KNOXVILLE — Tennessee’s unemployment in November climbed higher than the national rate for the first time in two years, a University of Tennessee study says.
Tennessee’s November index of leading economic indicators reports state unemployment rose nearly half a point to 4.1 percent.
UT economist Matt Murray said it was the first time since March 1999 that state unemployment surpassed the U.S. rate, which was 4.0 percent in November. The month’s 50,622 jobless claims were the most since 1995, Murray said.
“Because Tennessee’s economy is so manufacturing-driven, an economic slowdown can cause more rapid unemployment than it would for the nation as a whole,” Murray said.
“Several times over the past few decades when the national economy slipped, Tennessee’s economy has stumbled a little bit more seriously. I think we are seeing that now as the state unemployment rate has inched up above that of the nation as a whole.”
November’s index fell 9.0 percent overall, triggered by rising unemployment, a 12.3 percent drop in the state taxable sales rate and 11.2 percent drop in manufacturing hours.
The only positive component was construction employment, which rose 7.7 percent for an increase of 800 jobs.
“Construction employment was a real bright spot in November,” Murray said. “Residential, commercial and industrial construction activity continue to expand and accelerate. That is an encouraging sign, given all the other indications of a slowdown.”
Despite drops in the state’s economic index in four of the last five months, Murray said a recession remains unlikely.
“I am relatively optimistic that the state economy is going to weather the storm and not slip into a recession,” Murray said. “Economic conditions are weakening, but when we look at broader measures of economic activity such as personal income growth and gross state product, we will continue to see positive growth.”
Murray said Federal Reserve Board interest rate cuts last month will boost the economy later this year. Last year’s interest rate hikes were a mistake, he said.
“The Federal Reserve Board was acting with too much aggressiveness,” Murray said of last year’s rate hikes. “That last round of interest rate increases in May was simply not what we needed and was unwarranted.
“Part of the current slowdown is probably a result of the Fed overreacting in May. The Fed since has since lowered interest rates to boost the economy, and I think it is going to be effective.”
The Tennessee monthly index of economic indicators uses recent data to predict economic conditions in the near future. It is compiled by UT’s Center for Business and Economic Research.