agencies, and three local universities involved in geospatial work. Healthcare options expanded with the opening of the $71 million Madison Hospital in the first quarter of 2012; the hospital provides 60 beds and employs more than 300. The new hospital is managed by nonprofit Huntsville Hospital which expanded its reach in North Alabama, assuming management of Lawrence Medical Center and Decatur General Hospital. A three story medical office tower was completed in Madison late in the year. Athens Limestone Hospital, also under Huntsville Hospital management, completed emergency room renovations and will begin work on a $9.3 million 40 bed long term acute care hospital. An expansion of UAB s medical residency program with Huntsville Hospital will add 24 residents in internal medicine, further helping address the shortage of primary care physicians in North Alabama. In other services related activity during 2012, Huntsville International Airport completed a $92 million expansion project with the opening of a new baggage claim area in late November. But service from AirTran Airways ended in August and the airport continues to seek another low cost carrier. Air cargo was up 32 percent in 2011 as Panalpina added to its U.S. freight network that operates out of Huntsville. Lodging options in the area grew with the opening of Holiday Inn Express and Suites in Madison and SpringHill Suites by Marriott in the Village of Providence. The Four Points by Sheraton Huntsville Airport and Radisson Huntsville Airport underwent renovations, while the Radisson Suites Hotel on South Memorial Parkway is being redeveloped as a DoubleTree Suites by Hilton. Fairfield Inn and Suites in Athens and Home 2 Suites by Hilton and Hampton Inn and Suites near Bridge Street Town Centre are slated to open this year. Bank deposits in the Huntsville metro totaled $6.6 billion in June 30, 2012, down 3.3 percent from a year earlier. Although employment fell, there were numerous developments in the Huntsville metro area retail sector during Graham & Company reported a retail vacancy rate of 9.9 percent at the end of 2011, down from 10.8 percent in 2010; several projects completed in 2012 are contributing new space and taking up some of the old. The Shoppes of Madison opened in March with Target, AT&T, Petco, Ross, Dollar Tree, Kinnucan s, Maurice s, Rack Room Shoes, Kay Jewelers, and a number of service businesses and restaurants. Construction was underway on Medical Park Station near Madison Hospital, a retail and medical office development, including as tenants Taziki s Mediterranean Café, Sprint, and Mattress Firm. A Dunkin Donuts also opened in Madison. Huntsville s Bridge Street Town Centre added Panera Bread; Bed, Bath & Beyond; and H&M during the past year. Other additions included Brookstone, Mattress Firm, and Bar Louie; a planned expansion will create space for Belk and other retail stores and restaurants. The North Memorial Parkway area added a Dunkin Donuts, Five Guys Burgers & Fries, and Mapco Mart, while Oakwood Village gained Improv Entertainment & Restaurant and a Roses store. A Walmart opened in the new Colonial Promenade on U.S. 72 in the fall, hiring 300; additional retail and restaurants are slated to open there in The former Barnes and Noble space on University Drive was repurposed as a HomeGoods store. Other restaurant additions included Zoe s Kitchen and Shane s Rib Shack in the Village at Whitesburg, Chipotle Mexican Grill on University Drive, and Texas Roadhouse on U.S. 72. BRAC relocations coupled with new and expanding professional, scientific, and technical service firms helped draw 6,100 new residents to the Huntsville metro during 2011, boosting population 1.5 percent to 425,480. Home sales picked up in 2012, climbing 11.4 percent to 4,737 for the first 10 months of the year compared to the same period in Prices in third quarter 2012 were up a slight 0.2 percent over the third quarter of 2011, with the FHFA House Price Index level with its prerecession reading. The almost 1,600 single family building permits issued during the first nine months of the year was about the same as in However, multi family housing activity picked up from just a few units in the first three quarters of 2011 to 312 units permitted in In single family housing, Huntsville s Village of Providence will add 460 homes. Madison annexed land for the 53 home Belmont Place subdivision, while the 35 lot Greenway Park in southeast Huntsville was approved. Subdivisions under construction in the Limestone County portion of Huntsville included Olde Cobblestone, Westlake, and The Preserve at Limestone Creek. Apartment development surged in 2012 with 4,033 apartments completed, in progress, planned, or under consideration during the year. A Rock Apartment Advisors survey estimated area occupancy at 92.9 percent in June. Eagles Landing put 64 new units on the market in 2012, while the Belk Hudson Lofts offered 75 units in downtown Huntsville, and the first of 226 units in Providence Place were completed. Most apartments under construction 34 Alabama Metropolitan Areas

