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KNOXVILLE— Slowly and somewhat unsteadily, Tennessee and the U.S. are recovering from the Great Recession.

That’s the cautiously optimistic prediction in the 2012 Economic Report to the Governor, released today by the Center for Business and Economic Research at the University of Tennessee, Knoxville. The report can be accessed at

“We expect the expansion to continue, albeit at a modest pace,” said Matt Murray, associate director of CBER and lead author of the annual report. “The economic outlook for Tennessee calls for conditions to improve further in 2012 and 2013, assuming nothing derails the path of growth for the nation.”

Murray cited Tennessee’s gains in personal income, taxable sales, and job creation as key indicators of economic improvement.

Problems that caused hiccups in the nation’s economic recovery during 2011 included continuing problems in the housing sector and “political gridlock in tackling the nation’s fiscal problems which contributed to falling consumer and business confidence over the year,” he added.

Nevertheless, employment gains and a revival of the manufacturing sector have helped stabilize the national economy and set it on course for further improvement.

The biggest risks for the US economy are the Eurozone sovereign debt crisis, the Middle East because of Iran’s threats to shipping, and the risk of rising gas prices, Murray said.

In addition to forecasting US and Tennessee economies, the report tackles issues about transitioning from college to career in Tennessee and looks at state data culled from the 2010 Census, Tennessee’s rebounding automotive industry, and the deal Amazon has forged with the state.

Tennessee economy

Among the good news predicted for the state in the next year or two: rising personal income and taxable sales, a continued decline in the unemployment rate, and growth in nonfarm employment and manufacturing, specifically in durable goods.

The report notes some of the 2011 gains that signal this future economic improvement:

  • Tennesseans’ personal income was up 4.8 percent in 2011—after growth of only 4.2 percent in 2010 and a 2.9 percent backslide in 2009.
  • Despite quarterly fluctuations, there was a 1 percent pace of job creation for the year. It was the first year since 2008 that the state and national economies were able to engineer nonfarm job gains.
  • After peaking at 10.8 percent in the third quarter of 2009, the state’s unemployment rate inched downward, ending 2011 at 9.3 percent.
  • Thanks to personal income growth and an improved employment rate, taxable sales were up, which boosted local and state sales tax revenues.

However, not all of the tax revenue news was positive.

For local governments, property tax revenues make up about two-thirds of total tax collections, and property tax revenues haven’t rebounded in the same way as sales, income and corporate tax revenues.

“Due to stagnant or falling housing prices, as well as weaknesses in other property categories, local collections across the states were down 1.0 percent in the second quarter of 2011, the third consecutive quarter of decline,” the report says.

Tennessee’s automotive industry

After taking a battering in the Great Recession, the state’s automotive industry is revving up again with new investments from Volkswagen, Nissan, and General Motors.

“The revival of the automotive industry in Tennessee also benefits the state in terms of opportunities for automotive suppliers that manufacture the myriad components that go into each vehicle,” the report says. “The state now has four assembly plants but

nearly 1,000 major automotive suppliers.”

The report notes that for the second consecutive year, Tennessee led the nation in automotive manufacturing strength, according to rankings listed in Business Facilities, a national economic development publication.

Among the notable new investments in 2011:

  • Volkswagen’s two-million-square-foot Chattanooga plant opened in May and is expected, in time, to employ about 2,000 people.
  • GM announced it will reopen the Spring Hill facility—which was put on standby in 2009 as part of its bankruptcy plan—and convert it to an ultra-flexible plant that would serve as an overflow source of production for vehicles already built in other factories. The effort, expected to build 40,000 vehicles a year, will create about 700 jobs. Plus, GM said it plans to invest another $183 million in Spring Hill for the manufacture of midsize vehicles.
  • Nissan chose Decherd, west of Chattanooga, as the site to produce electric motors for the Nissan Leaf EV. Earlier this month, Nissan said it had a deal with Mercedes Benz to begin producing engines at the Dercherd plant in 2014.

C O N T A C T :

Matt Murray (865-974-6084 or 865-974-0931,

Amy Blakely (865-974-5034,