TENNESSEE ECONOMIC OVERVIEW
(August Index as of October 30, 1995)
After a lackluster performance over the last several months that has
been characterized by relatively modest up-and-down movements in the
Tennessee economic indicator series, the Tennessee economy began to
show signs of renewed strength in August as both the Tennessee
coincident and leading indexes moved forward. Tennessee labor market
signals were mostly positive as well, reinforcing the strength
evidenced in the economic indexes.
On the heels of a 4.3 contraction registered in July, the Tennessee
composite index of coincident indicators--a gauge of the state's
current economic conditions--rose at a seasonally adjusted annual rate
(SAAR) of 9.8 percent in August. All of the components of the index
experienced a turnaround. The Memphis help-wanted index bounced back
from a July setback with a modest gain (169 to 174), while Tennessee
commercial and industrial electrical consumption saw its strongest
gain in the past twelve months. The only remaining component of the
Tennessee coincident index, the U.S. composite index of coincident
indicators, rose 3.1 percent (SAAR).
The Tennessee composite index of leading indicators, which serves as a
yardstick for state economic activity six to nine months in the
future, also enjoyed a substantial gain in August, rising at a SAAR of
12.9 percent. This advance in the Tennessee leading index was
engineered by improvement in all of its five components. Initial
claims for Tennessee unemployment insurance fell substantially, from
41,800 to 37,800, following a surge in July. Total Tennessee
construction potentials increased from 520.5 to 534.7 for its second
consecutive monthly gain. Tennessee inflation-adjusted taxable
mortgages and inflation-adjusted taxable sales added to the good news,
as each posted respectable advances in August. Tennessee
inflation-adjusted taxable mortgages swelled to their highest level of
the year, evidencing sustained strength in Tennessee's residential
housing sector. Tennessee inflation-adjusted sales moved to reverse a
setback recorded in the previous month. Finally, the U.S. composite
index of leading indicators was up 2.4 percent (SAAR) to reverse a
July decline. The U.S. index had slipped in five of the six previous
months.
--Monthly Percent Change in the Tennessee Leading Index
The Tennessee unemployment rate inched downward for the first time in
five months as it fell from 5.2 percent to 5.1 percent in August. The
Tennessee unemployment rate continues to compare favorably with the
U.S. unemployment rate, which declined from 5.7 percent to 5.6 percent
for the month. Other Tennessee labor market signals were mostly
positive. As mentioned above, a decrease in initial claims for
Tennessee unemployment insurance helped to boost the Tennessee leading
index in August. Continued weeks claimed for Tennessee unemployment
insurance saw considerable improvement as well, falling from 211,700
to 192,700. Although Tennessee nonagricultural employment declined for
the third straight month, shrinking 0.7 percent in August, all three
setbacks have been very modest (at less than one percent). Moreover,
nonagricultural employment in the state still stands 2.3 percent
higher than that recorded in August, 1994. Tennessee manufacturing
employment saw its first advance in seven months as it moved a modest
0.2 percent (SAAR) upward. Average weekly hours for Tennessee
manufacturing workers were down 6.3 percent, however.
Overall, the Tennessee economy seems to have picked up some steam in
August, after struggling with up-and-down movements during the spring
and summer months. The solid performance of the coincident and leading
economic indexes, coupled with the support of a Tennessee labor market
that exudes underlying strength, suggests that the state economy
should continue to perform well throughout the rest of the year. The
resurgence of growth for the U.S. economy as measured by a sharp gain
in the gross domestic product in the third quarter should help
Tennessee solidify its economic gain. Conditions are ripe for
sustained growth in the state economy, and there is nothing imminent
on the horizon that should push the economy off course.
