The nation’s economic growth got off to a sluggish start the first quarter of the year because of a cold and snowy winter, but a drop in unemployment rates and increases in consumer spending signal stronger gains for the rest of the year.
Economic growth will accelerate in the second quarter thanks to lower energy prices, according to the spring 2015 Tennessee Business and Economic Outlook released by UT today.
The national unemployment rate fell to 5.6 percent in the first quarter, the lowest rate since the second quarter of 2008. Last year, the unemployment rate was 6.2 percent. It is expected to average 5.5 percent this year and fall to 5.2 percent in 2016.
The study, prepared by UT’s Center for Business and Economic Research, predicts the direction of the state and national economies by examining economic and fiscal factors and trends.
Consumer spending across the nation is expected to rise dramatically this year.
“This can be attributed to an increase in consumer confidence, lower energy prices, and increased purchasing power due to a stronger dollar and low inflation,” said Matt Murray, CBER associate director and report author.
The residential housing market hit a snag during the first quarter of 2015, but is expected to bounce back. Existing home sales fell from 5.1 million in the fourth quarter of 2014 to 4.9 million in this year’s first quarter. It is expected to reach 5.3 million overall this year.
Exports increased by 3.2 percent in 2014 but are expected to rise only 2.2 percent this year because of disruptions in West Coast port operations.
Tennessee’s economic growth has been on par with national growth in recent quarters, according to the report.
Nonfarm job growth outpaced US job growth during the second half of 2014, and Tennessee’s manufacturing sector outpaced the nation’s manufacturing sector in the last two quarters of 2014.
However, Tennessee’s unemployment rate still rests well above the national rate of 5.5 percent. The state’s unemployment rate will slowly trend downwards throughout 2015, pushing the average to 6.4 percent. Last year’s average was 6.6 percent.
Other Tennessee findings:
- Taxable sales are projected to increase by at least 3 percent in each of the remaining three quarters of 2015.
- Nominal personal income should increase by 4.4 percent this year and 4.3 percent in 2016. The growth will be driven by increases in proprietors’ income, wage and salary income, and rent, interest, and dividends income.
- Manufacturing employment is projected to grow by 1.7 percent this year and then slow to 0.7 percent growth in 2016.
- Statewide manufacturing employment growth will largely be driven by increases in jobs that stem from durable goods manufacturing, which will expand by 2.8 percent in 2015 and 1.6 percent in 2016.
- Within the durable goods sector, machinery manufacturing will enjoy the largest employment growth rate this year, followed by transportation equipment and wood products. Employment losses are predicted in computers and electronic products manufacturing.
- All nondurable goods sectors, except for manufacturing, will experience job losses in 2016. The textile mills, textile products and apparel sector, and the printing and related support sector will face the largest shortfalls.
Lola Alapo (865-974-3993, email@example.com)
Matt Murray (865-974-6084 or 865-974-0931, firstname.lastname@example.org)