Alabama's industrial boom, which began in the 1870s with the exploitation of the coal and iron fields in the north, quickly transformed Birmingham into the leading industrial city in the South, producing pig iron more cheaply than its American and English competitors. An important stimulus to manufacturing in the north was the development of ports and power plants along the Tennessee River. Although Birmingham remains highly dependent on steel, the state's industry has diversified considerably since World War II (1939–45).

By the late 1970s, the older smokestack industries were clearly in decline, but Birmingham received a boost in 1984 when US Steel announced it would spend $1.3 billion to make its Fairfield plant the newest fully integrated steel mill in the nation. In 1997, Mercedes Benz began manufacturing its sport utility vehicle at a new facility in Vance.

As of 1999, the principal employers among industry groups were food and kindred products, textile mill products, apparel and other textile products, primary metal industries, industrial machinery and equipment, electronic equipment, and transportation equipment. Electrical machinery, computer equipment, and transportation equipment in Alabama are typically exported to Canada, Mexico, and Germany. The value of manufacturing shipments in 1997 equaled $69.7 billion, with a 31.9% growth from 1992. Alabama was found directly in the middle of states ranked by growth in manufacturing. Mineral industries grew at a much slower rate (5.9%), on par with the US as a whole. Construction, on the other hand, grew at a rate of 65.4% from 1992 to 1997, to $12.6 billion of business done during 1997.

Earnings of persons employed in Alabama increased from $63.8 billion in 1997 to $66.9 billion in 1998, an increase of 4.9%. The largest industries in 1998 were services, 23.2% of earnings; state and local government, 12.5%; and durable goods manufacturing, 12.1%. Of the industries that accounted for at least 5% of earnings in 1998, the slowest growing from 1997 to 1998 was transportation and public utilities (6.6% of earnings in 1998), which increased 2.7%; the fastest was finance, insurance, and real estate (5.7% of earnings in 1998), which increased 7.7%.