--Quarterly Coincident and Leading Indexes
--Total Nonagricultural Employment
--Percent Change in U.S. Consumer Price Index
--MSA Nonagricultural Employment Growth
--Real Personal Income
--Civilian Unemployment Rates
TENNESSEE PERSONAL INCOME
92/IV 93/I 93/II 93/III 93/IV
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 91956 91406 93316 94602 96414
% Chg Prev Qtr SAAR.............. 14.59 -2.37 8.62 5.63 7.88
% Chg Same Qtr Last Yr........... 10.19 6.49 6.38 6.44 4.85
TN Personal Income (MIL 87 $) (1).. 73624 72718 73826 74607 75619
% Chg Prev Qtr SAAR.............. 10.25 -4.83 6.24 4.30 5.53
% Chg Same Qtr Last Yr........... 6.84 3.44 3.69 3.84 2.71
----------------------------------------------------------------------
94/I 94/II 94/III 94/IV 95/I
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 97920 99496 100963 103840 105802
% Chg Prev Qtr SAAR.............. 6.40 6.60 6.03 11.89 7.77
% Chg Same Qtr Last Yr........... 7.13 6.62 6.72 7.70 8.05
TN Personal Income (MIL 87 $) (1).. 76560 77189 77724 79571 80642
% Chg Prev Qtr SAAR.............. 5.07 3.33 2.80 9.85 5.49
% Chg Same Qtr Last Yr........... 5.28 4.55 4.18 5.23 5.33
----------------------------------------------------------------------
1992 1993 1994
--------------------------------------------------------
TN Personal Income (MIL $) (1)..... 88598 93935 100555
% Chg Prev Qtr SAAR.............. 8.47 6.02 7.05
% Chg Same Qtr Last Yr........... 8.47 6.02 7.05
TN Personal Income (MIL 87 $) (1).. 71744 74192 77761
% Chg Prev Qtr SAAR.............. 5.16 3.41 4.81
% Chg Same Qtr Last Yr........... 5.16 3.41 4.81
--------------------------------------------------------
ECONOMIC OVERVIEW,
SELECTED TENNESSEE MSAs
(August Index as of October 30, 1995)
CHATTANOOGA
The Chattanooga economic index advanced at a seasonally adjusted
annual rate (SAAR) of 0.5 percent in August, representing the first
increase in five months. This meager gain in the Chattanooga index
resulted from improvements in five of its seven components. Initial
claims for Chattanooga unemployment insurance fell 17.5 percent (SAAR)
after suffering considerable setbacks in the previous four months.
Other components impacting positively on the Chattanooga economic
index were (1) Chattanooga inflation-adjusted taxable sales, which
reversed a July decline; (2) Chattanooga nonagricultural employment,
which advanced 7.3 (SAAR); (3) Chattanooga airport passengers, which
also saw healthy improvement; and (4) the Tennessee composite index of
leading indicators, which advanced at a robust 12.9 percent (SAAR)
pace. On the downside, Chattanooga bankruptcies skyrocketed in August
(to 564 from 409 in July), which, along with a moderate setback in
Chattanooga commercial and industrial electrical consumption,
restrained growth in the Chattanooga index.
Although the Chattanooga unemployment rate inched up from 4.8 percent
to 4.9 percent in August, overall labor market signals remain very
positive. As mentioned above, a healthy gain in Chattanooga
nonagricultural employment and a welcomed downturn in initial claims
for Chattanooga unemployment insurance helped to propel the
Chattanooga economic index forward in August. The gain in
nonagricultural employment is particularly noteworthy, as employment
had slipped in four of the past five months. In addition, Chattanooga
manufacturing workers saw their ranks swell by 600, for a net gain of
17.6 percent (SAAR).
The August turnaround in the Chattanooga economic index, as well as
the strong signs heralded by the Chattanooga labor market, suggest
that the Chattanooga economy should enjoy stronger growth in the
months to come than that realized in the recent past. Look for modest
growth through the fall and into winter.
