EconSouth (First Quarter 2007)

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Volume 9, Number 1
First Quarter 2007


After the Boom, Housing Affordability a Growing Challenge

Florida Drives the National Auto Market

A Falling Dollar: Good or Bad News?


Fed @ Issue


State of the States

Q & A

Research Notes & News

Southeastern Economic Indicators




Knoxville Broadcasts Growth

Neyland Stadium
Photo courtesy of the University of Tennessee
Built in 1921, Neyland Stadium is where more than 100,000 fans of the University of Tennessee's football team go to cheer the Volunteers. The stadium is one of the nation's largest college sports venues.

If you asked college football fans what they know about Knoxville, most would probably describe Neyland Stadium, an oval hulk on the bank of the Tennessee River that, for a few weekends every fall, houses 105,000 screaming fans of the University of Tennessee Volunteers.

Knoxville might be best known as the home of "the Big Orange." But beyond the university's campus spreads a growing metropolitan area of nearly three-quarters of a million people, with a varied, vibrant economy that boasts one of the state's lowest unemployment rates. Major employers within a 30-mile radius range from the Oak Ridge National Laboratory (ORNL), home to a nuclear weapons lab and a supercomputer billed as the world's biggest, to Dollywood, country music icon Dolly Parton's homespun theme park.

Employment stands strong
Metro Knoxville's economic strength is evident in a December 2006 unemployment rate of 3.3 percent, the lowest among Tennessee's cities, said Matt Murray, a University of Tennessee (UT) economist who tracks the state's economy. Job growth in the six-county Knoxville metropolitan area has far outpaced state and national norms. Payroll employment in the area increased 35 percent from 1990 to 2005, from 242,800 to 327,700 jobs, according to the Bureau of Labor Statistics (BLS), a rate that surpasses the 25 percent growth statewide and 22 percent nationally during the same period. Further, BLS data indicate that Knoxville saw payroll growth of nearly 10 percent since 2000, compared with less than 2 percent for Tennessee and just over 3 percent for the United States in the same period.

"Some of the more attractive employers grumble that it takes 10 or 15 applicants to find a good worker," Murray said, indicating that the market favors job seekers. In 2006, Forbes ranked the city fifth nationally among metro areas for business and careers, weighing factors including the cost of living, job and income growth, workforce education, and the overall quality of life.

Knoxville's economy is expanding atop a bedrock of stable employers. That foundation is composed of the university, which employs nearly 8,000 people, and other educational institutions, ORNL; a growing health-care services sector, including Covenant Health and St. Mary's Health System; and several transportation equipment manufacturers, including Denso Manufacturing, ARC Automotive, and Sea Ray Boats.

Facts About Knoxville
Knoxville was named after Henry Knox, President Washington's secretary of war.
In early Tennessee histroy, Knoxville was one of four towns that served as the seat of state government.
When Knoxville hosted the World's Fair in 1982, it was the smallest city to date to host the international exposition.

Another Knoxville stalwart, the Tennessee Valley Authority (TVA), remains an important local presence even though employment has dipped as the electric utility streamlines and moves staff around the state and region.

In 2006, TVA employed 1,367 people in the Knoxville area, 493 fewer than seven years earlier, according to figures from the Knoxville Area Chamber Partnership, a local business association. But jobs in the TVA's downtown headquarters are especially crucial to the cityÑnot only symbolically but because those workers spend lots of money in the city's center, Murray said.

High-tech job incubation
While employment at the sprawling Oak Ridge complex still accounts for about 12,000 jobs, the workforce size has likewise declined slightly from its 1980s peak of about 16,000. Since 2000, UT-Battelle—a partnership between the university and Battelle, a nonprofit organization that manages several major research facilities—has operated and managed ORNL for the U.S. Department of Energy. UT-Battelle has established various business incubators and technology transfer programs designed to commercialize technologies emerging from the Oak Ridge labs. Over the past six years, UT-Battelle has also undertaken several renovation projects, said Alan Liby, manager of economic development for the ORNL Technology Transfer and Economic Development unit.

One of the biggest additions to Oak Ridge began operating last year: a $1.4 billion supercomputer, officially called the Spallation Neutron Source. It is used mainly by scientists researching how materials such as plant matter might be used to produce energy. Much of the work at Oak Ridge is basic, as opposed to applied, science, Liby said, so moving this work to the commercial marketplace rarely happens quickly.

Still, helping start-up companies with funding is part of the mission of UT-Battelle. To that end, since 2000 about 68 companies have resulted from the direct application of Oak Ridge technology and research, Liby said. One of the firms employs more than 300, while a couple of others employ about 100 people.

Knoxville, Tenn.
Population (city only) 173,890
Population (metro area) 687,249
Households 76,650
Median household income (metro) $36,874
Source: U.S. Census Bureau

In April, Oak Ridge will be the site of a venture capital and scientific conference concerning nanotechnology, a field of science concerned with controlling matter on a scale smaller than one-millionth of a meter.

Tuning in to Knoxville
While Oak Ridge scientists ponder things invisible to the naked eye, other Knoxville-area employees are producing work that is all about being seen. Over the past 15 or so years, Knoxville has become home to a number of television production outfits. Taken together, while these firms don't account for as many jobs as some of the area's older economic mainstays, they enrich the city culturally and socially as well as economically, Murray said. These television production companies, he notes, are "helping to move the economy away from the old stalwarts of the University of Tennessee and TVA and Oak Ridge, which are stable, important forces but not always viewed as creative entrepreneurial forces."

Knoxville became a television production hub largely because of Cinetel Productions. Founded in the 1980s by Ross Bagwell, Cinetel made commercials and industrial films before cracking the cable entertainment business by agreeing in 1985 to make a sitcom for the Nashville Network called "I-40 Paradise." That show prospered, and Cinetel later produced programming for other networks, including A&E and ESPN. In 1994, Scripps Networks acquired Cinetel and set up shop in Knoxville. Scripps, whose channels include the Food Network and HGTV, employs 764 at its Knoxville base. Its biggest network, HGTV, reaches 89 million U.S. homes.

Today, Bagwell's daughter, Dee Bagwell Haslam, operates a Knoxville production company, RIVR Media, that creates programming for high-profile networks, including ESPN, HGTV, A&E, the History Channel, Animal Planet, and Nickelodeon. RIVR Media also produced the cable hit "Trading Spaces" for the Learning Channel.

University of Tennessee campus
Photo courtesy of the University of Tennessee

The Web site of the East Tennessee Television and Film Commission, which promotes the region as a production site, lists 23 Knoxville-area production firms. The biggest TV production house in terms of workers, 14-year-old Jewelry Television, employs 2,000 people at its headquarters. That staff includes 26 on-air hosts who sell jewelry via a network reaching 58 million U.S. households full time and 20 million more part time, according to the company's Web site.

From the TVA to TV, there's plenty besides football going on in Knoxville. Local officials and economic developers hope it stays that way. To propel the economy in coming years, they look to the area's television and video production industry and business incubators, technology business parks, and technology commercialization efforts around Oak Ridge. In particular, hopes are high that nanotechnology work at the vast supercomputing complex will ultimately spawn companies and high-paying jobs.

A nanotech conference scheduled in April represents a step in that direction. Teams of graduate school researchers will hold an "idea-to-product" competition, and investors will hear pitches from companies seeking funding. Knoxville officials hope the forum, Nano Nexus 2007, helps create concrete economic results from the partnership among UT, Battelle, and the Department of Energy.

"That's only been underway a few years now," Murray said of the partnership. "But I think it is taking the economy in a direction it needs to go."

This article was written by Charles Davidson, a staff writer for EconSouth.