--Monthly Percent Change in Tennessee Leading Index
The Tennessee composite index of coincident indicators, a gauge of current economic conditions in the state, fell rather sharply at a seasonally adjusted annual rate (SAAR) of 13.4 percent in May, following very modest declines in the previous two months. All components of the coincident index were negative. The Memphis help-wanted index experienced a particularly notable setback as it retreated from 191 to 167. Also falling were Tennessee commercial and industrial electrical consumption, which decreased 12.0 percent (SAAR), and the U.S. composite index of coincident indicators, which declined 3.0 percent (SAAR) for its second consecutive monthly downturn.
The Tennessee composite index of leading indicators fell 3.4 percent (SAAR) in May driven in part by a dip in the U.S. index of leading indicators. The U.S. leading index, which has fallen for four consecutive months and declined 2.3 percent (SAAR) in May, is often thought to be as much a gauge of current economic conditions in the nation as it is a barometer of future economic conditions. As a result, the four months of decline in the U.S. index reflect the current slowdown as well as the likelihood of somewhat slower growth as the economy approaches 1996. A decrease in Tennessee inflation-adjusted taxable sales and a vigorous surge in initial claims for Tennessee unemployment insurance also helped to hinder the Tennessee leading index. Tennessee inflation-adjusted taxable sales were down 19.5 percent (SAAR), while initial claims for Tennessee unemployment insurance skyrocketed from 28,000 to 42,900. On the positive side, both Tennessee inflation-adjusted taxable mortgages and total Tennessee construction potentials were up sharply in May.
The Tennessee unemployment rate rose from 4.4 percent to 4.6 percent in May, while other labor market signals were mixed. The state unemployment rate was up rather sharply from the 4.0 percent rate recorded just two months previously. At the same time, there is little cause for alarm as the Tennessee unemployment rate remains below what analysts consider to be a "full employment" rate of unemployment. That is, even when the economy is operating at full capacity, some unemployment will exist and is in fact desirable as workers transition to better quality jobs. There is no evidence of an upswing in unemployment arising from cyclical variations in the performance of the economy. Although the Tennessee unemployment rate was up in May, Tennessee nonagricultural employment saw a moderate increase of 0.6 percent (SAAR). Also showing improvement were the average weekly hours of Tennessee manufacturing workers, which were up 0.2 percent (SAAR). On the downside, continued weeks claimed for Tennessee unemployment insurance increased from 149,200 to 180,700 reinforcing the negative signal arising from the surge in initial claims for Tennessee unemployment insurance. Tennessee manufacturing employment declined 2.2 percent (SAAR) for its fourth consecutive monthly setback.
The lackluster performance of the Tennessee economic indexes in May suggests that the state may see diminished rates of growth in coming months, but they do not as yet point to any kind of general economic downturn. The rise in initial claims for Tennessee unemployment rate was unusually large in May, but the overall employment picture should remain positive in the near term.
TENNESSEE PERSONAL INCOME
92/III 92/IV 93/I 93/II 93/III
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TN Personal Income (MIL $) (1)... 88878 91956 91406 93316 94602
% Chg Prev Qtr SAAR............ 5.40 14.59 -2.37 8.62 5.63
% Chg Same Qtr Last Yr......... 8.47 10.19 6.49 6.38 6.44
TN Personal Income (MIL 87 $) (1) 71850 73624 72718 73826 74607
% Chg Prev Qtr SAAR............ 3.70 10.25 -4.83 6.24 4.30
% Chg Same Qtr Last Yr......... 5.32 6.84 3.44 3.69 3.84
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93/IV 94/I 94/II 94/III 94/IV
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TN Personal Income (MIL $) (1)... 96414 98185 99909 101527 103668
% Chg Prev Qtr SAAR............ 7.88 7.55 7.21 6.64 8.71
% Chg Same Qtr Last Yr......... 4.85 7.42 7.07 7.32 7.52
TN Personal Income (MIL 87 $) (1) 75619 76767 77509 78158 79439
% Chg Prev Qtr SAAR............ 5.53 6.21 3.92 3.39 6.72
% Chg Same Qtr Last Yr......... 2.71 5.57 4.99 4.76 5.05
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1992 1993 1994
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TN Personal Income (MIL $) (1)... 88598 93935 100822
% Chg Prev Qtr SAAR............ 8.47 6.02 7.33
% Chg Same Qtr Last Yr......... 8.47 6.02 7.33
TN Personal Income (MIL 87 $) (1) 71744 74192 77968
% Chg Prev Qtr SAAR............ 5.16 3.41 5.09
% Chg Same Qtr Last Yr......... 5.16 3.41 5.09
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The Chattanooga economic index fell at a seasonally adjusted annual rate (SAAR) of 11.4 percent in May following a moderate downturn in April. This decline in the Chattanooga index was broadly based, as six of its seven components suffered setbacks. Chattanooga bankruptcies rose from 406 to 458, reversing a healthy improvement from the previous month and bringing the level to its highest of the year. Also notable was a relatively large upswing in initial claims for Chattanooga unemployment insurance from 1,430 to 1,570; however, initial claims for unemployment insurance remain lower than they were throughout most of the past year. Additional components impacting negatively on the Chattanooga economic index were (1) Chattanooga inflation-adjusted taxable sales, which turned downward after two months of substantial progress; (2) Chattanooga airport passengers, which diminished for the second consecutive month; (3) Chattanooga commercial and industrial electrical consumption, which reversed an April gain; and (4) the Tennessee composite index of leading indicators, which decreased 3.4 percent (SAAR). On the positive side, Chattanooga nonagricultural employment advanced a considerable 6.2 percent (SAAR) to temper the fall in the Chattanooga economic index.
