Business leaders in Birmingham-Hoover are anxious heading into 2024

Business leaders in Birmingham-Hoover are anxious heading into 2024

Business leaders in the Birmingham-Hoover area expect economic conditions to continue to deteriorate for the rest of 2023 according to the latest report from the Alabama Business Confidence Index (ABCI).

While a downturn in the fourth quarter of the year is normal, according to Birmingham Metro Black Chamber of Commerce President Curtis Richardson, he said whether things improve in the first quarter of 2024 will largely depend on the turnaround of the national economy.

“It all depends on how the (US) economy is shaped going forward,” he said. “It’s a lot of different things and we still don’t know what kind of increases we’re going to see going forward. But there’s going to be a rise (inflation) and it’s all going to come down.”

The index, created by the Culverhouse College of Business at the University of Alabama, is based on a survey conducted by a panel of regional business leaders before each fiscal quarter.

Panelists are asked to rank their confidence for the upcoming quarter in the following categories:

· Alabama’s economy

· American economy

· Industry sales

· Industry profits

· Industry recruitment

· Industrial capital expenditures

The overall ABCI score is calculated based on the average scores of these categories.

An index score above 50 means that business leaders in the region expect economic conditions to be better than the previous quarter, and an index score below 50 means they expect them to be worse.

Birmingham-Hoover’s most recent ABCI overall score was 42.9, which represents a 3.3-point decrease since the last quarter. The metro saw a decline in confidence in every category except employment in industry, which saw a slight increase of 0.6 points to 42.3. But just because companies want to hire doesn’t automatically mean there are more jobs for everyone, according to Richardson.

“So, you have the reports that people are hiring, but what you don’t see in that jobs report is the quality of what they’re hiring for,” he said. “So, depending on the industry, like especially in my industry (electrical contracting), yes, there are a lot of people knocking on the door. But there’s not a lot of skilled help out there.

He said this could be attributed to the lack of trained workers available to compensate for the growing number of retirees.

“You had a lot of men and women who retired,” Richardson said. “Then there are people 15 years ago who were not in some of the skilled trades. So, we’ve seen that happen today with a smaller pool of people who will be employed in those roles.”

Local urban analyst Christopher Burks, who also serves on the Birmingham Planning Commission, said increasing support for education to boost the state’s workforce could help lessen the blow of what many call an “inevitable” national recession. He pointed to Birmingham Southern College, which is currently on the brink of closure, as a specific opportunity for this increased support.

“Demand for higher education typically increases during recessions,” Birx said. “However, at the metro level, Greater Birmingham is unnecessarily close to losing one of its oldest institutions in Birmingham-Southern College. This would be a huge travesty, especially if the state allows the college to close its doors just before the recession — a period during which it could Birmingham-Southern College is a strong partner in supporting workforce development in the state and metro.

Metro business leaders have the least confidence in the U.S. economy, which saw a decline of 0.7 points over the next quarter to 33.7 points. Business leaders also reported the largest decline in confidence in the nation’s economy with a decline of 6.7 points to 43.3 for the upcoming quarter. According to Burks, these two results go hand in hand.

“Confidence in the state and metro economy is declining due to the broader outlook for the U.S. economy,” Birx said. “Nationally, major capital debt is coming due, interest rates are rising, consumer spending is slowing (especially as the pandemic has wiped out savings), student loans are starting to go unpaid, mortgage rates are rising, and federal stimulus funding is critical.” . Running out.”

Although the statewide index results were in line with Birmingham-Hoover’s negative outlook for all categories except industry employment due to “ongoing concern about a potential recession,” according to the report, business confidence varied across the state’s largest metros.

“Business leaders in Montgomery and Tuscaloosa expect economic expansion this quarter with a fairly confident ABCI at 51.5 for both regions due to optimistic outlooks for industry growth,” the report said. “Huntsville’s ABCI was neutral at 49.8, indicating expectations of continued economic conditions in the fourth quarter overall. Birmingham-Hoover had the lowest ABCI at a fairly confident deflationary index of 42.9, although Mobile was close at 44.2 .

How to deal with economic downturn

Increasing the state’s exports in agriculture and the auto/aerospace industry (Alabama’s largest industries) and increasing the property tax while cutting the sales tax to take pressure off the poor are two ways Birx said state leaders could help cushion the impact of the coming recession.

At the local level, Richardson said strategic planning and tight budgeting are key to success.

“I’m a fan of budgeting and watching your money personally as well as in business,” he said. “Pace yourself and be a little more strategic… Go back, look at your business plan. Update it. Review this. You might need to pivot a little bit. Stay lean and mean and you’ll be fine. You’ll be great.”

Richardson added that business leaders who are able to confront the economic challenges ahead will come out on the other side stronger and wiser.

“In my opinion, it’s not doom and gloom,” he said. “Because it makes you wiser in your career and your industry. It’s not just free will, where anyone can be successful if they get rid of something. 2021 was different. You started to see everything get a little crazy. At some point, it was just saying hello I’m going to start a business was common, and everyone seemed successful. But now the writing is on the wall, and it’s getting you closer to your business plan and how you should build your infrastructure.

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