Middle Tennessee residents have been exposed to several less-than-stellar reports regarding the pace of the economic recovery. The Middle Tennessee State University (MTSU) Office of Consumer Research published the Middle Tennessee Consumer Confidence Index, reporting a sharp dive in the overall consumer confidence index. Some of this negative sentiment could be tied to Tennessee's high unemployment rate, which ticked up to 9.8 percent in September. Yet positive reports can be found in sectors such as technology: the Nashville Technology Council reported that more than 900 tech jobs are available in Nashville.
Searching for some sense of clarity on the future of business conditions—even if only for the short term—local residents and business leaders were particularly interested in hearing from economist David Penn from MTSU's Business and Economic Research Center at the annual MTSU Economic Outlook Conference.
Held each fall, the conference offers insight into the local and regional economy. Dr. Penn believes the Nashville metropolitan statistical area (MSA) and Middle Tennessee will likely continue to see slow growth, but growth will greatly depend on overall trends in the national economy.
Positive signs in the Nashville MSA are evident. For example, the unemployment rate of 8.5 percent remains well below the state average, helped by stabilization in manufacturing and construction sectors. In addition, retail sales have increased, resulting in sales tax revenue growth.
The manufacturing sector in both Tennessee and Nashville has seen stability for nearly two years, with the auto sector experiencing growth and exports showing an increase. Dr. Penn is optimistic about the auto sector because fuel cost increases appear to be leading manufacturers to produce closer to their customers, and Middle Tennessee is centrally located to many large markets. In addition, labor costs are increasing overseas, helping to erode one of the main driving forces behind offshoring production.
Despite the depressed housing market, the overall construction sector in the Nashville MSA has grown during 12 of the last 14 months largely because of public infrastructure projects and educational facilities. While acknowledging lackluster consumer sentiment, Dr. Penn also noted that Tennessee residents have increased retail spending over the last year.
Regardless of the strengths present in the Nashville and Tennessee economies, in the current environment some challenges will linger. Dr. Penn expressed a concern about the slow growth rate of the education and health care services sectors. With health care being the second-largest economic driver in Middle Tennessee, the sector has traditionally been the region's safety net.
Dr. Penn forecasts continued moderate growth in nonfarm employment for Middle Tennessee, slow growth in sales tax collections, minimal housing construction, and a slight decline in the unemployment rate for the coming year. Improved consumer confidence and increased spending were reported as key factors needed to continue the recovery. Population in-migration is needed to spur the local housing market, which requires job growth. Dr. Penn forecasts that the region's unemployment rate will decline in 2012. As for total employment levels, it will take about a couple of years of job growth at the current level to return to the prerecession peak.
Dr. Penn's presentation can be found here.
By Amy Pitts, a regional economic information network senior analyst in the Federal Reserve Bank of Atlanta’s Nashville Branch