More jobs. An unemployment rate that’s trending down. Increasing personal income.
Thanks to these gains, there is a positive ring to this fall’s Tennessee Business and Economic Outlook report prepared by UT’s Center for Business and Economic Research.
“Tennessee’s economic outlook is very similar to the national outlook, with moderate to strong growth expected for the second half of the year and a continuation of growth through 2015,” said Matt Murray, associate director of CBER, who directed the report.
Job growth
Tennessee’s nonfarm employment increased by 1.8 percent this year and the upward trend is expected to continue in 2015, with a 1.6 percent increase predicted.
“This is slightly slower than the pace of growth expected for the national economy,” according to the report.
While the state is expected to see job growth in most categories during the next year, the biggest gains will be in professional and business services.
The transportation and utilities jobs sector and the education and health services jobs sector, are likely to see stronger growth in 2015 than they did in 2014.
The manufacturing sector has seen increased productivity—fewer workers producing more—which is both good news and bad news for the economy. Manufacturing employment remains below pre-recession levels, but industry output has surpassed pre-recession production. Future manufacturing employment gains are expected to be slow.
“There is still good news on the horizon for the manufacturing sector,” the report suggests. “Governor Haslam recently announced that General Motors will invest $185 million into an engine plant located in Spring Hill, and Magna International will invest $16 million to build a new manufacturing facility, also to be located in Spring Hill. Volkswagen’s expansion will also help boost jobs.”
Unemployment rate
If there’s a cloudy spot in the economic report, it’s Tennessee’s unemployment rate, which continues to be above the nation’s.
“The state unemployment rate continues its descent but has also seen a recent spike,” the report says.
In 2013, Tennessee’s unemployment rate was 8.2 percent. During the first quarter of this year, it fell to 6.9 percent, then dropped to 6.4 percent during the second quarter.
“This was the first time that the state rate had fallen below 6.5 percent since 2008, the report notes.
But Tennessee’s unemployment has risen in the last few months. It was 7.4 percent in August. The rate is expected to average 7.0 percent in 2014 and 2015 and then fall to 6.6 percent in 2016.
Nationally, the unemployment rate was 6.2 percent in the second quarter and fell to 6.1 percent in August. It’s expected to drop below 6 percent in 2015. Robust job growth is credited for the national decrease.
Personal income, tax collections
Tennesseans’ nominal personal income —the “take-home pay” part of a person’s income—is expected to grow by 3.5 percent this year and 4.4 percent in 2015. That’s a little slower than it’s growing nationwide.
The main driver of the state’s personal income growth is proprietors’ income although wage and salary income are the largest income components.
“Wage and salary income; rent, interest and dividend income; and other labor income will also experience solid growth during the short-term forecast period,” the report says.
With more money in hand, Tennesseans are spending more, too.
Taxable sales will grow by 3.1 percent this year and 3.4 percent next year, but the state is seeing only a modest boost in tax revenues.
Tennessee’s first-quarter tax collections grew by only .5 percent this year compared to last year. While that was better than that national average, which declined .3 percent, it was lower than the Southeast average, which increased 2 percent over last year. Among the twelve southeastern states, only Alabama, North Carolina, and Mississippi recorded lower revenue growth than Tennessee.
Read the entire report online.
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C O N T A C T:
Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)
Amy Blakely (865-974-5034, ablakely@utk.edu)