TENNESSEE ECONOMIC OVERVIEW
(December Index as of March 11, 1996)
The Tennessee economy ended 1995 with a very positive stride, as
demonstrated by solid gains in both the coincident and leading indexes
of state economic activity. The Tennessee coincident index has advanced
in four of the past five months; the Tennessee leading index has
recorded back-to-back gains after experiencing setbacks in September
and October.
The Tennessee composite index of coincident indicators, a gauge of
current economic conditions in the state, rose at a seasonally adjusted
annual rate (SAAR) of 7.1 percent in December after rising a healthy
6.2 percent (SAAR) in the previous month. This gain in the Tennessee
coincident index, which put the index at its highest level of the year,
was very broadly based, with all of its three components showing
improvement. The U.S. composite index of coincident indicators was also
at its highest level for the year, rising 3.1 percent (SAAR) in
December. Tennessee commercial and industrial electrical consumption
was up 5.5 percent (SAAR) following a considerable November gain.
Finally, the Memphis help-wanted index, which serves as a measure of
job availability in the state, moved forward from 121 to 127. (Note:
The Conference Board, which provides the help-wanted index data used in
this report, has revised their historical series. This revision may
affect the values of the historical indexes for the state and
metropolitan areas.)
The Tennessee composite index of leading indicators, a barometer
for economic conditions in Tennessee six to nine months in the future,
rose 5.5 percent (SAAR) in December following a moderate November
advance. The most notable improvement came from initial claims for
Tennessee unemployment insurance, which fell sharply from 45,600 to
34,300. This decrease reinforced a noticeable decline in the previous
month. At the same time, initial claims for unemployment insurance in
Tennessee remain moderately above the levels achieved in early 1995.
--Monthly Percent Change in the Tennessee Leading Index
Other components helping to boost the Tennessee leading index were
Tennessee inflation-adjusted taxable sales and the U.S. composite index
of leading indicators. Tennessee inflation-adjusted taxable sales
reinforced a November upturn by increasing a healthy 29.8 percent
(SAAR) in December. The U.S. leading index was up 2.4 percent (SAAR)
for its first improvement in four months. On the downside, setbacks in
Tennessee inflation-adjusted taxable mortgages and total Tennessee
construction potentials helped to hold back the advance in the
Tennessee leading index. Total Tennessee construction potentials, which
gives the number of construction contracts awarded during the month
scheduled to begin ground-breaking within 60 days, suffered a
significant decline following increases in October and November.
(Construction currently provides about 4.3 percent of gross state
product and 4.3 percent of nonagricultural employment in Tennessee.)
Tennessee inflation-adjusted taxable mortgages decreased for the second
consecutive month.
Signals from the Tennessee labor market were mixed in December,
but aggregate measures of employment were mostly positive. Tennessee
nonagricultural employment, the principal measure of aggregate
employment in the state, reached its highest level of the year,
advancing 3.6 percent (SAAR) in December. Other positive news came from
Tennessee unemployment. As mentioned above, initial claims for
unemployment insurance fell sharply in December. This improvement was
reinforced by a fall in continued weeks claimed for Tennessee
unemployment insurance from 199,000 to 177,800. Despite these
improvements, however, the Tennessee unemployment rate inched forward
from 5.0 percent to 5.1 percent, but remains below the national
unemployment rate of 5.6 percent, which was unchanged from the previous
month. Tennessee's manufacturing workers suffered some setbacks in
December, when manufacturing employment fell 4.7 percent (SAAR) for its
fourth consecutive monthly decline, while workers in Tennessee
manufacturing firms saw their average weekly hours fall 10.1 percent
(SAAR). This decline is unsettling since manufacturing accounts for
more than one in five nonagricultural jobs in Tennessee.
The Tennessee economy closed out 1995 on a high note and entered
1996 poised for sustained expansion. Economic conditions appear ripe
for continued growth into the summer months. The only weak spot in the
state economy is the manufacturing sector. Even a slight rebound in the
manufacturing sector will ensure the economy's success.