39 during the year will be available in 2013 including 136 units at Emerald Ridge, the first 36 units of 528 planned at Limestone Creek, and Phase I of the 228 unit Addison Park. There were several developments completed or under construction for residents 55 and older including 60 apartments at French Farm Villas in Athens, 54 at The Commons, and 56 in Franklin Hills. A $100 million public/private redevelopment of the former Councill Courts public housing site near Huntsville Hospital as Twickenham Square will include 246 apartments, a Publix supermarket and other retail, a Homewood Suites by Hilton, a five story office tower, and a 920 space parking garage. After sustaining serious damage from the April 2011 tornadoes, the Huntsville metro area was hit by storms and tornadoes again in March 2012, with almost 130 homes in Limestone and Madison counties destroyed or heavily damaged. In quality of life developments, Madison s new James Clemens High School opened in the fall; the downtown Madison area saw streetscaping, additional parking, and the first new building in recent years. A new study on Huntsville s young professionals completed during 2012 provides the city with a basis for decisions about downtown development and housing, transportation, assistance for start up entrepreneurs, and other initiatives that will attract the needed workforce. Kiplinger s Personal Finance named Huntsville #3 Best Cities for Professionals in its 2012 rankings, while Forbes chose Huntsville as one of the world s 10 smartest cities. New facilities were added in Huntsville s Burritt Museum, Veterans Park, and the Botanical Gardens, and the city moved forward with plans for John Hunt Park. Fire stations opened in Huntsville and Madison during the year. The Huntsville area ranked first among the state s 11 metros with a 2011 average annual wage of $49,070 and FY2012 median family income of $71,700; per capita income of $40,126 in 2011 ranked second. Mobile Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. Ships, airplanes, and steel dominated development news in the Mobile metro during Total nonfarm employment climbed by 4,000 between January and October 2012 to reach 177,000. There were 2,200 more jobs in the area in October 2012 than there were a year earlier, however, 8,000 more are needed to bring employment back up to its level five years ago. Most of the jobs added during the 12 months ending in October came from Mobile s natural resources, mining, and construction as well as transportation and warehousing, financial activity, healthcare, and leisure and hospitality businesses. The number of employed Mobile residents climbed by 3,320 during the same period, for a 1.9 percent gain that was the largest of the state s 11 metros. A slightly smaller increase of about 1,950 in the labor force helped bring the area s unemployment down from 9.5 percent to 8.7 percent in October An estimated 29.9 percent of Mobile area workers were underemployed in 2011, according to a Center for Business and Economic Research (CBER) survey, highest among the metro areas. Applying this rate to October 2012 labor force data, Mobile had an estimated 52,908 underemployed workers which, combined with 16,884 residents who were unemployed in October, shows an available labor pool of around 69,800 an encouraging number of potential workers for businesses that are new to the area or expanding. Mobile area business optimism, measured by CBER s Alabama Business Confidence Index (ABCI) was below the state average throughout the first three quarters of 2012, with sentiment in the first and third quarters indicating a slowdown in local economic activity. Area confidence got a clear boost from the Airbus announcement, however, with the fourth quarter 2012 Mobile ABCI at 51.0, 2.7 points above the reading statewide. Despite pessimism about the U.S. economy, Mobile business executives were optimistic about prospects for the state and their industry in the fourth quarter. CBER forecasts relatively strong employment growth of 1.3 percent for the Mobile area in 2013, with GDP increasing 2.0 percent. Although the future looks bright for Mobile s manufacturing industry, the sector as a whole shed 300 jobs during the past year. Job growth late in 2012 and in 2013 is likely to be driven by the area s shipbuilders. Austal USA, Mobile s largest industrial employer with around 3,000 workers late in 2012, plans to hire at least 1,000 during the next 12 to 18 months to fulfill its government contract obligations and other project work; employment could rise to 4,600 by Mobile s Maritime Training Center is an important resource for workforce development for area shipbuilders and related industries half of the facility is dedicated to Austal and the other half is used generally by Alabama Industrial Development Training. Fifteen employees graduated from Austal s four year apprenticeship program in August. During 2012 the company completed Phase 2 of its Module Manufacturing Facility office complex and fifth assembly bay, a $200 million project, as well as the $5 million Navy Administration Building that provides office space for Navy and other government workers at the shipyard. Austal, teamed with General Dynamics Advanced Information Systems, is currently under contract with the U.S. Navy for 10 JHSVs under a $1.6 billion contract and for five LCS, four of which are under a 10 ship, $3.5 billion contract. Planned defense spending cuts would reduce the LCS program modestly, but could end the JHSV program after the first 10 Austal built ships. The company s second LCS, the USS Coronado, was christened early in 2012 and completed systems and engine tests, with delivery planned for early in Construction is also underway on the USS Jackson, to be delivered in 2014, with the USS Montgomery Alabama Metropolitan Areas 35

