By DON FENLEY

Tennessee’s economy is expected to take a hit this year. Most industries except health care are down or flat. However, new residents will help keep the outlook. Tennessee is the six fastest growing state and while Nashville and Knoxville continue as the biggest growth centers, the Tri-Cities region has comparable – if not better – stability in some areas. The local region is seeing added attraction from relocators who want to be near, but not in, larger metros. Relocation indices for almost all the primary regional primary markets are up, while the total in-bound growth rate is lower than it was in 2022.

JOBS

Labor market reports for January are a few weeks off, but benchmarking 2023 annual data adds context to the monthly data churn and has followed the U.S. trend. The local economy continued adding jobs last year, but at a lower total than the previous year. That parallels the U.S. market, which continues to be more robust than expected. Last year, the economy was adding an average of 398 jobs a month. This year’s growth rate is expected to soften.

As illustrated in the accompanying chart, new jobs in the service and government sectors dwarf other sectors. Top industries by job openings were Health Care and Special Assistance, Unclassified, Retail Trade, Accommodations, and Food Services.

LABOR FORCE PARTICIPATION

December’s year-over-year rate increased 0.6% from Dec. 2022 and finished the year at an average 53%. That’s about 6% below the state and 9% below the U.S. rate. Key drivers are an older demographic aging out of the labor market, the number of retirees moving to the area and the local gray economy that’s off-the-books.

UNEMEMPLOYMENT CLAINS

Top industries of unemployment claims are Manufacturing, Construction, Administrative and Support and Waste Management, and Accommodations and Food Services.

CONSUMER SPENDING

Consumer spending picked up some of the slack from the housing market’s lagging performance during the last half of the year. NE TN county spending, as tracked by local sales tax collections, was up 9.8% – almost double the core annual inflation 5.2% rate. U. S/ consumers are feeling better about the economy because the stock market is strong, the price of eggs is down and stabilized, and gas prices are lower. Locally, eye-popping equity gains in the housing market are a factor. More than half of the regional existing mortgages are now classified as equity rich. Confidence will soften with a less robust labor market, typically accompanied by a decline in wage growth. While short-term consumer is still strong across the nation, uncertainty about the future due to geopolitics and U.S. governance is beginning to raise a red flat.

HOUSING

Sales prices for existing home sales should continue increasing, but at a slower rate than 2023’s annual 10.4% increase. January prices were up 8.9%. Low inventory and surging demand continue putting upward pressure on prices even though sellers are accepting the reality that they won’t get the same prices they have been accustomed to during the last couple years.

Mortgage rates average have stabilized a little above the 6% plus range and are not expected to fall below 6% this year. Research analysts at the National Association of Realtors (NAR) think an average of 6.5% to 6% will nudge about 10,000 locals back to the market.

Although the local jobs market continues to be robust, the jobs it’s creating don’t support a vibrant, affordable market.

Categories: ECONOMY