--Quarterly Coincident and Leading Indexes
--Total Nonagricultural Employment
--Percent Change in the U.S. Consumer Price Index
--MSA Nonagricultural Employment Growth
--Real Personal Income
--Civilian Unemployment Rates
TENNESSEE PERSONAL INCOME
93/I 93/II 93/III 93/IV 94/I
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 91530 93469 94765 96362 97882
% Chg Prev Qtr SAAR.............. -2.45 8.75 5.66 6.91 6.46
% Chg Same Qtr Last Yr........... 6.30 6.25 6.47 4.63 6.94
TN Personal Income (MIL 87 $) (1).. 72816 73947 74736 75578 76530
% Chg Prev Qtr SAAR.............. -4.91 6.36 4.34 4.58 5.13
% Chg Same Qtr Last Yr........... 3.25 3.56 3.87 2.50 5.10
----------------------------------------------------------------------
94/II 94/III 94/IV 95/I 95/II
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 99514 101120 104035 104893 105915
% Chg Prev Qtr SAAR.............. 6.84 6.61 12.04 3.34 3.95
% Chg Same Qtr Last Yr........... 6.47 6.71 7.96 7.16 6.43
TN Personal Income (MIL 87 $) (1).. 77202 77845 79720 79949 98617
% Chg Prev Qtr SAAR.............. 3.56 3.37 9.99 1.15 131.51
% Chg Same Qtr Last Yr........... 4.40 4.16 5.48 4.47 27.74
----------------------------------------------------------------------
1992 1993 1994
--------------------------------------------------------
TN Personal Income (MIL $) (1)..... 88794 94032 100638
% Chg Prev Qtr SAAR.............. 8.71 5.90 7.03
% Chg Same Qtr Last Yr........... 8.71 5.90 7.03
TN Personal Income (MIL 87 $) (1).. 71903 74269 77824
% Chg Prev Qtr SAAR.............. 5.40 3.29 4.79
% Chg Same Qtr Last Yr........... 5.40 3.29 4.79
--------------------------------------------------------
ECONOMIC OVERVIEW,
SELECTED TENNESSEE MSAs
(December Index as of March 11, 1996)
CHATTANOOGA
The Chattanooga economic index fell at a seasonally adjusted
annual rate (SAAR) of 2.7 percent in December, despite improvement in
most components. There were some other, very positive signals in the
Chattanooga economy in December, including the Chattanooga labor
market, which showed signs of renewed strength.
Three components were responsible for pushing down the Chattanooga
economic index in December, all of which reversed positive strides made
in the previous month. Chattanooga inflation-adjusted taxable sales
were down 12.4 percent (SAAR) following a November surge. Chattanooga
airport passengers decreased sharply, while Chattanooga commercial and
industrial electrical consumption fell 31.0 percent (SAAR). On the up
side, improvements in four index components helped to temper the fall.
Impacting positively on the Chattanooga economic index were (1)
Chattanooga bankruptcies, which declined 10.4 percent (SAAR); (2)
initial claims for Chattanooga unemployment insurance, which made a
welcome turnaround after a tremendous surge in November--falling from
2,490 to 2,230 to finish out the year; (3) Chattanooga nonagricultural
employment, which advanced at a strong 12.2 percent (SAAR) pace; and
(4) the Tennessee composite index of leading indicators, which enjoyed
an increase of 5.5 percent (SAAR).
The Chattanooga unemployment rate fell from 5.2 percent to 5.1
percent in December, a decline that was echoed in most other labor
market signals. As mentioned above, a large advance in Chattanooga
nonagricultural employment and a vigorous decrease in initial claims
for Chattanooga unemployment insurance helped to prop up the
Chattanooga economic index. On the downside, however, Chattanooga
manufacturing employment declined 2.7 percent (SAAR).