--Chattanooga Quarterly Economic Index
KNOXVILLE
After four consecutive months of less than stellar performance, the
Knoxville economy enjoyed a robust turnabout in August, as evidenced
by a Knoxville economic index that surged at a seasonally adjusted
annual rate (SAAR) of 11.9 percent. This welcomed gain in the
Knoxville index was engineered by improvements in four of its six
components, most notably a vigorous decline in initial claims for
Knoxville unemployment insurance from 4,800 to 3,920. Other components
aiding in the August advance of the Knoxville index were (1) Knoxville
inflation-adjusted taxable sales, which enjoyed an especially strong
surge to its highest level of the year; (2) Knoxville nonagricultural
employment, which reinforced a considerable July increase by moving up
6.3 percent (SAAR); and (3) the Tennessee composite index of leading
indicators, which bounded upward 12.9 percent (SAAR). On the downside,
Knoxville bankruptcies suffered a surprisingly steep increase, from
486 to 548. The disappointing growth in Knoxville bankruptcies is not
consistent with other barometers of local economic performance. A
decline in the Knoxville help-wanted index also helped to temper the
healthy advance in the Knoxville economic index.
The Knoxville unemployment rate was unchanged in August at 4.2
percent, while other Knoxville labor market signals were mixed. As
mentioned above, a considerable decrease in the number of initial
claims for Knoxville unemployment insurance and a solid advance in
Knoxville nonagricultural employment gave a boost to the economic
index, while a setback in the Knoxville help-wanted index served to
moderate the gain. Knoxville manufacturing employment fell 6.8 percent
(SAAR) in August for its second consecutive decline. However, weak
employment growth has not translated into higher local unemployment
rates. While employment gains may be difficult to engineer in the
months to come, the Knoxville economy should continue to expand into
winter.
--Knoxville Quarterly Economic Index
MEMPHIS
As mentioned in last month's Tennessee Economic Overview, the
Memphis economy showed some signs of rejuvenation in July, following a
disappointing spring and summer. News from the Memphis economy in
August reinforced this view, as the Memphis economic index rose at a
robust seasonally adjusted annual rate (SAAR) of 7.5 percent. This
gain in the Memphis economic index, which is the first increase since
January, came about from improvements in three of its five components.
The Memphis help-wanted index enjoyed modest growth, increasing from
169 to 174 to reverse a July setback. Memphis nonagricultural
employment advanced 10.7 percent (SAAR) for its second consecutive
month of progress. The Tennessee composite index of leading indicators
turned upward 12.9 percent in August to further enhance the Memphis
economic index. On the downside, Memphis new incorporations were down
from 150 to 143 and initial claims for Memphis unemployment insurance
increased from 4,700 to 4,990 to temper the gain.
Despite the healthy improvement in Memphis nonagricultural employment
and the Memphis help-wanted index mentioned above, the Memphis
unemployment rate managed to climb to 5.0 percent in August, up from
4.8 percent. A negligible decline in Memphis manufacturing employment
of 0.3 percent (SAAR) and the increase in initial claims for
unemployment insurance in Memphis also worked to put a damper on some
otherwise strong signals from the Memphis labor market.
The turnaround in the Memphis economic index offers the promise of
renewed strength in the months to come. Although there were some
negative signs from the Memphis labor market in August and the Memphis
unemployment rate moved upward, the Memphis labor market also
exhibited some signs of underlying strength. In light of the
improvement in the Memphis economic index in August, coupled with
expectations of an expanding national and state economy for the
remainder of 1995, expect a slight rebound in economic conditions in
the next six months.
--Memphis Quarterly Economic Index
NASHVILLE
The Nashville economic index rose at a seasonally adjusted annual rate
(SAAR) of 12.2 percent in August to more than reverse a July decline.
