The Center for Business and Economic Research (CBER) at the University of Tennessee recently published its spring 2013 economic outlook for the state of Tennessee, and all things considered, the outlook’s not too bad. Considering the deep recession and meek recovery we have endured over the last six years, some might even call it rosy.
CBER conducts research on national and state economic trends. Report findings are used not only by the University of Tennessee but also by state government and other public and private entities. Dr. William F. Fox heads the center as director, along with associate director Dr. Matthew Murray. The center has provided an economic report to the governor every year since 1975, and these reports serve as the official forecast for the state.
Diving into the report, one will encounter modest expectations for economic growth. However, encouraging tidbits can be found in Tennessee’s recent performance, and there are encouraging signs in the outlook for the Volunteer State, which an earlier SouthPoint post mentioned. Overall, Tennessee’s economy in 2012 was the best year since the onset of the Great Recession. The outlook for employment gains through 2014 is a humble 1.8 percent. Nevertheless, the state should still outpace job growth for the nation. In a recent USA Today article, Tennessee ranked ninth on a list of states with the fastest-growing economies, which should bode well for a continued gradual lowering of the unemployment rate through 2015.
Indications also point to tangible and stable momentum in the residential housing sector. The state has experienced 22 consecutive months of year-over-year increases in single-family permits through May 2013. Further evidence that the housing outlook is improving is the 12.1 percent year-over-year increase in the state’s realty transfer tax in April. Housing may finally be gaining some traction, which would be a welcome relief from the historically low levels of activity endured over the last five years.
Nominal personal income growth in Tennessee eclipsed the national average in 2012 growing at 3.9 percent compared to 3.6 percent. Personal income growth took a hit during the first quarter of 2013 as a result of the expiration of the payroll tax holiday. As economic conditions strengthen, it is expected that 2014 will see personal income grow at a 4.4 percent rate.
Summing up CBER’s outlook for Tennessee, expectations are for a modest slowdown in the third quarter of 2013, with growth picking up steam toward the end of the year. Economic growth should persist through 2015, including a 1.7 percent increase in employment in 2013 and a 1.8 percent increase in 2014. Manufacturing employment will continue to grow by 1.6 percent through 2015. The unemployment rate is expected to level out at 7.8 percent by year-end and at 7.5 percent by 2014.
OK, maybe not rosy, but not too bad, either!
By Troy Balthrop, a Regional Economic Information Network analyst in the Atlanta Fed’s Nashville Branch