The string of setbacks suffered by the Chattanooga economic index
in recent months is somewhat out of line with the performance of the
state economy, which continues to move forward. Although the
Chattanooga economic index has not seen an appreciable gain in the last
nine months, December labor market signals suggest an underlying
strength that may help the Chattanooga economy to get back on track. If
December's employment gains are sustained, look for the Chattanooga
economy to fall more in line with the state's modest growth path in the
near future.
--Chattanooga Quarterly Economic Index
KNOXVILLE
The Knoxville economic index rose at a seasonally adjusted annual
rate of 4.3 percent in December, building upon a modest November
advance. The increase in the Knoxville index was broadly based, as five
of its six components showed improvement. Initial claims for Knoxville
unemployment insurance took a welcome turn downward after suffering
considerable setbacks in the previous two months. Other labor market
components of the Knoxville economic index were also positive.
Knoxville nonagricultural employment increased for the third
consecutive month, moving forward 3.9 percent (SAAR) in December to its
highest level of the year. The Knoxville help-wanted index was up
significantly, from 146 to 159, turning around after significant
declines in October and November. Other components impacting positively
on the Knoxville economic index were Knoxville inflation-adjusted
taxable sales, which reinforced a November surge by advancing 21.4
percent in December, and the Tennessee composite index of leading
indicators, which rose 5.5 percent (SAAR). On the downside, Knoxville
bankruptcies were up sharply in December, from 497 to 574, the highest
level of the year.
Despite the improvement in labor market components of the economic
index, the Knoxville unemployment rate crept upward from 4.0 to 4.1
percent in December. However, the unemployment rate remains well below
the state unemployment rate of 5.1 percent, Initial claims for
Knoxville unemployment insurance continue to be high relative to the
level of a year ago, but a significant decline in December, coupled
with a year-end high in nonagricultural employment, suggests that
Knoxville's employment picture will remain bright well into spring.
Additional good news for Knoxville workers came from the Knoxville
manufacturing sector, which saw its employment advance 9.7 percent
(SAAR) to its highest level of the year. This gain is in contrast with
the state, which overall witnessed a contraction in manufacturing
employment.
Overall, the Knoxville economy--as with the state--ended 1995 on a
high note. A broad-based advance in the Knoxville economic index and
continued strength in the Knoxville labor market suggest that the
Knoxville economy will see continued moderate growth through early
1996.
--Knoxville Quarterly Economic Index
MEMPHIS
The Memphis economic index ended 1995 with a string of gains, as
the December index advanced at a seasonally adjusted annual rate (SAAR)
of 8.7 percent, its largest gain of the year. The turnaround in Memphis
economic activity, which began in late summer, continued to hold at the
close of 1995, proffering a good start for the Memphis economy in the
coming year. The rise in the Memphis economic index was engineered by
improvements in four of its five components, most notably, a vigorous
decline in initial claims for Memphis unemployment insurance from 4,820
to 4,440. Augmenting the retreat in initial claims for unemployment
insurance was a hearty advance in the Memphis help-wanted index, from
121 to 127, and a moderate gain in nonagricultural employment of 2.8
percent (SAAR). Memphis nonagricultural employment reached its highest
level of the year in December, and aside from a very modest glitch in
November, has seen continued, steady improvement since July. The
Tennessee composite index of leading indicators rose 5.5 percent (SAAR)
to further boost the Memphis index. On the downside, downturn in
Memphis new incorporations served to mitigate the gain in the Memphis
economic index. New incorporations fell from 140 to 130 in December
following a substantial increase in November.
The Memphis unemployment rate inched upward from 4.4 percent to
4.5 percent in December, but remains well below the 4.9 percent
recorded in October. Other Memphis labor market signals were mostly
positive, reinforcing the good news brought by the continued low
unemployment rate. As mentioned above, solid improvement in labor
market components helped to boost the Memphis economic index in
December. One weak spot was Memphis manufacturing employment, which
fell 13.0 percent (SAAR).
Expect the Memphis economy to continue to prosper into the spring,
with the regional labor market remaining relatively tight. Large surges
in economic activity are not anticipated, nor are sharp contractions.
