Job growth and consumer spending continue to grow and position Tennessee and the nation’s economies for a strong 2016, according to a report released today from the Center for Business and Economic Research.
“Financial market instability has captured the headlines, but the fact is that the nation’s economy is in good shape and continues to expand,” said Matt Murray, associate director of CBER and the report’s lead author.
According to the 2016 Economic Report to the Governor of the State of Tennessee, 2015 saw a significant increase in new jobs for the nation, along with the lowest national unemployment rate since 2008.
These positive factors, coupled with falling gas and food prices, led to consumption reaching its highest growth rate since 2006. Strong consumer spending has picked up the slack from reduced exports, concerns about financial markets and the oil and gas industry, and the economic slowdown in China.
Residential and nonresidential investment also grew in 2015—a good sign for the housing sector, which showed only modest growth in 2014.
While interest rates increased in 2015 and will continue to rise in 2016, both residential and nonresidential investment are expected to expand, according to the report.
The study predicts the course of the state and national economies by examining fiscal factors and trends.
- Tennessee’s economic growth continued to resemble the nation’s in 2015, and this pattern should continue in 2016.
- Tennessee’s unemployment rate continues to be higher than the 2015 national average of 5.3 percent. The state unemployment rate dropped from 6.6 percent in 2014 to 5.9 percent in 2015. Tennessee’s unemployment rate is expected to average 5.5 percent this year and then fall to 5.4 percent in 2017.
Other report findings:
- Nonfarm employment increased by 1.9 percent in 2015, representing a gain of more than 54,600 jobs. It is expected to grow by 1.7 percent this year and 1.3 percent in 2017.
- Leisure and hospitality fields, professional and business services, and natural resources, mining, and construction should enjoy the largest employment gains in 2016 and 2017.
- Nominal personal income is projected to rise by 4.8 percent this year and 4.7 percent in 2017.
- Taxable sales continue to show rapid growth. Hotels and motels along with light vehicle sales had the strongest taxable sales growth. Nominal taxable sales are expected to expand by 4.7 percent this year and 3.5 percent in 2017.
- Tennessee’s tax revenue growth outpaced both the national and regional average in fiscal year 2015. Tennessee had a 6.5 percent growth rate in total tax revenues. Among the 12 southeastern states, only Virginia, Mississippi, and North Carolina enjoyed faster tax revenue growth than Tennessee.
- In December 2015, tax collections grew by 8.0 percent. Sales tax revenues are up 7.1 percent, and franchise and excise tax collections increased by 23.8 percent compared to December 2014 collections.
In the long term, state education initiatives such as Tennessee Promise and Drive to 55 aim to increase the education status of the state.
“These efforts could support stronger income growth and a narrowing of the gap between the incomes of Tennesseans and other Americans,” said Murray.
The report also includes a topical chapter on higher education in Tennessee, reviewing the landscape on college-going in the past, looking at early indicators of success for Tennessee Promise and highlighting challenges and opportunities for the years ahead.
The Center for Business and Economic Research is housed within the Haslam College of Business.