KNOXVILLE — Tennessee’s economy appears to be turning the corner and is projected to enjoy its strongest year of growth since 2000, the University of Tennessee’s 2004 Economic Report to the Governor says.
While the findings are encouraging, Tennessee is not out of the woods yet, the report says.
Dr. Matt Murray, the UT economist who directed the report, said the Tennessee economy should witness improved economic conditions through 2005, building on a firmer foundation established in 2003 and benefiting from the expectation of stronger growth for the national economy.
“After more than two years of flat growth and recession, all the indicators point toward a long term rebound for the state’s economy to begin in 2004,” Murray said. “This is without a doubt the most promising outlook we have seen in recent years.”
The report forecasts continued slowdowns this year in manufacturing — the state’s hardest hit sector — with a one percent decline in job growth and non-durable goods.
However, a modest turnaround of .5 percent growth in manufacturing jobs is expected by 2005, and the outlook is positive for all other sectors for years to come.
Nonagricultural jobs are to advance at a 1.2 percent pace in 2004 and 2 percent in 2005, and the durable goods sector will see job growth in both years, the report says.
Relatively strong growth also will take place in the various service-producing sectors of the economy.
Professional and business service jobs are expected to rise 3.5 to 4.7 percent, while other services experience 3.4 percent and 5.2 percent growth.
The unemployment rate will fall slowly as the year unfolds. Starting with an anticipated 5.4 percent rate in the first quarter of the year, the unemployment rate will drift down into 2006. The unemployment rate is expected to average 5.2 percent in 2004 and 4.7 in 2005.
The UT report projects the number of unemployed people to rise very slowly in 2004 then decline by nearly 10 percent in 2005. Tennessee unemployment rate will fall below the nation’s rate through the short-term forecast horizon.
Personal income growth will improve as wage and salary income, proprietor’s income and rent, interest and dividend income all show renewed strength.
Total personal income is expected to climb 5.0 percent in 2004 and 5.6 percent in 2005.
Income growth will total 5.4 percent for the 2004 and 2005 fiscal years. Per capita personal income will enjoy a similar rebound, advancing 3.5 percent in 2004 and 4.1 percent in 2005. Unfortunately, state per capita income growth is expected to lag the nation.
Taxable sales will show improved growth as income and job growth improves. Taxable sales growth should gain ground and record 4.0 percent and 4.8 percent growth in 2004 and 2005.
The 2004 Economic Report to the Governor of the State of Tennessee is the 28th in a series of annual reports compiled by UT’s Center for Business and Economic Research. It can be seen online at http://cber.bus.utk.edu/erglist.htm.
The report is published, distributed, and financed through the Tennessee Department of Finance and Administration, Tennessee Department of Economic and Community Development, Revenue, and Labor and Workforce Development. Its primary purpose is to provide the most current economic analysis possible to planners and decision-makers in the public and private sectors.