Birmingham Economic Forecast 2010

I recently attended the 2010 Economic Forecast presented by the Birmingham Business Journal and hosted by Samford University’s Brock School of Business. Brought together for this event was an esteemed panel of guests to include Mickey Gee, Executive-in-Residence at UAB, Cynthia Lohrke, Professor at the Brock School of Business, John Norris, Managing Director for Oakworth Capital Bank, and Jacksonville University Associate Professor of Economics, Christopher Westley. This panel fielded a variety of questions concerning opinions and predictions of the Birmingham marketplace for 2010. To follow is a summary.

Consumer confidence appears to be rising and is expected to continue into 2010. Of course this is good news for the retail industry, and December numbers will be out soon to show exactly how 2009 finished. In general, retail department stores have been seen as surviving the holiday season by creating value as opposed to deep discounting as a manner of creating sales for the holiday season. It was noted that 74% of the US economy is driven by consumer spending, and has seen a low of 61% last summer. The drop in consumer spending was due to the increase in unemployment, and decline in consumer confidence. Unemployment for the state has hovered around 10.2% and 9.9% for Birmingham. Some areas of Alabama are experiencing real unemployment of upwards to 25%. Interestingly 16-17% of workers at this time are part-time employees. News that Joe Consumer is pulling out of this tail spin is great to hear. But, a move to full employment according to this group will be driven by the part-time workers that shift back to full-time employment first, followed by hiring of the unemployed. Any businesses that support the Temporary job sector should be a good bet for growth in this type of marketplace. The company ManPower was sited as one of the top ten businesses in 2009. During this time of employment unrest there does seem to be a silver lining. Baby Boomers are not taking on more debt during this recession, and the savings rate has started to increase.

A discussion of the role of Federal stimulus dollars that may find its way to Alabama centered on recommendations as to where funds should be allocated. Most agreed that there has been no real stimulus money impact as yet, with most of the funding going toward government stabilization. In specific, the monies have gone to government expenditures for education, health and human services, and even 4% to transportation (considered a non-business expense). Stimulus dollars that go to support large companies with government contracts will prove to be a frustrating competitive playing field for any small business that competes with them. The real need for use of these funds is to fund real business expenditures to drive the economy along. Most on the panel agreed that now is the time to invest in innovation and to take the time to build strong strategy. In particular technology is strong for software development, and it was interesting to learn that we have an iphone developer right here in Alabama. It has been suggested that there is a need to invest in wireless and broadband infrastructure. In general, most agreed that the stimulus money has not altered the economy that much, just simply moved the demand curve forward. Eventually, the same costs will still be due. The 787 billion dollars that have been tagged are actually slated to be spent this year, not last year, which just so happens to be an election year.

Though Washington has released monies to support small business loans, access to these funds will continue to be restrictive with some loosening of credit by the end of 2010. Amazingly, it was stated that private sector job growth has been at zero since 2001. Any growth seen has been produced by “government growth” as created by what has been called the warfare state and the welfare state. The concern here is that this is not real capital creation, and is most likely not sustainable.

Opinions were raised with respect to the Jefferson County Business License tax as a revenue source for Jefferson County. Essentially, the point was made that most counties that have an occupational tax do not do well. With regard to business friendly strategy, the panel reminded us that a tax increase of 1% is still a tax increase. Of course the full impact of the healthcare bill remains to be seen too.

So how does a business owner continue to break ahead of the pack and earn the biggest gains as we pull out of the recession? The good old fashioned way: Customer Service, reliable experience, and a heavy dose of ethics. One certain area for growth in the near future is a demand for graduate level education. This higher level of education will help create and drive technology growth, energy growth (specifically green), healthcare industry and technology (contingent on the healthcare bill outcome), and most fascinating to this writer is the recommended need to learn Mandarin as a second language. Bottom-line for Alabama: We need to have academic specialization, think globally, and bring the business opportunity and job creation home. We will need workers with high knowledge and critical thinking skills. Not surprisingly there is a direct correlation between education levels and per capita income.

As you think on some of these opinions and thoughts concerning developing and changing business here in Alabama, ask yourself how this applies to your position. Are you using knowledge to leverage your position? Are you adaptive to technology? Does your strategy still embrace and compliment your mission? Do you have a corporate culture which leverages the least costly business strategy available which is concrete customer service? Lastly, are you involved with your City council, local government and Chamber of Commerce? If not, then start today. The positive interaction between your business and these leadership entities will be the driving force behind strong economic development.

Good customer service is free, and is as simple to implement as a change in attitude. So remember, take care of your customers, or someone else will.