At the end of September, Middle Tennessee State University’s Business and Economic Research Center hosted the school’s annual economic outlook conference. In October of 2012, we reported on the presentation by the center’s director, Dr. David Penn, who spoke at last year’s conference about his forecast for Middle Tennessee’s economy. In 2012, his forecast was not particularly upbeat, although he did highlight a few positive signs emerging in the region, particularly in manufacturing and housing. Fast-forward a year, and the economic picture is much brighter, according to Dr. Penn’s presentation at this year’s conference.
The two positive signs, manufacturing and housing, have turned into powerful trends that are driving Middle Tennessee’s economy, especially in Nashville. The manufacturing sector is performing exceptionally well, propelled by the expansion in auto manufacturing. The Nashville-area manufacturing sector has seen 11,000 new jobs the since 2010. While employment gains in the sector have slowed in 2013, recent job announcements from a number of manufacturers, including Nissan and GM, suggest acceleration in the near term.
The housing sector has also shown a lot of strength over the past year. Home sales are booming, with home inventory relative to sales now at the lowest level since 2006. Single-family home construction is rapidly increasing. Dr. Penn estimates that home price growth could accelerate and may even approach prerecession levels next year.
The Nashville area’s quickening economic tempo has fueled job creation. In terms of the pace of job growth, two counties in the Nashville metropolitan statistical area (MSA), Rutherford and Williamson, are in the top 15 counties among more than 300 largest U.S. counties. Total employment in the Nashville MSA was growing faster than in any other major metro area (with payroll employment of at least 500,000) in the second quarter on a year-over-year basis. There are now nearly 50,000 more jobs than in 2007. Employment growth is also broad based across industries led by job gains in professional and business services and manufacturing. In fact, in the second quarter the year-over-year pace of job growth in those two industries in Nashville ranked first and second, respectively, among the country’s largest MSAs.
Measured by the unemployment rate, however, Nashville’s labor market does not look as rosy—the unemployment rate has moved higher in recent months. But the news is not all bad since the increase in the unemployment rate is mostly a result of people entering the labor force at a faster rate than the pace of job creation. Perhaps because of improved job prospects, the labor force participation rate in Nashville has been increasing for more than two years after a sharp drop-off in 2010.
What about Nashville’s economy a year from now? Dr. Penn projects ongoing strength in housing, continued improvement in manufacturing, and a declining unemployment rate as a result of strong job growth.
By Galina Alexeenko, a Regional Economic Information Network director in the Atlanta Fed’s Nashville Branch