KNOXVILLE — Tennesseans are expected to make more money and have greater job opportunities throughout the second half of 2006 despite the nation’s skyrocketing energy prices and rising interest rates.
Those are among the projections made by University of Tennessee economists as part of a mid-year update to the Economic Report to the Governor, which was issued in January. Both reports are compiled by the University of Tennessee’s Center for Business and Economic Research (CBER).
Although economic forecasters predicted Tennessee would see a growth in manufacturing jobs this year for the first time since 1998, the upswing hasn’t happened.
“While manufacturing jobs are going to slow more than we thought, there should be stronger-than-expected job growth in the service industries. Most workers and businesses will benefit from the sustained expansion that dates back to 2001, and that will boost personal income,” said UT economist Matt Murray, CBER associate director and project director.
The main risk to the state outlook is a potential slowdown in the national economy, Murray said.
“While the economy is still growing at a healthy pace, rising inflation threatens to take a toll on national labor markets and that could impact the state economy,” he said. “A big question is how aggressive the Federal Reserve will be in raising interest rates to slow inflation.”
The Federal Reserve has raised interest steadily since mid-2004 to keep inflation in check. “Overshooting on interest rates could slow the national economy and hurt our growth,” Murray said.
Among the projections in the mid-year report:
• PERSONAL INCOME: Personal income for both the state and the nation will be up 5.8 percent in 2006. “The improved state labor market situation will help propel average wages forward this year and next year,” Murray said. In 2004, the most recent data available from the Bureau of Labor Statistics, Nashville had the highest per capital income among the state’s MSAs, followed by Memphis and then Knoxville. The per capita income in Nashville was $34,904; in Knoxville, $30,209; in Chattanooga, $29,912; in Memphis $32,741; in the Tri-Cities, $26,316; statewide, $29,844; and in the U.S., $33,050.
• JOBS: Statewide, jobs are expected to grow by 1.4 percent in 2006 — as they did in 2005 — with growth in the service sector offsetting continued losses in manufacturing. Neither the state nor the nation has seen its manufacturing job base expand since 1999. Most of the state’s new jobs will come in education and health services, and leisure and hospitality services. “The strong growth in leisure and hospitality services is sign of strength in our tourism sector” Murray said.
• EMPLOYMENT: State unemployment rate for 2006 is expected to be 5.2 percent, above the nation’s rate of 4.7 percent. “While our unemployment rate is still above the nation’s rate, we have seen significant improvement over last year when the unemployment rate averaged 5.6 percent Murray said. With a rate ranging from 4.2 to 4.4 percent, Knoxville has had the lowest unemployment of the state’s Metropolitan Statistical Areas (MSAs) since 2003, according to the Bureau of Labor Statistics.
• GAS PRICES: Nationwide, people are continuing to pay more at the pump and, therefore, are saving less. “Higher energy prices have eaten into disposable household income and have arguably contributed to a national saving rate that was negative in 2005 and is expected to stay in the red in 2006,” Murray said. The average price of a gallon of gas in Tennessee hit its peak of $3 during the week of Sept. 4, 2005. It dropped back to around $2 in mid-October and then began edging up again. By May 7, 2006, the price had climbed to an average of $2.76. “Rising global demand, supply interruptions and speculative forces have all been contributors to the run up in prices.”
A copy of the report is available on CBER’s Web site, http://cber.bus.utk.edu.
Amy Blakely, (865) 974-5034, firstname.lastname@example.org
Matthew Murray, (865) 974-6084, email@example.com