State Economy to Rebound in 2001, UT Study Finds

KNOXVILLE — The state can expect an economic turnaround in the next six to nine months based on an analysis of June business data by the University of Tennessee’s Center for Business and Economic Research.

A drop in June claims for unemployment insurance, coupled with an increase in taxable sales and a rise in construction employment, generated a 7.2 percent increase in the Tennessee leading index published by the UT center. The state leading index had registered declines in March, April and May.

Only two of the five indicators — average weekly manufacturing hours and the overall U.S. index of leading indicators — were negative, said Dr. Matt Murray, CBER executive director.

“Following the three previous months of setbacks in the index, we were worried about whether the economy might be contracting at the worst possible time — around the Christmas season,” Murray said. “The real good news is that the June index suggests that is not likely to be the case.

“The economy has enough momentum to continue to grow into the new year.”

Four of the state’s five major metropolitan areas share the positive outlook for early 2001. Only the June numbers for Nashville failed to show growth in future economic activity, as the capital city’s indices fell 0.9 percent, the report said.

“That’s a little bit surprising, largely because the Nashville area has been the leading engine of economic growth for the state throughout the decade of the 1990s,” Murray said. “The weakness of the index in Nashville reflects its inability to engineer strong rates of economic growth, but the fact is that the economy there is moving along at a very high level.

“Nashville already has an exceptionally low unemployment rate.”

Knoxville and Memphis recorded significant rebounds. On the strength of a 29.7 percent increase in construction employment, as well as an increase in average weekly manufacturing hours, Knoxville posted a 7.6 percent increase.
Memphis indices grew 2.7 percent on the basis of increased weekly manufacturing hours.

Chattanooga’s index gained 3.5 percent, and the Tri-Cities posted a 7.4, both based on strong increases in inflation-adjusted taxable sales totals.

The seasonally-adjusted index is based on the most recent monthly data available, Murray said. It uses the U.S. index of leading economic indicators, initial claims for state unemployment insurance, average weekly manufacturing hours for the month, inflation-adjusted taxable sales, and construction employment totals.

UT economists developed the index by looking at various indicators and determining what economic conditions followed six to nine months later. They found that these five indicators are the best predictors of the state’s short-term economic performance, Murray said.