by Mike Murphey, Porter White & Co.
The best way to understand what is happening in your market is to do what Alabama Community Bankers excel at every day…understanding your clients and their financial needs. That said, having reliable, timely economic data applicable to your community is a great way to complement your existing market knowledge to help your bank develop strategies to best serve your customers, shareholders, and community. Historically, that meant using annual or quarterly GDP or unemployment data to develop strategy. Given the unprecedented volatility we are seeing in our nation’s economic data, that will not work anymore. This article will provide an overview and links to free data sources that provide monthly, and in some cases daily, economic updates relevant to your market, and will discuss what current indicators mean for the Alabama economy.
GDP
State, county, or city GDP information can be found at the Bureau of Economic Advisors site. We do not find this particularly useful for assessing day to day business operations, as county/city GDP is only produced once a year, and state level GDP is only produced quarterly. However, this data would be useful as executive management and board members assess longer term bank strategy.
Unemployment
This is a very powerful indicator. It is timely (produced monthly) and highly correlated to Alabama community bank profitability, as reflected in the chart below.
The Alabama Department of Labor site provides a wealth of monthly unemployment data at the state, city and county level, as well as weekly information by county and industry on unemployment insurance claims. Use caution when utilizing unemployment insurance claims information, as double counting and potential fraudulent applications may skew results. (Note: community banks defined as banks with less than $1B in assets)
http://www2.labor.alabama.gov/default.aspx
Help Wanted Online Alabama Survey (“HWOL”)
A very useful view of future unemployment levels. Produced monthly by The Conference Board, it provides views on current online unemployment advertisement by occupation, salary, and employers, as well as a snapshot of unemployment data.
https://labor.alabama.gov/news_feed/News_Page.aspx?id=277
Federal Spending on Unemployment
In normal times, unemployment is an optimal indicator of economic activity. These are not normal times. In the past several months, despite record levels of unemployment banks remained solidly profitable with minimal credit issues primarily due to $3 trillion in fiscal stimulus, most of which is in the form of enhanced unemployment benefits. The easiest way to track this measure is from The Bureau of Economic Advisors site, which produces a quarterly analysis of Personal Income by State. This measure includes Transfer Receipts from the Federal Government, including COVID related unemployment benefits, providing the reader a good view of personal income of unemployed individuals in their communities. This is an important measure, especially for states like Alabama which typically pay lower than average levels of unemployment insurance.
https://www.bea.gov/sites/default/files/2020-09/spi0920_0.pdf
Census Pulse Survey
A weekly state level survey produced by the US Census Bureau of small business views on how COVID has impacted their business. Provides a very useful view of the “typical” community bank business client’s economic outlook, and what industries are most impacted. Make sure you click on the survey question dropdown…lots of useful information there regarding revenue, employees, liquidity, and loan activity.
https://portal.census.gov/pulse/data/
Opportunity Insights
Provides daily Consumer spending data by state and most Alabama counties as well as Small business revenue, small business openings and job postings by state and industry. The site also has unemployment information, but we find the Alabama Department of Labor superior to this data.
https://tracktherecovery.org/
Redfin
Weekly housing data by county including median listing and sales price, new listing activity and homes sold. Mortgages and residential construction lending are a big part of our business, and this site gives useful views into that market.
https://www.redfin.com/blog/data-center/
What does this data tell us?
As reflected by the chart below, the above indicators reflect Alabama’s economy is clearly outperforming the nation, but still has a way to go to meet pre COVID unemployment levels of 3%.
Mike Murphey is a senior advisor who supports Porter White’s Community Banking practice. He has spent forty years in the southeastern US banking industry in various capacities related to commercial lending, including relationship management, underwriting, credit, and portfolio management.
