More than half of Tennessee business leaders absorbed higher fuel costs rather than passing them on to customers, according to a new survey by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville. The survey overall shows continued optimism about Tennessee’s economy, despite a bleaker national outlook and increased sensitivity to global political instability.
In the summer 2026 Tennessee Business Leaders Survey, administered in August, more than 47% of employers said they had raised prices to offset rising gas and diesel costs. One in 10 said they were passing a lot of the increased costs on to their customers.
“Oil market instability continues to strain our state’s businesses and their bottom lines,” said Don Bruce, director of the Boyd Center. “These August results show that business leaders are trying to cushion the blow to consumers, but absorbing those costs will become harder.”
Four in five business leaders surveyed put the chance of a recession in the coming year at below 50%. That rate is consistent with the winter survey, which was conducted in February. Still, pessimism about the national economy is increasing. Almost 45% said the economy was somewhat or considerably worse than a year ago, up from 37.6% in February. The share of business leaders expecting the national economy to worsen over the next year rose nearly 10 percentage points, from 32.7% in February to 42.1%.
Though confidence in the state’s economy has declined since February, 57.2% of the business leaders surveyed said they still expected Tennessee’s economy to outperform the nation’s, and almost two-thirds said Tennessee was on the right track. Asked about the reasons behind their responses, 48.2% credited business investment in Tennessee and 24.8% listed government leadership in the state. Three in five respondents rated the business environment in Tennessee as good or excellent, but areas for improvement included developing infrastructure and enhancing workforce development.
For the first time, 40% of respondents ranked global political instability as one of their top three business concerns. Other top concerns included adverse economic conditions (39%) and healthcare costs (33%).
A little over half (56.8%) of employers surveyed reported an insufficient supply of appropriately trained workers in the state labor force. About 61% identified work ethic as the most frequently missing attribute among job applicants. In West Tennessee, work ethic was overwhelmingly the top issue, with 85% of employers listing it. Statewide, employers also identified initiative (44.4%), realistic compensation expectations (43.8%) and technical skills (40.1%) among their concerns.
The employers surveyed said they were increasingly using artificial intelligence in a way that doesn’t affect hiring levels. Almost 72% said AI hadn’t affected their employment levels, an increase of almost 10 percentage points since the winter survey. About 10% reported hiring fewer employees due to AI, and just 16.3% said they are not using AI in any capacity — down from a quarter of respondents in February.
The share of business leaders citing problems attracting and retaining employees increased from 36.8% in February to 43.5%. The issue appears to be less acute among employers in Middle Tennessee, with only a quarter of respondents reporting it as a problem for their business. Nearly three in five of all employers surveyed attributed the challenge to the cost of housing, though many cited the cost of childcare (37.9%) and availability of housing (30.4%) as well.
The full set of survey responses is available on the Boyd Center website.
The Boyd Center, part of UT’s Haslam College of Business, surveyed business leaders across Tennessee between Aug. 5 and Aug. 28. 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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