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KNOXVILLE– Tennessee-s economy will continue to strengthen through 2006, and will benefit from an increase in per capita income and job growth and the first expansion in manufacturing jobs since 1998, according to a new economic forecast report released by the University of Tennessee.

-The economy has finally been able to engineer sustained job growth that will help propel the state forward through next year,- says Matt Murray, author of the report and associate director of UT-s Center for Business and Economic Research.

The forecast, the Tennessee Business and Economic Outlook is an update to the annual report to the Governor that is compiled and released by UT every January. The positive outlook for Tennessee benefits from the expectation of sustained growth in the national economy.

While the report notes that the U.S. economy has -cooled off some in recent quarters,- sufficient momentum remains to keep the economy on track well into next year. Rising interest rates and high energy prices are two of the obstacles the economy has overcome.

Personal income growth – one of the broadest measures of economic expansion for the state – is expected to advance by 5.8 percent in 2005 and 5.7 percent in 2006. Tennessee will experience -slightly stronger growth in per capita personal income than the nation in both 2005 and 2006,- according to the report.

Job growth in the state is projected to increase by 1.4 percent in 2005, the same rate of growth that took place in 2004. This means more than 37,000 new jobs for the state economy. Growth will be especially strong in the service sector. Tennessee-s unemployment rate is expected to average 5.7 percent in 2005.

Tennessee should see job growth in manufacturing in 2005, although the gain is projected to be modest. Murray notes, -this will be the first expansion in manufacturing jobs since 1998 and represents a modest turnaround.-

At the same time, Murray cautions that -the competitive global marketplace continues to imperil the state-s manufacturing sector.- Manufacturing accounts for about 15 percent of the jobs in Tennessee today versus nearly 19 percent in 1998.

The full report is available at http://cber.bus.utk.edu/tefslist.htm.