40 in preproduction; a subsequent LCS will be named the USS Gabrielle Giffords. An important milestone was reached in the JHSV program with the December delivery of the first ship, the USNS Spearhead, to the U.S. Navy, completing a project that began in December Construction is underway on the second and third JHSV, with the USNS Choctaw County scheduled for delivery to the Navy in Mobile s BAE Systems Southeast Shipyards also saw strong business growth during Working with Austal, the company finished repair and maintenance of the Sea Fighter U.S. Navy research vessel. BAE launched the chemical tanker, American Phoenix, built with Mid Ocean Tanker Company, in June and began construction of the MV Magdalen, a trailing suction hopper dredge for Weeks Marine that is slated for completion in A mid 2012 contract with Great Lakes Dredge and Dock for two dump scows was followed by a contract with GulfMark Americas for two platform supply vessels. Employment at BAE, which stood at around 650 early in 2012, was up to 830 in September, with plans to hire 125 by year end; the company expects strong employment growth in Several shipbuilders worked on projects for the U.S. Army Corps of Engineers Signal International was adding about 100 employees for work on a $15.9 million contract to repair a hopper dredge, while Bayou La Batre s Horizon Shipbuilding completed an inland river tug. Looking out a few years, Mobile s burgeoning aerospace industry will be a major contributor to manufacturing job growth. With Airbus July 2nd announcement of a $600 million aircraft manufacturing plant that will employ 1,000, Mobile finally reaped the benefits of the groundwork which was laid several years earlier with EADS in pursuit of the Air Force refueling tanker contract. Airbus officials cite Mobile s deepwater port in close proximity to the airport and other infrastructure as key factors in their decision. The facility will be built at Brookley Aeroplex, which is already home to about 200 Airbus employees at an aircraft engineering center. Groundbreaking for the plant is tentatively scheduled for April 2013, with construction contracts awarded early in the summer; construction employment could reach 3,600. Assembly of the A320 aircraft family will get underway in 2015, with the first planes delivered in 2016; production should be up to 40 to 50 aircraft per year by 2018, or around 4 planes a month. Airbus employment ad for a Director of Human Resources was posted in November; AIDT is partnering in a dedicated, but not exclusive, Airbus training facility and a tailored curriculum at Brookley. Of course, the aviation and aerospace industry is not new to Mobile and the Gulf Coast; the I 10 aerospace corridor, stretching from New Orleans to Panama City, was the third highest area in the U.S. in 2010 aerospace and defense revenues. Brookley Aeroplex houses ST Aerospace Mobile, one of the area s largest manufacturing companies with about 1,500 employees and aircraft mechanics and avionics training is offered at Brookley s Alabama Aviation Center. With the Airbus plant a certainty, local and state development officials have been busy courting potential suppliers at events like the ILA Berlin Air Show and the 2012 Aviation forum in Hamburg. However, supply chains in the aerospace sector are more dispersed than in the auto industry and develop more slowly, so the immediate supplier impact will likely be smaller; there could be an estimated 2,000 indirect jobs created by Indications are that about four to six integral service providers would locate on the Airbus site at Brookley, with other critical suppliers also at Brookley, but not on the site. A ring of suppliers within around 100 miles is likely, as warehousing may not be available onsite. An outer band of companies supplying the suppliers could fall within a 100 to 300 mile radius. The numbers of suppliers should continue to grow as the plant s rate of production increases from around four planes per month to eight planes at full capacity. Airbus, which already has an existing supplier base and operational models from other U.S. facilities, including EADS subsidiary American Eurocopter in Columbus, Mississippi, is sensitive to concerns among existing aerospace firms in the Mobile area that they will lose their trained workers to higher paying jobs. The company hopes to grow the aviation workforce overall and see new opportunities created for existing companies. Wages at Airbus could average $43,700 for skilled laborers and $72,600 for management and engineers. Partnerships between existing area aerospace companies and European Tier 2 or 3 suppliers could benefit both groups. Airbus also raised the prospect of forging supplier relationships with existing auto suppliers, helping them navigate the rigorous process required to obtain aerospace supplier certification. AIDT has pledged to help companies that lose 10 or more workers to Airbus rehire. The challenge generally will be to provide enough workers with the skills needed through workforce training initiatives. Growing aerospace employment will encourage cooperative programs for aerospace education, such as the Aerospace and Aviation Academy recently implemented at B.C. Rain High School near Brookley in partnership with Enterprise Ozark Community College. Baldwin County is setting up an aviation education center as a partnership between Fairhope, Faulkner State and Enterprise State community colleges, and the Baldwin County EDA. The new plant will enhance the existing relation between the University of South Alabama s College of Engineering and Airbus, providing opportunities for graduates to stay in Mobile and work in their field. Development news was mixed in Mobile s steel producing industry during SSAB brought a close to $300 million expansion online, creating 120 new jobs with increased capacity for quenched and tempered steel. ThyssenKrupp Stainless USA opened its melt shop in December; employment stood at about 750 in the fall. A $3.5 billion divesture of the stainless unit, which was renamed Inoxum, to Finnish steelmaker Outokumpo Oyj won European Commission approval in November and was expected to close by year end. Citing a weak international market and cost overruns and delays at its carbon steel 36 Alabama Metropolitan Areas