The Chattanooga unemployment rate rose from 4.1 percent to 4.3 percent in May, but remains well below what is considered the "full employment" rate of unemployment, which is approximately 5.0 percent. Other Chattanooga labor market signals were mixed. As mentioned above, a rise in initial claims for Chattanooga unemployment insurance helped to push down the Chattanooga economic index, while a healthy gain in Chattanooga nonagricultural employment served to temper the fall. Chattanooga manufacturing employment was down 10.1 percent (SAAR) in May.
Although the Chattanooga economic index declined rather sharply in May, the current level of the index does not suggest an impending downturn in Chattanooga economic activity, but more likely a moderated rate of growth. Despite some negative signals in May, the Chattanooga labor market remains strong as evidenced by the advance in Chattanooga nonagricultural employment and a continued low unemployment rate.
The Knoxville economic index retreated at a seasonally adjusted annual rate (SAAR) of 6.3 percent in May following a considerable downturn in April. This decline in the Knoxville economic index resulted from setbacks in four of its six components. Most salient were a vigorous surge in Knoxville bankruptcies from 390 to 490 and a considerable drop in the Knoxville help-wanted index from 478 to 451. Knoxville bankruptcies, which have seen much fluctuation over the last year, should see a transition to lower levels during the next few months. Also impacting negatively on the Knoxville economic index were Knoxville inflation-adjusted taxable sales, which fell 3.9 percent (SAAR), and the Tennessee composite index of leading indicators, which was down 3.4 percent (SAAR) following a significant April decline. Although there was a downturn in the Knoxville help-wanted index, other labor market components of the Knoxville economic index helped to temper its descent. Knoxville nonagricultural employment advanced 3.9 percent (SAAR), while initial claims for Knoxville unemployment insurance took a welcomed plunge from 3,860 to 3,370, thereby reversing a large April upswing. Knoxville manufacturing employment, which does not impact the Knoxville economic index, increased sharply in May at a SAAR of 18.0 percent.
Although a majority of components of the Knoxville economic index were negative in May, the decline in the index was heavily influenced by a surge in Knoxville bankruptcies, which as mentioned above, should diminish over the next few months. Moreover, the Knoxville labor market continues to gain strength, which suggests that the fall in the Knoxville economic index in May is not enough to imply any kind of slowdown in Knoxville economic activity. The Knoxville economy should see continued prosperity through the summer and into the fall.
The Memphis economic index fell for the fourth consecutive month in May as it descended at a seasonally adjusted annual rate (SAAR) of 9.2 percent. This decline in the Memphis economic index resulted from setbacks in four of its five components. The most notable of these setbacks was a retreat in the Memphis help-wanted index from 191 to 167, a level well below the previous low for the year. Other components impacting negatively on the Memphis economic index were (1) initial claims for Memphis unemployment insurance, which rose modestly from 3,940 to 4,080; (2) Memphis nonagricultural employment, which saw a moderate decline of 2.5 percent (SAAR); and (3) the Tennessee composite index of leading indicators, which moved downward 3.4 percent (SAAR) to amplify a relatively large April decrease. On the positive side, Memphis new incorporations jumped from 122 to 136, which helped to mitigate the fall in the Memphis economic index.
