Economic growth in Tennessee has surged ahead of the nation’s pace of growth in recent quarters. Tennessee’s unemployment rate took a big dip, while its personal income growth rate rose above the national rate, according to a study released today by the Boyd Center for Business and Economic Research.
UT experts expect this trend to continue for the next two years as personal income and nonfarm job growth continue while the state’s unemployment rate rests below the nation’s.
“The state economy has seen remarkable improvement in the last several quarters. April’s drop in the unemployment rate was exceptionally good news,” said Matt Murray, associate director of the Boyd Center and the report’s lead author.
The study, “Tennessee Business and Economic Outlook Spring 2016,” forecasts the direction of the state and national economies by examining economic factors and trends.
Tennessee’s April unemployment rate is 4.3 percent—the lowest in nearly a decade. It fell below the national rate of 5 percent for the first time in two years.
Nonfarm jobs grew by 2.5 percent, faster than the national growth rate of 2.1 percent. This jump is the strongest employment growth rate seen in Tennessee since the 1990s.
Tennessee highlights from the report:
- Manufacturing employment is expected to grow by 2.3 percent in 2016 and 0.8 percent in 2017.
- Tennessee’s unemployment rate will fall from an annual average of 5.8 percent in 2015 to 4.6 percent in 2016, marking a remarkable 1.2 percentage point drop. Based on performance in the past two years, the state unemployment rate is predicted to drop to an annual average of 4.5 percent in 2017.
- Nominal personal income is projected to grow 5 percent this year, and an additional 5 percent in 2017.
- Taxable sales will continue to expand, growing by a projected 5.3 percent in 2016 and 5.1 percent in 2017. This will be a continuation of the strong sales growth that has helped generate strong revenue growth for the state.
US Economy
While the nation’s inflation-adjusted gross domestic product grew by only 0.5 percent in the first quarter, other aspects of the economy showed promising growth. Consumer spending saw growth of 1.9 percent, and residential fixed investment grew by 14.9 percent. Business investment was weak because of the struggling oil and natural gas sector, the report states.
The national unemployment rate also fell, from 5 percent in the fourth quarter of 2015 to 4.9 percent in the first quarter of 2016.
The nation’s labor force participation rate—the percentage of the noninstitutionalized population age sixteen or older that is either working or unemployed but actively seeking employment—expanded after a lengthy decline, as did Tennessee’s participation rate. The national participation rate has been falling since 2000, raising many questions about the health of the labor market. A special section in the report details the nation’s labor force history and current growth.
Tennessee had the tenth worst labor force participation rate in the nation, above only Alabama, Arkansas, Florida, Kentucky, Louisiana, Mississippi, New Mexico, South Carolina, and West Virginia.
Other US highlights:
- Interest rates are expected to rise, with the federal funds rate reaching 1 percent by the close of the year.
- Consumer prices are expected to advance only 1 percent in 2016. Prices are projected to see growth of 2.4 percent next year and 2.5 percent in 2018.
To read the full report, visit cber.haslam.utk.edu/tefs/spr16.pdf. The Boyd Center for Business and Economic Research is housed within UT’s Haslam College of Business.
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CONTACT:
Matt Murray (865-974-6084, mmurray1@utk.edu)
Tyra Haag (865-974-5460, tyra.haag@tennessee.edu)