Tennessee Economic Report Forecasts Slower Growth (550)
KNOXVILLE — Slower economic growth in the near future with little chance of a recession is predicted in the University of Tennessee’s economic report to Gov. Don Sundquist.
Despite a slow start in 2001, the report predicts the state’s economy will gain strength in coming months with continued growth through 2002.
“Though the economy looks weak right now, the entire year is only expected to slow modestly relative to 2000,” Dr. Matt Murray, associate director of UT’s Center of Business and Economic Research, said in an interview Tuesday.
“We do not think the whole of 2001 is going to look like what we are seeing right now. The end of the year will look better than the very beginning of the year.”
The report compiled by the center forecasts steady personal income growth and a slight dip in job growth over the next two years.
Agriculture may be one of the state’s hardest hit sectors, as tobacco acreage and agricultural incomes are expected to plummet.
Over the longer term, Tennesseans’ per capita income is expected to climb closer to the U.S. average by 2009.
Service jobs, finance, insurance, real estate and mining are expected to be the strongest growth areas, while construction, agriculture, manufacturing and government spending will lag behind the overall state economy.
Murray said private investment, education and infrastructure are the keys to Tennessee’s economic success over the next decade.
“Over the forecast horizon, Tennessee’s overall growth path is expected to trend upward,” Murray said. “This trend can be enhanced by investment in the state’s human capital through education.
“Also, encouragement of new private capital investment and maintenance of the state’s infrastructure are ways for Tennessee to improve its productivity and competitiveness in the years to come.”
Tennessee’s economic outlook includes:
— unemployment (3.7 percent in 2000) rising to 4.3 in 2001 and remaining above 4.0 through 2002.
— job growth (1.5 percent in 2000) slowing to 1.3 percent this year but rebounding to 1.6 in 2002.
— Personal income growth stable at about 5.8 percent through 2002.
The report also says that 1999 farm income of $141 million was less than half of 1998 and about a fourth of the yearly average for the decade.
Without government aid such as disaster and market loss payments, farm income would have shown a loss of $67 million, marking the first year that government payments have been necessary for a positive farm income.
Drought, low market prices and lower tobacco quotas contributed to recent decline, and short-term recovery is unlikely, the report says.
Despite the slowing economy and agricultural concerns, short-term economic growth is expected to remain respectable but sluggish compared to recent years, Murray said.
“What is now considered as a slow growth rate would have been viewed quite favorably (before the 90s boom),” Murray said, “but in light of exceptionally strong growth during the 1990s, expectations have been raised regarding the acceptable pace of economic advance for the state.”
The economic report also summarizes progress of Tennessee’s Families First, the state welfare reform program launched in 1996.
The report says the program ranked:
— Third nationally in the percentage of recipients entering the workforce.
— 14th nationally in recipients’ job retention
— 15th nationally and tied with North Carolina for first in the region for recipients’ success in the workforce.
— Seventh among nine regional states in welfare caseload reduction.