UT Report: Economic Recovery Has Begun but at Slow Pace
KNOXVILLE — The worst is over, but better times are still a few years away.
That’s the mixed economic forecast as described in “The Tennessee Business and Economic Outlook: Fall 2010,” a report just issued by the Center for Business and Economic Research (CBER) at the University of Tennessee, Knoxville.
“After an 18-month recession that officially ended in June 2009, the recovery has begun, but it is moving forward slowly,” wrote Matt Murray, author of the report. “The recession was the longest and deepest since the Great Depression and will have a lasting impact on budgets at all levels of government in the U.S.”
According to the report, the economy will see modest improvements over the next year but won’t be at the pre-recession levels of 2007 until at least the 2013-2014 fiscal year.
The report looks at both the U.S. and state economy and notes that the Tennessee economy has largely tracked the national economy with some exceptions, such as employment.
Employment, Unemployment and Job Growth
“The employment situation in Tennessee has been dismal and worse than the national economy’s performance. While U.S. nonfarm employment fell 4.3 percent in 2009, Tennessee saw jobs decline at a 5.6 percent pace,” the report says.
The state’s jobs drop was due in large part to a 14.2 percent cut in the state’s manufacturing sector — roughly 3 percentage points above the national average. In total, the state lost 155,800 jobs in 2009. Natural resources, mining and construction suffered the deepest setbacks.
Still, overall there are signs of life. On an annual basis, the state unemployment rate should average 10.1 percent this year, falling to 9.5 percent in 2011. Compare that to the national average of 9.7 for this year and a projected rate of 9.6 for next year.
To date, the county with the highest unemployment is Scott County at 19.8 percent. Lincoln County has the lowest with 6.4 percent.
Next year, all employment sectors in the state will enjoy job growth. Yet as hiring increases, the unemployment rate could also increase as additional workers — who had since stopped looking for work — start looking again, putting upward pressure on unemployment rates because those workers were not previously counted towards the rate.
Income and Sales
The Great Recession was unique in that it is the only modern recession to produce an outright decline in annual personal income growth. Nominal personal income, which includes all forms of income earned by Tennesseans, fell 1.6 percent in 2009. However, the first two quarters of 2010 produced respectable year-over-year gains and that growth is expected to continue on an upward trajectory.
More money means more to spend. Last year, taxable sales fell 7.4 percent, but the situation is slowly improving. Sales rebounded in the second quarter of 2010 and should continue to grow each year.
The Stimulus Effect
On June 30, 2011, the American Recovery and Reinvestment Act (ARRA) will expire, placing further burden on state and federal economies. Some fear a double-dip recession due to the lack of stimulus funds coursing through the economies, but the report predicts the recovery will persevere but in an anemic state.
“The reduced role of the federal ARRA will take some steam out of the economy going forward, and the economy will have to rely more on fundamental market forces,” the report says, noting structural adjustments, such as eliminating the excess inventory of homes on the market and a restoration of household saving, will be required to move the economy to stronger rates of growth in the years ahead.
To see the report in its entirety, visit http://cber.bus.utk.edu.
The report was financed in part by the state Department of Finance and Administration, the state Department of Economic and Community Development, the state Department of Revenue, the state Department of Labor and Workforce Development and the Appalachian Regional Commission.
Whitney Holmes, (865-974-5460, firstname.lastname@example.org)
Matt Murray, (865-974-6084, email@example.com)