41 plants in Calvert and Rio de Janeiro, Brazil, ThyssenKrupp decided to put both plants up for sale, while maintaining ongoing operations. However, in August ThyssenKrupp eliminated 197 of the 1,653 workers at the Calvert facility. Initial offers from seven steel producers fell far short of the $9 billion book value that ThyssenKrupp hoped to recover from its $15 billion investment in the two plants and prompted a call for new offers. Several projects were undertaken to serve Thyssen Krupp during 2012, including Heidtman Steel Products $18.5 million steel slitting facility onsite; Tube City IMS, with a $23 million investment providing 68 jobs in melt shop scrap services for the stainless division; and Kloeckner Metals $18 million steel processing plant that will create 32 jobs. Other Mobile area industrial developments included a $6 million investment by Aker Solutions that increased production of umbilicals and created 25 new jobs. UOP LLC, a Honeywell company, is investing in a $20 million expansion to produce absorbents and catalysts, while AMVAC Chemicals added 60 jobs in 2012, including 10 for production of a new cotton defoliant a $9.9 million expansion at AMVAC announced in August will create 21 additional positions. Taylor Wharton s new $6 million cryogenics manufacturing facility will create an initial 15 jobs. And resin manufacturer Huntsman Americas is in the midst of a $40 million expansion that will add 35 jobs. Investments by the Alabama State Port Authority continued to pay dividends in 2012 and saw the Authority turning a profit after two years in the red. Infrastructure investment of over $340 million at APM Terminals Mobile over the last several years created a 45 foot channel and turning basin for ships as long as 1200 feet, enabling an increasing number of post Panamax ships to call at the facility in A new container service by Mediterranean Shipping now provides weekly direct call service to and from north European ports. Volumes of steel products handled by the Port Authority have increased substantially as ThyssenKrupp production ramps up. Coal industry export capacity at the Port of Mobile will increase this spring with completion of a $12 million upgrade of McDuffie Coal Terminal. Walter Energy s $100 million conversion of a former steel import facility at the Port of Mobile for coal exports will create 50 jobs in conjunction with its Tuscaloosa County energy project in A $12 million U.S. Department of Transportation grant and matching funds from the Alabama State Port Authority got work started on the $31 million Phase 1 of the Garrows Bend Intermodal Container Transfer Facility that will connect containerized imports and exports from the Port of Mobile to major rail lines, creating over 300 jobs in logistics, handling, trucking, and rail work. An oil unloading terminal for Arc Terminals LP in partnership with the Canadian National Railway will begin operation in Mobile in June International Shipholding, headquartered in Mobile, undertook steps to improve its business position, including buying and selling several ships and acquiring U.S. Ocean Services LLC in a $111 million deal. Although data indicate that area tourism has completely recovered from the April 2010 BP Deepwater Horizon oil spill, Mobile County s coastal seafood industry is still struggling. Sales were down about 10 percent in the two years following the spill to $146 million. But before that time, hurricanes, high fuel prices, and foreign competition had already put the industry in jeopardy. Hope is resting on a $5 million marketing campaign coordinated by the Alabama Seafood Marketing Commission to promote seafood from the Gulf as a healthy choice. Mobile s former Sara Lee bakery closed in May, idling 90 workers. Mobile s services sector added around 500 employees between October 2011 and October 2012 and accounted for 40.4 percent of area jobs. Healthcare and social assistance employment grew by 200, while leisure and hospitality businesses created 300 jobs. Although professional and business services shed 100 positions overall, Alorica s new call center that opened in March in west Mobile hired 200 workers and the company s Saraland location added to its workforce. Mobile continued to investigate prospects to fill the void left by the abrupt departure of Carnival Cruise Lines in October 2011 and to pay on the $22 million owed on the Alabama Cruise Terminal that was previously funded from parking revenues. The nearby $52 million GulfQuest National Maritime Museum, set to open in 2013, could help recruiting efforts. Large scale events such as Mardi Gras, Bay Fest, the GoDaddy.com Bowl, and the Senior Bowl provide significant tourism revenue. Mobile s Convention and Visitor s Bureau launched its Mobile Bay Secretly Awesome campaign in the fall. Businesses in Mobile s financial activities sector saw a net gain of around 200 jobs during the past year. However, deposits in FDIC insured institutions, which accounted for 7.1 percent of all deposits statewide, fell 0.9 percent during the year ending June 30, The University of South Alabama s Mitchell Cancer Institute received a number of new NIH research grants as it strives to gain National Cancer Institute designation. A $1 million federal grant will fund students in the Department of Physician Assistant Studies, with emphasis on retraining veterans as physician assistants. Shelby Hall, housing the university s College of Engineering and School of Computing, was dedicated in the fall. Although state government employment was flat, federal and local government entities saw employment fall slightly during the 12 months ending in October. In area retail developments, construction progressed on two Publix Supermarkets, with stores at Airport and University Boulevards and in the Hillwood Plaza set to open in summer Bel Air Mall added Versona Accessories and Maurice s. Other retail store openings during the year included Kelsey s Bargain Town in the Victoria Place Shopping Center, Zeal Boutique in the Schillinger Place Shopping Center, and Raven s Nook on Airport Boulevard. Academy Sports & Outdoors will anchor the new Westgate Pavilion on Airport Boulevard; Walgreens purchased land Alabama Metropolitan Areas 37

