Slow Economic Growth Predicted Until 2003

KNOXVILLE — A University of Tennessee economic report forecasts slow economic growth for the state and the nation at least until 2003.

The Tennessee Business and Economic Outlook, published by UT-s Center for Business and Economic Research, projects Tennessee’s job growth to fall 0.2 percent this year before increasing 1 percent in 2003. U.S. job growth will total 1.5 percent in 2003, the report says.

Most Tennessee job losses are in manufacturing, where 45,000 jobs have been cut since 1999. Manufacturing jobs will drop 3.1 percent this year and continue sliding in 2003, the UT report says.

State unemployment will remain between 4.7 percent and 4.8 percent this year and next, compared with 5.9 percent expected nationally in 2003.

Tennessee will continue to lag behind the nation in personal income growth at 2.6 percent in 2002 and 4.4 percent expected in 2003. U.S. personal income will increase 3.3 percent this year and 4.9 percent in 2003, the report says.

UT economist Matt Murray, who directed the report, said strong consumer spending, mostly on new houses and automobiles, has averted a deeper recession.

However, that demand may be weakening, as consumer confidence slipped for the third consecutive month in September, Murray said.

State and national outlooks both hinge on stronger growth in business investments, which have suffered from recent accounting scandals, Murray said.

Other negative forces on the economy include falling consumer confidence, inequities in foreign and domestic currencies and increased risk of international conflict.

“When you put all these pieces together you have a weak foundation for economic growth,” Murray said.

“The expected catalyst for economic expansion was a turnaround in lethargic business investment, but given the crisis of confidence created by recent accounting scandals and the ability of firms to meet consumer demand, the business sector has not made significant new investments.

“Accordingly, the short-term outlook for the state and national economy remains guarded.”

The report is available here, in Adobe PDF format.