During the most recent Federal Open Market Committee cycle (which ran from July 31 to September 17), the Atlanta Fed's Regional Economic Information Network (REIN) team at the Birmingham Branch met with business leaders, including branch directors, to discuss economic conditions in Alabama.
General business conditions
Overall, REIN contacts in Alabama see continued slow growth during the next three to six months. We heard accounts of improvement in industrial manufacturing, and commercial construction contacts reported growing demand for office, industrial, and retail space. Contacts in the finance and professional service industries also reported growing demand. Although comments regarding headwinds had grown scarcer during the past few cycles, we heard more mentions of concerns over the effects of “unknowns” from the upcoming elections and international turmoil stemming from recent events in Ukraine and the Middle East.
Employment and labor markets
We heard mixed stories about future hiring plans, ranging from no plans to hire in the near term to substantial hiring plans on the horizon. The chart below illustrates both the short-term and long-term employment momentum by sector. Compared with a year ago, Alabama has seen employment expand in several sectors like manufacturing, construction, health care, private education, and business services. However, sectors such as retail, other services (including automotive repair, personal care services, and business and professional associations, among others), and state government saw momentum contract.
In August, Alabama payrolls increased month over month by a seasonally adjusted 8,400 jobs, on net. All sectors gained except retail, which posted a loss of 1,900 jobs, and federal government, which remained unchanged since July. Alabama has seen overall job growth in the last two months, and August's unemployment rate was 6.9 percent (see the chart).
That rate is down 0.1 percentage point since July, but it's still higher than the national unemployment rate of 6.1 percent (see the chart).
Costs, prices, and wages
In most cases, our contacts reported only modestly increasing input prices, with the exception of construction materials, which have reportedly risen. No contacts reported the ability to significantly raise prices broadly, but more are reporting passing along selective increases where they can. However, growing price pressure was noted in the transportation sector and with the exception of ocean shipping (which has excess capacity), other transportation segments have reached capacity, with prices consequently rising.
When the conversations shifted to wages, many of our contacts reported that although they are not planning to increase wages, they are carefully watching what other companies are doing. No overarching wage pressure was apparent, although there was mention of wage pressure being reported for select, high-skilled positions. Mostly, contacts reported continued modest pay increases.
Availability of credit and investment
Participants told mixed stories regarding investment plans. We heard reports of idled plants being brought back online and some talk of companies beginning to consider investments that would increase production capacity. However, we also heard some discussion about companies that had been investing through the downturn considering moderating investments. Additionally, several contacts noted continued challenges in obtaining financing for smaller builder/developer projects.
Our conversations will continue in Alabama, and we'll relay them to you in the future. In the meantime, what are you hearing?
By Teri Gafford, a REIN director,
and Susan Remy, a REIN analyst, both at the Atlanta Fed's Birmingham Branch