42 for a store at Spring Hill Avenue and Mobile Infirmary Boulevard; and Dollar General stores are planned for Moffett Road and Bayou La Batre. New restaurants included Pita Pit, Fuji San, and LoDa Bier Garden in downtown Mobile; other areas saw a mix of casual dining and dessert and yogurt shops. Housing sector indicators were mixed, with the number of homes sold up a modest 4.0 percent in 2012 compared to 2011, but single family home building permits for the first nine months of the year down slightly and multi family housing units permitted only about half the number for the same period in Average home prices in the third quarter of 2012, measured by the FHFA House Price Index, were 3.5 percent below third quarter 2011 and still 15.2 percent lower than five years earlier. Multi family development during 2012 included the Gardens at Wellington, a 51 apartment independent living facility; the 92 unit Hallmark at Mobile complex; conversion of an old Army barracks in midtown added 16 units. Volume builder D.R. Horton bought lots and undeveloped acreage in Longleaf Gates in June and development could pick up with optimism surrounding the Airbus announcement and strong growth in the shipbuilding industry will also see rebuilding activity as the cities of Mobile and Prichard recover from the tornado destruction that occurred on Christmas Day. Mobile s historic Murphy High School, housing in the Spring Hill Avenue vicinity, and midtown Mobile s business and medical districts were among the areas damaged. Population in the Mobile metro, which grew 3.3 percent between 2000 and 2010, fell by a slight 0.1 percent during the year ending July 1, Airbus and related companies should provide a boost to Mobile area income levels. At $39,190 in 2011, the average wage for all industries was just above the state average and ranked third among the 11 metros. But 2011 per capita income of $32,779 fell below Alabama s $34,880 and FY2012 median family income amounted to a well below average $51,900. Montgomery Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. Manufacturing and professional and business services drove job growth in the Montgomery metro area during Total nonfarm employment of 165,600 in October 2012 was 100 workers above a year earlier; however, the area still needs to create 14,800 jobs to be back at the 180,400 prerecession level of five years ago. An increase of 624 in the number of employed residents, coupled with a decline of around 230 in the civilian labor force, brought unemployment down from 8.5 percent in October 2011 to 8.0 percent for October 2012, ranking 8th lowest among the 11 metros. Adding an estimated 35,336 underemployed workers to the 13,679 unemployed in October brings the Montgomery area s available pool to around 49,000. That s a sizeable number of potential employees for new and expanding business and industry prospects. Montgomery area business executives were the most optimistic about prospects for the economy and their firm or organization during all four quarters of 2012 compared to executives statewide and in other large metros. Although confidence as measured by the Center for Business and Economic Research (CBER) s Alabama Business Confidence Index (ABCI) fell from 58.4 on the second quarter survey to 51.3 in the fourth quarter of 2012, area businesses expected modest growth as the year came to a close. CBER forecasts have employment in the Montgomery area rising 0.6 percent in 2013, with GDP increasing 1.7 percent. In manufacturing, where employment increased by 1,700 from January to October 2012 and accounted for 10.9 percent of nonfarm employment, the keyword was Hyundai. After striving to meet demand for the Sonata and Elantra by running two 10 hour five day shifts plus Saturday overtime, Hyundai Motor Manufacturing Alabama added a third shift at its Hope Hull plant in September. The 877 new hires that came on board for training in July brought employment to more than 3,000. With the new shift, production of Sonatas and Elantras at the plant could reach 345,000 for 2012 and 360,000 in Montgomery s other Hyundai, Hyundai Heavy Industries, which opened its plant in November 2011, added around 400 workers during 2012 as it ramped up production of power transformers. Montgomery County gained its 13th auto supplier as DAS North America started production of automotive seat components in a temporary facility with around 60 workers. The company plans to invest $50 million in a new plant that should be online by early in 2015 and employ 240. Tallassee Hyundai suppliers expanding include Hanil USA, planning a $3 million investment that will create 60 jobs, and E&I, with a $2 million investment and 20 new jobs. Commercial vehicle brake component manufacturer Fras le announced an $11 million investment bringing 100 jobs to Prattville. In other manufacturing developments during 2012, TK Electric is building a $3 million facility in Pike Road to supply Hyundai Heavy Industries; employment should start at around 30 when it opens in Hospital equipment manufacturer Steris decision to invest $11 million in an expansion of its Montgomery plant preserves the company s current 270 jobs and will add at least 80 new positions late in Dow Corning Alabama completed a $30 million power substation at its silicon metal manufacturing facility in Mt. Meigs and added 30 employees. A grant to improve road access will help Atagi Water, which began production in Autaugaville during the summer. Firms in professional and business services employed 20,600 across the Montgomery metro in October 2012, the area s second largest sector with 12.4 percent of jobs. Employment climbed by 700 during the first 10 months of the year; a fall job fair aimed at connecting potential employees with information technology and project 38 Alabama Metropolitan Areas

43 management companies suggests continuing growth. Retirement Systems of Alabama opened a $13 million Datacenter in its Dexter Avenue building in the fall. Medical supply company InMed Group added around 30 employees at its new downtown corporate headquarters, while working on plans to convert a city owned property downtown and add 60 employees with the move. The area s financial sector continues to rebound from the demise of Colonial Bank; FDIC insured deposits as of June 30, 2012 were 9.6 percent higher than a year earlier. Education and health services generally held its own in terms of employment during Montgomery Catholic Preparatory School opened a new $6.2 million elementary school in August. Faulkner University completed a number of projects during 2012, including an addition to Jones School of Law, a men s dorm, and extensive renovation to convert an existing building into a Dinner Theatre. The school dedicated its $2 million John Mark Stallings Field, a new football and soccer stadium, in time for fall semester use. Health services in the Montgomery area saw the loss of almost 120 jobs as the Department of Mental Health closed Greil Hospital August 31 and moved patients to community care or other state hospitals. UAB s Montgomery regional medical school on the campus of Baptist Medical Center South will begin training residents in May 2014 and should help provide more primary care physicians to the Montgomery area and central Alabama generally. Public K 12 schools and higher education institutions saw numerous developments over the past year. The Montgomery Public Schools started construction on the $34.1 million Park Crossing High School its first high school on the city s eastern side slated to open in Fall Career prep efforts accelerated with the opening of the Montgomery Technical Education Center, offering training in carpentry, industrial maintenance, and welding to high school students in a year round program that includes summer apprenticeships. The school system continues to repurpose, tear down, or sell unused schools and property. Alabama State University (ASU) completed its 26,500 seat, $62 million football stadium just in time for the 2012 Turkey Day Classic game against Tuskegee University. The university dedicated the expanded Levi Watkins Learning Center, a $22 million project, in November, and continued work on a $4.2 million renovation of a downtown Montgomery building that will house the master of accountancy and other upper level College of Business programs. Renovation of a former Alabama Public Television building will provide space for ASU s new Center for Applied Communications Media. Auburn University at Montgomery opened a $20.6 million wellness center in the fall. The university s new Confucius Institute will promote teaching Chinese language and culture at the public school and university level. An economic development institute being established at Troy University Montgomery will bring elected leaders and business people to the campus beginning in April Deposits in All FDIC Insured Institutions (Millions of Dollars) Percent Change Percent 6/30/2012 from 6/30/2011 of State Alabama 84, Anniston Oxford 1, Auburn Opelika 2, Birmingham Hoover 29, Decatur 1, Dothan 2, Florence Muscle Shoals 2, Gadsden 1, Huntsville 6, Mobile 5, Montgomery 7, Tuscaloosa 3, Source: Federal Deposit Insurance Corporation. While state government employment declined by 5,700 across Alabama between October 2011 and October 2012, the Montgomery area saw an increase of around 200 during this time. Altogether, the metro that includes the capitol had 22,800 residents working for the state in October, amounting to 13.8 percent of total nonfarm employment. A constitutional amendment that passed in September allowing the transfer of $145.8 million per year for three years from the Alabama Trust Fund to the Alabama General Fund was critical to avoiding substantial cuts in Montgomery area state government employment. Federal government jobs fell by 200 during the 12 months ending in October, as defense budget tightening cut around 200 civilian positions at Maxwell Gunter Air Force Base. Another 125 full time military jobs at the base are slated for elimination by the end of FY2013. Efforts were ongoing in November to keep the Air Force from removing C 130 transport planes from a Montgomery reserve unit a move that could affect as many as 550 jobs at Maxwell. Leisure and hospitality businesses in the Montgomery metro employed 14,200 in October 2012, up 300 since January but down by 100 from October Hotel occupancy improved to an average of 72 percent for hotels near EastChase in May and 67 percent downtown, drawing interest in new hotel construction. A Doubletree Hotel will open at the end of March following a $6 million renovation of the former Clarion Hotel on Madison Avenue, making 176 more rooms and suites available for downtown conference attendees. Completion of a Fairfield Inn and Suites near Hyundai is scheduled for April. The Poarch Band of Creek Indians began construction of a $246 million, 20 story hotel and casino that will add 285 rooms and a 90,000 square foot gaming floor to its adjoining Wind Creek Wetumpka hotel and casino. About 600 jobs will be created by the new project, bringing total employment to around 1,000. Construction resumed after a halt to address concerns of the Muskogee Nation of Creek Indians and could be completed early in However, the Southern Star Entertainment Center in Lowndes County, which had reopened in March 2012, was shuttered again in November Alabama Metropolitan Areas 39