--Memphis Quarterly Economic Index
NASHVILLE
The Nashville economic index rose at a seasonally adjusted annual
rate (SAAR) of 2.8 percent in December, thereby augmenting a
considerable November gain. This increase in the Nashville index
resulted from improvements in five of its six components, including all
of its labor market components. Initial claims for Nashville
unemployment insurance fell from 4,870 to 4,640 for its second
consecutive monthly decline. Moreover, the Nashville help-wanted index
was up slightly, from 122 to 123, and Nashville nonagricultural
employment advanced 2.5 percent (SAAR)--its seventh consecutive monthly
gain. Other components impacting positively on the Nashville economic
index were Nashville inflation-adjusted taxable sales, which reinforced
a substantial November increase by rising 12.9 percent (SAAR) in
December, and the Tennessee composite index of leading indicators,
which enjoyed an upturn of 5.5 percent (SAAR). On the downside,
Nashville construction potentials failed to hold onto a significant
November boost, declining from 172 to 151.
Despite the healthy reduction in initial claims for Nashville
unemployment insurance and gains in Nashville nonagricultural
employment and in the Nashville help-wanted index, the Nashville
unemployment rate increased from 3.4 percent to 3.7 percent in
December. Given the good news heralded by other labor market signals
and the low level of the unemployment rate, however, the ascent in the
Nashville unemployment rate should not cause alarm. Nashville's
unemployment rate compares favorably with the state-wide unemployment
rate of 5.1 percent and with unemployment rates in other Tennessee
metropolitan areas. Moreover, Nashville manufacturing employment
received a much-needed boost of 12.9 percent (SAAR) in December after
five consecutive monthly setbacks.
Economic news for Nashville was for the most part very positive in
December. A broadly based advance in the Nashville economic index and
generally strong signals from the Nashville labor market suggest that
the Nashville economy can look for continued growth in early 1996.
Expect Nashville to remain on a path of sustained growth and lead the
state in the new year.
--Nashville Quarterly Economic Index
TRI-CITIES
The Tri-Cities economic index failed to hold onto a moderate
November gain as it fell at a seasonally adjusted annual rate (SAAR) of
2.9 percent in December. This decline in the Tri-Cities economic index
resulted from setbacks in four of its six components, most notably, a
strong surge in Tri-Cities bankruptcies from 497 to 574. Other
components helping to hold back the Tri-Cities economic index in
December were (1) initial claims for Tri-Cities unemployment insurance,
which increased slightly from 2,200 to 2,220; (2) Tri-Cities commercial
and industrial electrical consumption, which reversed a moderate
advance from the previous month; and (3) Tri-Cities nonagricultural
employment, which suffered a negligible decline of 0.4 percent (SAAR).
On the positive side, a substantial increase in Tri-Cities
inflation-adjusted taxable sales and a respectable upturn in the
Tennessee composite index of leading indicators helped to temper the
fall in the Tri-Cities economic index. Tri-Cities inflation-adjusted
taxable sales were up considerably to reinforce a strong November gain,
while the Tennessee leading index saw a 5.5 percent (SAAR) improvement.
Tri-Cities labor market signals were all negative in December,
although the setbacks were modest. As mentioned above, Tri-Cities
nonagricultural employment fell 0.4 percent (SAAR), while initial
claims for Tri-Cities unemployment insurance increased by a mere 20
claims. Manufacturing employment in the Tri-Cities was down for the
second straight month, falling 6.6 percent (SAAR) in December. The
Tri-Cities unemployment rate rose from 4.7 percent to 4.9 percent,
which was not unexpected, given an unusually sharp 1.1 percent drop in
the unemployment rate in November.
Overall, news from the Tri-Cities labor market was uninspiring in
December and the Tri-Cities economic index itself suffered a moderate
setback. Together this suggests the local economy may have difficulty
engineering appreciable gains 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, December 1995
Tennessee Economic Overview, Current
CBER Home Page
Last updated March 11, 1996