The Center for Business and Economic Research (CBER) at the University of Tennessee recently published its fall 2014 economic outlook for Tennessee. The report painted a moderately positive economic picture for the Volunteer State, lining up well with what we have been hearing from our business contacts, highlighted in a recent SouthPoint post.
CBER conducts research on national and state economic trends. Report findings are used not only by the University of Tennessee, but also by state government and other public and private entities. The center—headed by director William F. Fox and associate director Matthew Murray—has provided an economic report to the governor every year since 1975, and these reports serve as the official forecast for the state.
The fall report highlighted a rebound in state employment and noted slow but steady gains during the first half of 2014. Nonfarm employment grew by 1.4 percent in the first quarter and 2.6 percent in the second. To compare, the national employment growth rate was 2.2 percent in the second quarter. Although Tennessee's unemployment rate has come down during 2014, the progress has been somewhat uneven. During the first quarter, the unemployment fell to 6.9 percent, and then it fell further to 6.4 percent in the following quarter. Recently, however, the rate increased to 7.4 percent in August. The unemployment rate is expected to inch downward during the fourth quarter and average 7.0 percent for 2014 and 2015. That said, the state's unemployment rate has remained even with or above the national rate since March 2012.
Looking down the road
Employment gains this year and next should be broad-based across most sectors of the Tennessee economy, with the exception of the information and government sector, which is projected to shed jobs this year. The professional and business services sector is expected to lead employment gains, but it could experience slowing growth in 2015. The transportation and utilities, education, and health care services sectors are expected to see stronger growth in 2015 compared with this year, and manufacturing employment growth is expected to slow to 0.9 percent in 2014 and 0.5 percent in 2015. Manufacturing employment in the state remains below prerecession levels although manufacturing output has surpassed prerecession levels, indicating productivity gains in the sector.
Nominal personal income is on pace to grow by 3.5 percent in 2014, well ahead of the 2.1 percent mark seen in 2013. Income growth is expected to accelerate to 4.4 percent in 2015. Tennessee's personal income grew faster than that of the nation in 2013, but it is expected to be slightly lower than the national rate in 2014 and 2015.
New investments on the horizon
Tennessee has recently received several welcome developments on the investment front. Volkswagen announced plans to add a midsize SUV to its manufacturing plant in Chattanooga, resulting in a $600 million expansion and an additional 2,000 jobs. The Maryland-based apparel company Under Armour plans to build a distribution facility in Mount Juliet. The facility will create 1,500 new jobs and represents a $100 million investment.
Overall, it appears Tennessee will hold its own, economically speaking, and the national economy will continue to rebound. If that modestly optimistic outlook doesn't sound like much to get excited about, it nevertheless represents an improvement over recent years.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch