Alabama's economy should improve this year, experts predict
by Tim Lockette
MONTGOMERY — Alabama has good prospects for economic growth in the coming year as long as Congress can stay away from the fiscal cliff, some of the state's leading economic observers say.

"If Congress does the right thing, there is upside potential," said Samuel Addy, director of the University of Alabama's Center for Business and Economic Research, or CBER.

Addy was one of the speakers at CBER's Economic Outlook Conference at the convention center at the Renaissance Hotel in Montgomery. CBER holds the event every year to unveil its economic projections for the state.

Addy was guardedly optimistic about the state's chances for growth this year. The center's figures show the Alabama economy growing by 1.9 percent over 2012, a little slower than in the previous year. The center expects a similar rate of growth in 2013, with growth rising to 2.8 percent in 2014.

David Altig, an executive vice president for the Atlanta branch of the Federal Reserve, offered a similar vision. He said the Fed projected the country would reach 6.7 percent unemployment by mid-2015. That could happen if the country adds 158,000 jobs per month, he said — roughly the amount the economy added in December.

"That pace is an improvement, but it's slow improvement," he said.

Both Altig and Addy cautioned that the looming fiscal cliff — which Altig described as a "crisis" — could jeopardize that growth. Addy said polls show economic confidence among business leaders in Alabama dropping over the last two quarters, a drop he attributes to the fiscal cliff. Hiring dropped at the same time, Addy's numbers suggest.

Car manufacturing was the brightest spot in Addy's numbers. CBER estimated that Alabama produced 880,000 cars in 2012, a record output and nearly twice the number made in 2009, at the height of the recession.

Auto workers made an average of more than $1,400 per week, nearly twice the wage of the average worker.

"A lot of the workers are making, because of overtime, in the six figures," Addy said.

But far more people are among the ranks of the unemployed — either working part time or for a wage that can't pay the bills. Addy said about 473,000 people, or 24 percent of the total workforce, are underemployed.

Anniston's numbers were a little better, with 19 percent of the area's workers underemployed.

Addy projected that the state's tax revenues would grow by 3.5 percent in 2013, a little less than the previous year.

Legislators are likely to closely watch those numbers. The state has faced increasingly tight budgets every year since the recession, first because of declining revenue, and later because of the loss of federal stimulus funding and rise in enrollment for Medicaid, the joint state-federal program that provides medical insurance for people in poverty.

David Bronner, director of Retirement Systems of Alabama, told the audience he believed the hardest years for the state budget are over.

"The future is more positive than what we've been facing for the past three or four years," he said.

Bronner said the state should have expanded Medicaid to an additional 300,000 clients, something the Affordable Care Act originally required of states. Gov. Robert Bentley opted out of the expansion after the U.S. Supreme Court ruled that states aren't required to do the expansion.

Bronner said the expansion would have been good for the economy.

"Forget helping 300,000 people," he said. "Think of how many people will be employed."

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© 2013