Lower unemployment rates, falling gas prices, and increased consumer confidence position the national and Tennessee economies for continued recovery and strong growth in 2015 and beyond, according to a UT report released today.
Last year marked the fifth year of consecutive economic growth, according to the forecast in the 2015 Economic Report to the Governor of the State of Tennessee. In 2014, US total nonfarm payrolls finally reached and surpassed their prerecession level. An estimated 2.5 million jobs were created in 2014 for a total of 138.9 million jobs in the economy. Consumer confidence is up, thanks to falling gas prices that have increased consumers’ disposable income.
The study, prepared by UT’s Center for Business and Economic Research, predicts the course of the state and national economies by examining many fiscal factors and trends.
“While there are reasons to be cautious about the next year in the US recovery, there are more reasons to be optimistic,” said Matt Murray, CBER associate director and the report’s author. “The economy did well overall last year and is expected to continue to grow in 2015.”
The US unemployment rate will continue to fall and average 5.5 percent this year, compared to 6.2 percent in 2014. Consumer spending is expected to grow by 3.4 percent.
A negative indicator in 2014 was the housing market, which did not experience the double-digit growth it saw in 2012 and 2013. Residential fixed investment grew by only 1.6 percent. The housing market is expected to recover this year, with residential fixed investment to grow by 11.1 percent.
Tennessee’s economic performance relies heavily on the national economy, and as a result the state’s short-term economic outlook largely resembles that of the nation’s, according to the report.
The state unemployment rate dropped from 8.2 percent in 2013 to 6.8 percent in 2014. However, it is still above the national rate of 5.5 percent. Tennessee’s unemployment rate is predicted to average 6.5 percent this year and then fall to 6.2 percent in 2016.
Other report findings:
- Nonfarm employment increased by 1.9 percent in 2014, representing a gain of more than 51,000 jobs. It is expected to grow by 1.8 percent this year and 1.5 percent in 2016.
- Professional and business services, natural resources, mining and construction, and leisure and hospitality will enjoy the largest employment gains in 2015 and 2016. Conversely, the government sector will continue to lose jobs over the next two years.
- Nominal personal income is projected to rise by 4.2 percent this year and 4.4 percent in 2016.
- Nominal taxable sales is predicted to expand by 3.9 percent this year and 3.4 percent in 2016.
The quality of the labor force—education, skill level, and health—will be a key ingredient of the state’s long-term economic growth. In many instances, Tennessee’s economic growth has lagged behind the nation’s.
In 2013, the percentage of Tennesseans with a high school degree was 85.6 percent, compared to 86.6 percent for the nation. The percentage of Tennesseans with a bachelor’s degree was only 24.8 percent, compared to a national average of 29.6 percent.
Programs like Tennessee Promise and Drive to 55 can help transition workers into high-skilled occupations in sectors that are growing. “If Tennessee cannot produce a high-quality workforce, businesses that need to compete in a global economy will go elsewhere,” the report states.
Recently, the White House announced that UT will lead the Institute for Advanced Composites Manufacturing Innovation, a $259 million public-private partnership. It is a consortium of 122 companies, nonprofits, and universities in partnership with the Department of Energy that will connect the world’s leading manufacturers and develop a robust supply chain for advanced composite materials. The institute will make Tennessee a regional hub for advanced manufacturing and a training center for students and workers at all levels.
“It also should help provide a much needed influx of well-paying jobs into the state’s manufacturing sector,” according to the report.
State Revenue Performance
Tennessee tax revenue growth was slightly slower than both the national and regional average in fiscal year 2014. Total tax collections grew by only 1 percent over fiscal year 2013, and sales and use tax revenues increased by 3.6 percent.
The state also experienced a large contraction in corporate income receipts last fiscal year, as revenues fell by 8.7 percent.
“This was the second lowest in the region, only behind West Virginia, and was largely driven by strategic business decisions that can likely be viewed as one-time events,” the report states.
In December 2014, sales and use tax collections grew by 5.9 percent, and franchise and excise tax collections increased by 9.9 percent compared to December 2013 collections.
Read the entire report online.
Matt Murray (865-974-6084 or 865-974-0931, firstname.lastname@example.org)
Lola Alapo (865-974-3993, email@example.com)