KNOXVILLE, Tenn. — Tennessee’s economy will out-pace the nation’s as a whole the next nine years, University of Tennessee economists told Gov. Don Sundquist in their annual forecast.
“Tennessee is poised to reap the benefits of a successful economic past,” but the state must continue investing in education and infrastructure to make it happen, UT economist Matt Murray said.
“Future prosperity rests on continued gains in worker productivity and the ability to attract new, capital-intensive firms to Tennessee,” Murray said.
Murray’s conclusions are contained in the annual statistical report and forecast prepared by the UT-Knoxville Center for Business and Economic Research.
“Educational spending can be thought of as investing in (human) capital…since education endows people with skills enabling them to be productive workers,” the report says.
“The state must continue to attract private-sector firms and their capital investment to ensure quality job opportunities for Tennesseans,” Murray said.
The rate of job creation in Tennessee will slow in 1996, but overall the state’s economy will produce 650,000 new jobs by the year 2004, the report says.
Manufacturing will continue to be the primary contributor to Tennessee’s economic growth, but the bulk of new jobs is expected to come from the trade and service sectors, the report says.
Bill Fox, director of CBER, said an estimated 334,000 jobs will be created in Tennessee through the year 2000. About half of those are the types of jobs for which welfare recipients will likely be qualified, he said.
“That’s more than enough jobs to absorb people who will be coming off the welfare rolls,” Fox said. “It would take all of the unemployed people in the regular work force plus those coming off welfare to fill the jobs that will become available the next six years.”
Although former welfare recipients who find employment will exert a positive impact on the economy through their increased spending, “this impact is not likely to be significant (because) welfare recipients comprise less than 2 percent of the state’s population,” the UT report says.
The short-term outlook for Tennessee indicates:
* Non-agricultural jobs increasing by 2.2 percent this year and 2.4 percent in 1997.
* Unemployment rate increases of 5.3 percent this year and 5.4 percent in 1997, “though these rates are consistent with full employment.”
* Taxable sales growth of 6 percent this year and 6.2 percent in 1997.
The U.S. economic growth is slowing down, Murray said. American consumers, businesses and government will increase their spending again in 1996 but at a slower pace than in 1995, he said.
“On the brighter side, consumer optimism remains relatively high, interest rates are expected to fall through the winter and into the spring, inflation remains in check, productivity is showing strong gains,” Murray said.
Lower interest rates through 1996 will help buoy interest-sensitive sectors of the economy, ranging from automobiles to housing, he said.
“Barring some unforeseen shock, all indications point to a period of moderate, stable growth through the next two years,” Murray said.
The UT report says Tennessee gradually over the years has narrowed the gap between the state and national economies by investing in people, infrastructure and attracting new private capital.
The long-term forecast for Tennessee projects includes:
* A 3.5 percent growth in the state’s economy through 2004.
* A 2.6 percent growth in non-agricultural employment.
* Tennessee’s per capita personal income will increase to an inflation-adjusted $18,957 in 2004 — most of it coming from sources other than wages and salaries, such as dividend and proprietors’ income, rents and interest.
* Mild inflation, rising above 3 percent in only one year of the forecast.
* Interest rates, measured by the prime lending rate, falling to 6.7 percent by 2004.
* Tennessee manufacturing workers each accounting for $65,000 of output in 2004.
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Contact: Dr. Matt Murray, Dr. Bill Fox (423-974-5441)