UT economic report predicts slowing employment gains in 2019
Economic growth in Tennessee will be modest in 2019 and will slow in 2020, according to forecasts in the 2019 economic report released by the Boyd Center for Business and Economic Research at the University of Tennessee.
Though employment rates and personal income are expected to grow slightly, potential automobile tariffs and indications of a recession could have significant impacts on Tennessee.
Possibility of a recession?
Based on historical evidence, the report recommended the state prepare for a recession by making targeted expenditure cuts, building reserves and maintaining revenue structures.
A modest recession would cause a small revenue reduction in the initial years and slower growth for the next few, according to the Boyd Center.
In a severe recession, revenues would fall in the first year, fall sharply in the second and would not return to pre-recession levels until the fourth year or after. It would exhaust reserves quickly and require elimination of all non-recurrent expenditures.
"Even a mild recession could create substantial deficits in the absence of expenditure controls," the report stated. "Analysis suggests that current reserves are sufficient to weather a modest 2001-style downturn as long as all non-recurrent expenditures are eliminated quickly and recurrent expenditure growth is reduced below recent patterns."
Effects of Trump tariffs on Tennessee
The effects of ongoing trade negotiations between the U.S. and China on Tennessee could be significant, the report concluded. Potential tariffs on automobiles and parts could pose a major risk to the state.
"If the U.S. were to impose tariffs on automobile imports, other countries would likely respond in kind, threatening Tennessee's auto manufacturers' $6 billion export market," the report stated.
About 1.6 percent of Tennesseans work in industries facing tariffs. The report estimated Knox County could experience a .42 percent job loss as a result of tariffs; in some Tennessee counties it could be as high as 33 percent. Tariffs could affect up to 1 percent of jobs in Blount and Loudon counties, 1.42 percent in Sevier County, 3.39 percent in Jefferson and 1.24 percent in Union.
Slowing growth of employment
Statewide non-farm employment is projected to grow by 1.8 percent in 2018 and should outpace the projected 1.6 percent increase nationwide.
Employment will grow by 1.4 percent in 2019, but only .9 percent in 2020.
Job growth in 2019 will be driven by professional and business services, education and health services, leisure and hospitality and financial activities sectors. The information sector will see modest losses in 2019 and remain stagnant in 2020.
Manufacturing employment will see mild gains in durable goods, specifically wood products, nonmetallic minerals, fabricated metals and transportation equipment. Computer and electronics manufacturing will see losses.
In nondurable goods growth will be slight, with gains in beverage and tobacco manufacturing, plastics and rubber. Food and paper manufacturing will remain flat and chemical manufacturing will decrease.
"It seems unlikely that manufacturing employment will revert back to their pre-2000 levels anytime in the forseeable future," the study indicated.
Personal income, taxable sales will grow
Nominal personal income is projected to grow by 4.3 percent in 2019 and 4.5 percent in 2020. Within the category, wages and salaries will grow by 4.6 percent in 2019 and 4.2 percent in 2020. Rent, interest and dividend income will grow by 4.1 percent in 2019 and 6.2 percent in 2020.
Taxable sales are projected to increase by 4.1 percent in 2019 and 3.9 percent in 2020 in Tennessee, including a 5.3 percent increase in hotel and motel sales and a 2.6 percent increase in auto sales.
Long-term, fewer jobs will be created
The report also offered long-term economic predictions through 2028.
It projected Tennessee will create 209,000 jobs in the next decade, seeing some gains in professional and business services, education and health services, and manufacturing. The small information sector will lose jobs.
From 2008 to 2018, 288,500 jobs were created.
The long-term unemployment rate will remain under 4 percent through 2022 and then above 4 percent through 2028. Knox County's long-term unemployment rate will remain between 2.7-3.7 percent.
Population will grow statewide by 7.8 percent, while the U.S. sees a 7.9 percent increase. In Knox County, the population is estimated to increase by 8.2 percent by 2028. Blount County's population could increase by 9.4 percent. Twenty-eight counties will see a decline in population.
Tennessee's gross domestic product will grow 1.82 percent from 2018 to 2028, the study indicated. The most significant gains will come in the information and professional and business services sectors.
The state's per capita income will increase 3.2 percent compound annual growth rate between 2018 and 2028.
Source: Knoxville News Sentinel, by Brenna McDermott
The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org
Published December 20, 2018