Hopes for accelerated growth this year in the state and national economies “have been dashed,” due to the sluggish creation of jobs, according to a report by University of Tennessee, Knoxville.
But it’s not all bad news. The unemployment rate is steadily decreasing, jobs have been growing, the housing market continues to address its long-standing pressures, and the financial health of states has improved—all key indicators of economic recovery, according to the spring 2012 Tennessee Business and Economic Outlook, a mid-year update released today by UT’s Center for Business and Economic Research (CBER).
“Despite slower-than-desired growth, the economy is on much firmer footing today than it was a year ago,” said Matt Murray, associate director of CBER and the report’s author.
The economy is also enjoying “a bit of a respite” from oil price pressures that significantly affected 2011, he said. The economy is expected to continue to grow along the same track throughout this year and into 2013. There likely will be subpar growth, but sustained expansion into 2014.
The main short-term risks confronting the US. economy are the possibility of a political and economic meltdown in the European Union and sharply lower rates of growth in emerging market economies, including China.
Tennessee has a marginally healthier economy than the nation despite facing the same challenges, although there are some exceptions, according to the report.
- Tennessee’s nonfarm employment is expected to increase by 1.7 percent, compared to 1.5 percent growth for the nation.
- The state’s unemployment rate is expected to average 7.8 percent this year and 7.4 percent in 2013. By contrast, the nation’s unemployment rate is expected to average 8.1 percent this year and 7.8 percent in 2013.
- The state’s personal income is expected to grow 4.2 percent this year, while US personal income will be up 3.8 percent.
Not all state indicators were as bright. Manufacturing employment growth in Tennessee lagged behind national growth in 2011 and the first quarter of 2012.
The strongest employment outlook for 2012 is in natural resources, mining and construction, durable goods manufacturing, and professional and business services.
“Most measures of state growth will show further improvement in 2013, assuming the nation’s path of economic growth is not derailed,” Murray said.
In other areas, taxable sales have rebounded significantly, increasing to 7.9 percent this year, compared to 5.9 percent in 2011.
Automobile dealers, miscellaneous durable goods, eating and drinking establishments, and hotels and motels will show strong growth this year and in 2013.
State Revenue Performance
Nationally, state tax revenues have been slowly increasing in 2011 and this year although local revenues have been held back due to ongoing housing market crisis and the lag in property tax revenues.
Despite strong growth in revenue in the short-term, Tennessee and the nation “are not out of the woods,” Murray said.
The economy has yet to fully recover and states are facing more budget shortfalls.
“With revenue collections that aid in education resources still struggling to climb back up to prerecession peak levels and programs being cut, providing services to students and others will continue to be a challenge,” Murray said.
Read the full report online (pdf).
Matt Murray (865-974-6084 or 865-974-0931, firstname.lastname@example.org)
Lola Alapo (865-974-3993, email@example.com)