This increase in the Nashville economic index was very broadly based,
as all of its six components showed improvement. Initial claims for
Nashville unemployment insurance, which fell from 5,890 to 5,750,
began an expected move downward following a considerable surge in
July. Other labor market components of the Nashville economic index
that showed improvement were the Nashville help-wanted index, which
advanced from 287 to 291, and Nashville nonagricultural employment,
which saw its third consecutive monthly gain as it increased 5.8
percent (SAAR). Also impacting positively on the Nashville economic
index in August were (1) Nashville construction potentials, which
enjoyed a hearty progression from 128 to 153; (2) Nashville
inflation-adjusted taxable sales, which surged vigorously following a
July setback; and (3) the Tennessee composite index of leading
indicators, which advanced a robust 12.9 percent (SAAR).
The Nashville unemployment rate fell from 3.7 percent to 3.6 percent
in August, while most other Nashville labor market signals also
proffered good news for the Nashville economy. As mentioned above, all
of the labor market components of the Nashville economic index showed
improvement in August. Moreover, Nashville nonagricultural employment
was at its highest level of the past year. On the downside, however,
the Nashville manufacturing sector did not share in this employment
gain, as Nashville manufacturing employment declined 15.6 percent
(SAAR) to its lowest level of the year. Approximately 17 percent of
Nashville workers are employed by manufacturing firms.
The Nashville economy heralded generally good news in August, and the
Nashville labor market remains very tight, as evidenced by the
exceptionally low unemployment rate. This resurgence in strength for
the Nashville economy suggests that local economic conditions should
continue to remain strong in the winter months.
--Nashville Quarterly Economic Index
TRI-CITIES
The Tri-Cities economic index advanced at a seasonally adjusted annual
rate (SAAR) of 6.7 percent in August to partially reverse a
substantial July decline. This gain in the Tri-Cities economic index
was engineered by improvements in five of its six components. All
labor market components of the index were positive. Tri-Cities
nonagricultural employment increased 5.0 percent (SAAR) to reinforce
the considerable progress seen in July, while initial claims for
Tri-Cities unemployment insurance fell from 2,600 to 2,560. Other
components impacting positively on the Tri-Cities economic index were
(1) Tri-Cities inflation-adjusted taxable sales, which were up 9.8
percent (SAAR); (2) Tri-Cities commercial and industrial electrical
consumption, which saw a healthy increase to partially reverse a July
setback; and (3) the Tennessee composite index of leading indicators,
which rose 12.9 percent (SAAR). On the downside, Tri-Cities
bankruptcies surged vigorously in August to mitigate the hearty
advance in the economic index. This rapid growth in bankruptcies
should be viewed as an aberration, as it is inconsistent with other
measures of economic performance.
The Tri-Cities unemployment rate rose from 5.2 percent to 5.3 percent
in August; however, all other labor market signals were positive,
which suggests that Tri-Cities labor markets remain in relatively good
shape. In addition to the improvements in initial claims for
Tri-Cities unemployment insurance and Tri-Cities nonagricultural
employment mentioned above, Tri-Cities manufacturing employment saw
its first gain in four months, advancing 2.3 percent (SAAR) in August.
The up-and-down movement in the Tri-Cities economic index continued in
August, with modest growth in the economic index. Strength in the
local labor market is particularly noteworthy, offering renewed hope
for economic expansion in the months to come.
--Tri-Cities Quarterly Economic Index
Center for Business and Economic Research, College of Business
Administration, The University of Tennessee, Knoxville. For further
information, call CBER (423) 974-5441.
Data reported herein are seasonally adjusted, and therefore
may not be directly comparable to data elsewhere. The five
seasonally adjusted leading index components are Tennessee
construction potentials, initial claims for Tennessee unemployment
insurance, the U.S. leading index, inflation-adjusted taxable sales
and taxable mortgages. The three seasonally adjusted coincident
index components are Tennessee commercial and industrial electricity
consumption, the Memphis help-wanted advertising index, and the U.S.
coincident index. See the Fall 1988 issue of the Survey of Business
and the 1994 Economic Report to the Governor for a complete
discussion of the methodology underlying the Tennessee economic
indices.
Economic Indicator Tables: TN, US, and MSAs, August 1995
Tennessee Economic Overview, Current
CBER Home Page
Last updated October 31, 1995