Alabama Economy: Auto, Aerospace, and Agriculture

Alabama is a mid-sized state economy, usually ranked in the middle of U.S. states by GDP — the dollar value of everything a place makes and sells in a year. The Alabama economy has shifted from a textile and steel base to a modern mix of auto manufacturing, aerospace, agriculture, and a growing healthcare and finance sector in Birmingham.

This is a plain-English tour. For the national picture, see The State of the U.S. Economy and the Economy hub.

How big is the Alabama economy?

For example, recent state GDP for Alabama has run around $290 billion, according to the Bureau of Economic Analysis. Population is roughly 5.1 million, per the U.S. Census Bureau. Birmingham, Huntsville, Mobile, and Montgomery anchor four very different regional economies.

The biggest industries

Alabama's industry mix is more manufacturing-heavy than most Southern states. The main pillars are:

• Auto manufacturing — Mercedes-Benz, Honda, Hyundai, and Mazda Toyota all build vehicles in Alabama; the state is one of the top auto-producing states in the country.
• Aerospace and defense — Huntsville is home to NASA's Marshall Space Flight Center and the U.S. Army's Redstone Arsenal, supporting one of the highest concentrations of engineers in the country.
• Steel and metals — Birmingham was built on iron and steel, and the industry is still meaningful through companies like U.S. Steel and Nucor.
• Agriculture and forestry — poultry, cattle, peanuts, cotton, and timber are major. Alabama is one of the top broiler chicken producing states.
• Shipbuilding — Austal USA in Mobile builds Navy ships and is a major employer on the Gulf Coast.
• Healthcare and finance — UAB Medicine in Birmingham is the largest single-site employer in the state; Regions Financial is headquartered in Birmingham.

Jobs and wages

Alabama labor data is published by the Alabama Department of Labor, with national-level numbers from the Bureau of Labor Statistics. For example, the Alabama unemployment rate has typically run close to or below the national average, with Huntsville often the tightest labor market in the state.

The Alabama minimum wage is tied to the federal floor of $7.25 per hour. Many large Alabama employers — especially the auto plants and Huntsville aerospace contractors — pay well above that on their own.

Taxes in Alabama

Alabama has a graduated state income tax with relatively low top rates. Cities and counties can also charge a small local occupational tax in some areas.

The state sales tax rate is 4%, but local add-ons push the combined rate above 9% in many cities — among the highest in the country. Groceries are taxed, though the state has been lowering the grocery rate. State tax forms and rules live at the Alabama Department of Revenue. You can read more about how sales tax works in our glossary.

Cost of living

Cost of living in Alabama is among the lowest in the country. Birmingham, Huntsville, Mobile, and Montgomery are all affordable compared with similarly sized metros elsewhere. The federal government tracks region-specific Consumer Price Index data through the BLS Southeast region, and HUD publishes Fair Market Rents for every county at HUD User.

Huntsville's aerospace cluster

Huntsville is one of the unusual stories in the U.S. economy. The metro is small but has one of the highest shares of engineers, scientists, and aerospace workers anywhere in the country, thanks to NASA, Redstone Arsenal, and a deep contractor base. Median incomes in Huntsville run well above the Alabama state average.

Birmingham's healthcare and finance core

Birmingham has shifted from a mid-20th-century steel town into a regional healthcare and finance center. UAB Medicine, the academic medical system tied to the University of Alabama at Birmingham, is the single largest employer in the state and anchors a deep medical research and biotech presence. Regions Financial Corporation is one of the largest banks headquartered in the South. Birmingham's economy still has steel and metals roots, but the day-to-day texture of the local labor market today is hospitals, banks, and law firms.

The Gulf Coast economy

Alabama's coastline is short, but its economic footprint is significant. The Port of Mobile is one of the busier ports in the South, handling coal, steel, and chemicals as well as containers. Austal USA's shipyard in Mobile builds Navy ships and is one of the region's largest manufacturing employers. Baldwin County, just east of Mobile, has been one of the fastest-growing counties in the country, driven by retiree migration, beach tourism, and a steady spillover of Mobile-area workers.

How does the Alabama economy fit into the national picture?

Alabama has one of the most export-intensive economies in the South, with cars, aerospace components, and steel shipped worldwide. Population growth is modest, with most gains in the Huntsville and Baldwin County (Gulf Coast) areas.

A note on the numbers

Numbers in this article change every quarter — always check the latest from BEA, BLS, and the Alabama Department of Revenue for the most current data.