All Memphis labor market signals were negative in May, including the Memphis unemployment rate, which rose from 4.2 percent to 4.4 percent. Although the Memphis unemployment rate increased in May, it remains below what is considered to be a "full employment" rate of unemployment, and thus gives no cause for alarm. In addition to the setbacks in the Memphis help-wanted index, Memphis nonagricultural employment, and initial claims for Memphis unemployment insurance that helped to push down the Memphis economic index, Memphis manufacturing employment also turned downward in May, falling 4.5 percent (SAAR).
A fourth decrease in the Memphis economic index, coupled with somewhat disappointing labor market signals, suggests that the Memphis economy may continue to weaken in the coming months. At the same time, it is extremely unlikely that the Memphis economy will experience actual contraction. A more likely path is simply weaker, but positive economic growth.
The Nashville economic index turned downward for the second consecutive month in May as it fell at a seasonally adjusted annual rate (SAAR) of 20.5 percent. This considerable decline in the Nashville economic index was broadly based, with five of its six components suffering setbacks. Most conspicuous was a surge in initial claims for Nashville unemployment insurance from 4,220 to 4,610 and a Nashville help-wanted index which plunged from 351 to 240. Other components impacting negatively on the Nashville economic index were (1) Nashville inflation-adjusted taxable sales, which were down for the second straight month but remained at or above the level seen during most of the past year; (2) Nashville nonagricultural employment, which decreased 7.5 percent (SAAR); and (3) the Tennessee composite index of leading indicators, which fell 3.4 percent (SAAR) for its fourth setback in five months. Nashville construction potentials advanced from 131 to 133 to temper the decline in the Nashville economic index.
The Nashville unemployment rate increased from 2.9 percent to 3.1 percent in May, however this rate remains well below the "full employment" rate of unemployment as well as significantly better than the state unemployment rate of 4.6 percent. Other Nashville labor market signals were mostly negative. As mentioned above, all of the labor market components of the Nashville economic index, including significant setbacks in initial claims for Nashville unemployment insurance and the Nashville help-wanted index, as well as a retreat in Nashville nonagricultural employment, served to push down the Nashville economic index in May. Nashville manufacturing employment, however, was unchanged.
In light of continued tightness in the Nashville labor market, as evidenced by its very low unemployment rate, the considerable decline in the Nashville economic index should not be viewed as a sign of a problematic Nashville economy. Nashville continues to outperform the other metropolitan areas of the state, as well as the state as a whole. Nashville's economic prospects remain very bright, and the local economy should continue to enjoy relatively strong growth in the coming months.
The Tri-Cities economic index fell at a seasonally-adjusted annual rate (SAAR) of 21.1 percent in May to more than offset an April gain. This considerable decline in the Tri-Cities economic index was engineered by setbacks in five of its six components, most notably, a vigorous surge in Tri-Cities bankruptcies from 390 to 490. Other components impacting negatively on the Tri-Cities economic index were (1) initial claims for Tri-Cities unemployment insurance, which saw a significant increase from 2,020 to 2,220 but were down 16.7 percent from May 1994; (2) Tri-Cities commercial and industrial electrical consumption, which partially reversed an April gain; (3) Tri-Cities nonagricultural employment, which fell sharply at a SAAR of 11.0 percent; and (4) the Tennessee composite index of leading indicators, which suffered a 3.4 percent (SAAR) downturn. A modest 0.4 percent advance in Tri-Cities inflation-adjusted taxable sales helped to temper the fall in the Tri-Cities economic index.
Tri-Cities labor market signals were mixed in May. As mentioned above, a substantial increase in initial claims for Tri-Cities unemployment insurance and a weighty drop in Tri-Cities nonagricultural employment helped to turn the Tri-Cities economic index downward. Tri-Cities manufacturing employment, however, saw a much-welcomed 2.3 percent (SAAR) gain. The Tri-Cities unemployment rate was unchanged in May at 4.3 percent.
A 21.1 percent (SAAR) setback in the Tri-Cities economic index is disappointing. However, the Tri-Cities labor market remains tight and has benefited from important gains in the local manufacturing sector. This suggests that the Tri-Cities economy is not in danger of serious slippage in the near term. Instead, the fall in the Tri-Cities economic index implies the potential for less robust, but sustained growth in coming months.
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, May 1995 Tennessee Economic Overview, Current CBER Home Page
Last updated October 17, 1995