44 when the state seized 350 electronic bingo machines and cash. Although budget restrictions forced cancellation of the Air Force s 2012 Information Technology Conference scheduled for Montgomery, a number of conventions and sporting events brought influxes of people to the area during A girl s 16 and under softball tournament drew 180 teams in the fall. The new $22 million Cramton Bowl Multiplex opened for sporting events in July and hosted the Alabama All Star Sports Week; at least 24 events are on the schedule through More than 30,000 visitors were in town for the 19th annual Buckmasters Expo. And the Navistar LPGA Classic in September that brought 144 top women golfers to Prattville s Capitol Hill Course contributed an estimated $7 million to the area economy. CBS will televise the new college football All Star game from the renovated Cramton Bowl in January 2013, with Raycom Media as the title sponsor. The Emory Folmar YMCA Soccer Complex, dedicated in September, hosted the men s NAIA Soccer Championships in late fall. Development of downtown Montgomery as a location for entertainment and dining continued. New businesses opening during the year included the restaurant Central, SandBAR at the Silos, Barra Hookah, Railyard Brewing Co., Irish Bred Pub, and Aviator Bar. New dining and shopping options across town included several eateries at Zelda Place, Festival Plaza, Montgomery East Shopping Center, and Eastchase Market Center; Versona Accessories and Peach Mac at The Shoppes at Eastchase; Alabama Outdoors at Festival Plaza; Goody s at Colonial Promenade; and Hibbett Sports in Governor s Square. Prattville s High Point Town Center is expected to benefit from new management by Jim Wilson & Associates as it continues to recover from the recession. A project to widen Old Farm Road will improve access to Prattville shopping. The City of Montgomery, continuing its strategic development initiative to purchase blighted or unused properties, spearheaded planning and improvement efforts in the area during Sale agreements are in place for many of the 12 properties the city owns on Dexter Avenue, with most slated for retail, restaurant, and commercial use. Some facades are being updated and upper floors converted to residential use. Demolition of the former Sears building on Court Street opens up that site for redevelopment. Meanwhile, the new City Hall opened downtown; private renovation of the historic Webber Building next to City Hall will feature retail, business, and residential floors. Birmingham developer JS Group is pursuing plans to turn the parking lot at the Corner of Bibb and Commerce Streets into a $15 million development with restaurants and apartments. Construction could start this spring on a $10 million apartment and restaurant development at the Old Skate Park on Bibb Street. The Printing Press Lofts, under construction on Court Street, will contribute 21 lofts in mid 2013 to the estimated 3,000 residential units needed in downtown Montgomery. Montgomery s former Tulane Court housing project site will be reborn as the Plaza at Centennial Hill, a mixed income development with up to 340 housing units; ground was broken on the 129 units in Phase 1 in May. As part of the Madison Avenue Gateway Plan, the City of Montgomery is buying the State House Inn Plaza for implosion and resale and has acquired the properties needed for construction of a new municipal court. Revitalization is ongoing in West Montgomery, with a combination of city and nonprofit projects. Streetscaping and façade renovations are underway along West Fairview Avenue, and work should be wrapping up on Phase I of the Genetta Park Stream Restoration project. An investor has been renovating the Highland Village apartments, while the nonprofit ACTS has been buying distressed properties from the city to renovate and sell. Christian ministry House to House is working to revitalize the Washington Park community. Federal funding will go toward improving the attractiveness of the last section of the Selma to Montgomery National Historic Trail. Renovations that will turn Overlook Park near Maxwell into Wright Brothers Park should be complete for a mid 2013 opening. The city continus to work with developers on a plan to sell city owned properties on Maxwell Boulevard for mixed use that would include 150 apartments as it pursues efforts to improve the connection between Maxwell Air Force Base and downtown. Other projects completed or ongoing during 2012 will contribute to the quality of life and housing opportunities available to area residents. The recently approved Atlanta Highway Master Plan seeks to make that area of Montgomery more attractive and pedestrian and bike friendly. Plans for the city owned portion of the old Montgomery Mall include a fire station, police offices, and an indoor public walking track. Future renovations could create a suitable location for a call center business. In east Montgomery, the newly opened Park Crossing provides a convenient connector for access to area schools and businesses, including the new high school that is under construction. The historic Capri Theater in Montgomery s Cloverdale neighborhood is undergoing extensive renovations. A new dog park near Blount Cultural Park is a joint project of the city and the Humane Society. The City of Prattville completed the first phase of a project to develop land adjoining Kiwanis Park with hiking, biking, and equestrian trails; residential redevelopment of the historic cotton mill in downtown Prattville is progressing. With growth ongoing, the Town of Pike Road hired Volkert and Associates to develop a comprehensive plan for city services, traffic flows, and development. Volunteers in Pike Road worked with Home Depot to build a baseball field and add a veterans memorial and seating at the Old Town Hall Park. Population in the four county Montgomery metro area continued to increase at a faster pace than across the state; 3,405 new residents during the year ending July 1, 2011 amounted to a 0.9 percent gain. However, prices as measured by the FHFA House Price Index were down 2.3 percent in third quarter 2012 from their third quarter 2011 level. House prices in the Montgomery metro are 10.8 percent below their level five years ago, on average. Still, 40 Alabama Metropolitan Areas

