In Tennessee, COVID-19 uncertainty causes persistent labor shortages as consumer spending soars


There are still 54,500 fewer workers on Tennessee payrolls than there were prior to the pandemic, mostly in the leisure and hospitality, education and health services sectors, according to a new report from the University of Tennessee.

The slowdown in the labor market recovery is complicated, according to Larry Kessler, the project director for the report from the University of Tennessee's Boyd Center for Business and Economic Research.

But the bright side is that Tennessee's labor market is much closer to a full recovery than most other states.

According to the report, employment in Tennessee is projected to reach pre-pandemic levels by the second quarter of 2022 — a full quarter ahead of the nation’s projected labor market recovery.

“The economic recovery has been incredibly strong so far, and the Tennessee economy seems to be on solid footing,” Kessler said. “Real (gross domestic product) has already recovered to pre-pandemic levels due to a strong surge in consumer spending. Employment in the state has been a little slower to recover, but we expect job levels to recover by the first half of 2022.”

Gov. Bill Lee praised Tennesseans' resilience for restoring unemployment levels to ones seen before the pandemic.

“This significant milestone is a testament to our fiscally responsible approach and commitment to meaningful work. While we continue strengthening our workforce, Tennessee families and businesses will enter the New Year in a new, hopeful chapter for our state’s economy,” he said.

The pandemic is still causing labor shortages

There are three main reasons for the slow labor market recovery:

  1. After layoffs and furloughs caused by the pandemic, finding jobs and hiring staff became more time-consuming.
  2. The pandemic accelerated the rate of retirement.
  3. Emerging COVID-19 variants continue to bring employment uncertainties.

Other factors potentially contributing to the slowdown include workplace safety concerns, child care issues and people leaving the workforce.

Teachers and health care professionals across the nation have been feeling the burnout of the pandemic, and the job levels in Tennessee show it. There are 23,300 fewer workers in the education and health services sectors than there were in February 2020, according to the report.

Schools are struggling to replace teachers who left. Feeling overworked, fearing spreading or contracting COVID-19, and not wanting to face backlash of COVID-19 protocols are just a few reasons why those in the education field opted out, according to the report.

Health care workers are also feeling burned out and underpaid, which may be why that job area has been slow to recover.

The leisure and hospitality sector is slow to recover. In October, there were still 36,700 fewer workers in the leisure and hospitality sector than there were in February 2020, according to the report. Nashville in Davidson County has been hit hard given its reliance on large entertainment events, some of which have yet to return to pre-pandemic crowds.

Despite the slow recovery in some job sectors, others have rebounded. Professional and business services and trade, transportation, and utilities jobs have all fully recovered to prepandemic employment levels, according to the report.

Tennessee's unemployment rate has fallen dramatically since the pandemic. It spiked at 15.8 percent in April 2020, but is already back down to 4.2 percent as of October 2021.

"The state economy has proven to be incredibly resilient, and we project strong economic growth in the near term," Kessler said.

More money for Tennesseans to spend

While the labor market has slowed, Tennesseans are spending money again thanks to vaccines allowing then to venture out, stimulus checks coming in and other COVID-19 relief measures in place. The state's real GPD has recovered to prepandemic levels and is anticipated to grow 4.2% in 2022.

"We saw consumer spending just surge in the first half of the year, and that helps for an incredible strong economic recovery for 2021," Kessler said.

Larry Kessler is a research associate professor in the Boyd Center and project director for the 2022 Economic Report to the Governor of the State of Tennessee.

This spending surge shocked some businesses that had to downsize or close at the beginning of the pandemic. Some were unable to keep enough product in stock and others weren't able to hire enough employees to meet demand.

"These are largely temporary issues, but in the interim we have seen a pretty dramatic surge in prices on a lot of goods and services, and that may have prevented the economy from growing even faster in 2021," Kessler said.

Tennesseans have been putting more money in their pockets through 2021 with personal incomes growing 7.7% in 2021. This increase has come from both stimulus checks and a rise in wages and salaries.

But Tennesseans' personal income is still behind the national average. In the second quarter of 2021, per capita income was roughly $53,000 in the state. This was slightly below the southeast average of $54,399 and well below the national average of $62,215.

About the report

The report includes a deep dive into the employment recovery in Tennessee and examines how the recovery differs by age, race, gender, marital status, and education, as well as by industrial sectors and geographic area. It also dives into the long-term economic outlook for Tennessee as well as the results of the 2020 census.

The Boyd Center for Business and Economic Research has provided Tennessee's governor with this report annually since 1975.

Source: Knoxville News Sentinel, by Rebecca Wright

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


Published December 21, 2021