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The Associated Press August 26, 2011, 2:23PM ET

Wells Fargo report: Alabama likely in recession

A report from Wells Fargo says Alabama's economy has likely fallen into a recession, but two economic experts in Alabama have a different outlook.

The report from the San Francisco-based bank said Alabama was one of 12 states experiencing an economic contraction in July and "likely slipped into a recession."

The report, written by senior economist Mark Vitner and economist Michael A Brown, said more states "are likely to fall into negative territory within the next six months" because of a persistent decline in manufacturing jobs.

Keivan Deravi, an economist at Auburn University Montgomery, said the national economy is dragging down a lot of states' economies, including Alabama's.

"We are slowing down but we are not in worse shape than most other states. Only states that are heavy in energy or farm sectors are escaping the wrath of the current downward cycle," he said Friday.

Sam Addy, director of the Center for Business and Economic Research at the University of Alabama, said Alabama could be headed into recessionary territory if it has a couple of more bad months.

"But we are not there yet," he said.

Deravi and Addy, who have advised state officials for many years, said Wells Fargo's report is based on the state coincident indexes from the Federal Reserve Bank of Philadelphia. Those indexes are heavily weighted on employment and unemployment. Deravi said Alabama's unemployment rate went up in June and July because of the entry of new job seekers graduating high school and college and the resumption of job searches by unemployed people who had quit looking for work. They weren't counted in the unemployment statistics when they weren't hunting jobs.

At the same time, employment declined, Deravi said.

"This double coincidence of negatives put Alabama in their recession prone zone," the AUM economist said.

Addy said it's important to remember that there were 24,000 more people working in Alabama in July than in January. He said that gives Alabama 1 percent growth in jobs, and it's ahead of the 0.8 percent job growth that the UA center had forecast.

He said another positive sign is that the state's income tax collections from individuals are up. According to the Alabama Department of Revenue, it has collected 5.7 percent more income tax from individuals during the first 10 months of fiscal 2011 than it did during the same period a year ago.

Of the 12 states cited in Wells Fargo's report, five were in the South. Joining Alabama were Georgia, South Carolina, North Carolina and Virginia. The other seven states were Michigan, Nevada, Montana, Illinois, Indiana, Vermont, and Alaska.

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