45 the area s real estate market appears to be on the upswing, with the total number of homes sold during the first 10 months of 2012 up 13.3 percent from the same period in And building permits for both single family and multifamily homes rose during the first nine months of 2012 compared to the same period in Financially, Montgomery area residents are better off than the average Alabamian, with a 2011 per capita income of $36,450 ranking third among the 11 metros and the fourth highest FY2012 median family income of $60,100. At $39,020, the average annual wage was close to the state average and ranked fourth among the metros. Tuscaloosa Nonfarm Employment (thousands) Source: U.S. Bureau of Labor Statistics. In Tuscaloosa, The University of Alabama s presence provided stability, and the metro area dealt with only minor losses in most areas during As always, visitors that came to the area for football games and other sporting events at the University offered support to local businesses still recovering from the damage of the 2011 tornadoes. The continuing rebound in the auto industry boosted economic activity in the Tuscaloosa metro at both Mercedes Benz U.S. International and local automotive suppliers. A total of 2,700 nonfarm jobs were lost between October 2011 and October 2012, decreasing payroll employment in the Tuscaloosa metro to 91,200. Area manufacturers added 200 jobs during the 12 month period. Service providing industries were responsible for most of the employment decreases in the metro, with the main losses from state and local government entities shedding 2,300 jobs. The metro area also posted job declines in retail trade (100); transportation, warehousing, and utilities (100); education and health services (200); and leisure and hospitality (300). The final closing of the W.D. Partlow Developmental Center in Tuscaloosa at year end 2011 resulted in the layoff of the last of the 455 employed at the facility when the closure was announced. Wholesale trade, which added 300 positions, was the only service providing sector to post gains between October 2011 and October The forecast for Tuscaloosa metro employment in 2013 is mildly optimistic, with the expectation of a 0.4 percent employment expansion. GDP forecasts are also encouraging; Tuscaloosa area output should grow 1.5 percent over the next year. The Tuscaloosa metro imported fewer workers in the past year, providing only about 300 more jobs than the number of employed residents, compared to 2000 from the previous year. During the 12 months through October 2012, employment of area workers and the metro s labor force contracted 1.8 percent. Unemployment remained below the state average of 8.5 percent, but rose 0.1 percentage points from October 2011 to 7.8 percent. According to a CBER survey, the Tuscaloosa metro area had an underemployment rate of 16.8 percent in 2011, second lowest among the metro areas. Underemployment is estimated at 15,338 for 2012 by applying this rate to October labor force data. Adding the 7,702 unemployed residents, there was an available labor pool of 23,040 for the metro area, 3.0 times the number of unemployed. Manufacturing contributed 14.4 percent of Tuscaloosa area jobs in October 2012, above the state average of 13.0 percent. Mercedes Benz was at the heart of many positive announcements this year since it is making major expansions to its Vance plant. The company started off the year reporting record breaking vehicle sales, up 26 percent compared to January The plant added a third shift for the first time to meet the demand for the M Class, GL Class SUV, and R Class crossover. The first vehicle of the second generation of the upscale GL Class SUV was officially rolled out over the summer at the Vance plant. Mercedez Benz suppliers brought new business to the region in Lear Corp., a seats and seating frame supplier, and Boysen, an automotive exhaust systems provider, both plan to build new plants in nearby Brookwood. ZF Lemforder Corporation grew its worker base by 85 with a $14.6 million expansion in automotive axle systems manufacturing. BLG Logistics expanded local operations by adding the former Syncreon warehouse in the Legacy Industrial Park. Other industrial development included Coskata choosing Boligee as the site of its first commercial plant to make biofuel from wood wastes. Walter Energy began its six year development for a new underground coal mine in Tuscaloosa County that will create over 500 high paying jobs once it is fully operational. Major closings also struck the metro area with Johnson Controls laying off 103, Heartland Catfish shedding 150 in Hale County, and Syncreon losing 312 jobs. The University of Alabama (UA) again experienced a record breaking year of growth. Fall 2012 saw enrollment of 33,602 students, a 5.8 percent increase from Another championship season for The University of Alabama s Crimson Tide football team brought fans and opportunities to Tuscaloosa. Alabama football games bring approximately $15 million into the local economy for most game weekends, and against major rivals like LSU, Auburn, and Tennessee, the games produce an additional $2 to $3 million in impact. University women s athletics teams were also highly successful in 2012, bringing home national championships in gymnastics, softball, and golf. UA academics were esteemed this year as well with the School of Law earning its highest ever rank of 29th in the year s U.S. News & World Report s ranking of law schools. The Manderson Graduate School of Business was named the fourth most popular business school in the country by the same magazine, and the Department of Advertising and Public Relations was again one of the top five finalists for the PR Education Program of the Year award. Other bright Alabama Metropolitan Areas 41