Most Tennessee business leaders use artificial intelligence to complement the work of employees and not to replace them, according to a new survey by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville. Employers also said that although tariffs are still affecting their bottom line, most believed the chance of recession was low and were optimistic about the state’s economy.
Nearly 63% of employers responding to the winter 2026 Tennessee Business Leaders Survey, administered in January and February 2026, said they were using AI in a way that didn’t affect their employment levels, while about 10% said they have fewer employees because of AI. AI was a recurring theme among respondent comments on the survey, with some business leaders wondering how it would affect the younger entry-level workforce in the future.
To learn more about what’s driving survey responses, the Boyd Center hosts an annual dinner in Nashville. This year’s event, held March 3, brought together 62 survey respondents and government officials to discuss the state’s economy. The sentiments shared there mirrored those of the survey, with one attendee saying that technical skills are changing because “AI is changing the game, and the disruptive technology is making it hard for the labor force to keep up.” Another said, “If my 7-year-old daughter can build a game on Claude in two minutes, what am I looking for in an employee? The world is changing, so what I’m expecting from my employees is changing quickly too.”
The winter survey also showed that four in five employers still believed the chance of a U.S. recession is less than 50%, and 72% said tariffs continued to affect their business. Nearly half (46.1%) added that they were passing some or all of the tariff costs on to customers.
Business leaders see Tennessee’s economy gaining ground
Pessimism surrounding the U.S. economy continued, with just 36.3% of respondents holding a favorable opinion of the current economy. Almost 47% expected conditions to improve over the next 12 months. Optimism for Tennessee’s economy increased slightly from the summer survey, with over two-thirds of business leaders expecting Tennessee to outperform the U.S. economy. Employers attributed the difference to business investments and government leadership in the state.
Over 70% of business leaders surveyed said Tennessee was headed in the right direction, and nearly two-thirds said the state could improve its business climate further through infrastructure development. Other areas of improvement included enhanced workforce development (47.4%), energy infrastructure (41.6%) and business development incentives (41.6%).
Adverse economic conditions continued to be the top challenge for Tennessee businesses, with 49% of survey respondents listing it among their top three concerns. Health care costs were the second-most cited issue, with almost 36% listing it as a major concern. Government regulation rounded out the top three at 33.8%. Global political instability ranked fourth at 31.7%, but over half of respondents in West Tennessee cited it as their top business concern. One respondent wrote, “Political instability has kept companies from making long-term commitments, and this has adversely affected our business.”
About half of employers continued to report an insufficient supply of appropriately trained workers in the state labor force. Although employers said the number one missing attribute among job applicants was work ethic, that number fell from 66.2% last summer to 54.5% this winter. Business leaders often identified technical skills (44.8%), initiative (46%) and being realistic about compensation (43.4%) as their top concerns, with over half of East Tennessee business leaders citing technical skills most often.
“The number of employers unable to find employees with the appropriate skill sets was higher last summer, so it’s good to see that trending downward,” said Don Bruce, director of the Boyd Center. “Although AI is creating a lot of questions when it comes to the workforce, employers seem to be embracing it and integrating it into their workflows — we heard that in the survey responses and at our annual business dinner.”
The number of business leaders citing problems attracting and retaining employees held steady from the summer survey at 36.8%, but each region told a different story. East Tennessee employers reported a 7 percentage point increase to 41.4%, while Middle Tennessee dropped by almost 10 percentage points to 27.1%. Almost half of employers surveyed attributed this challenge to the cost of housing, and a third also cited the availability of housing and the cost of childcare services. Almost three-fourths of employers said they had not changed their requirements for new hires over the past year, while 18.7% said they had increased their educational requirements.
The full set of survey responses is available on the Boyd Center website.
The Boyd Center, located in UT’s Haslam College of Business, conducted the survey between Jan. 14 and Feb. 6, gathering responses from business leaders across Tennessee. Respondents represented a broad sample of businesses across all industries, ranging in size from fewer than 50 employees to more than 5,000.
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