TENNESSEE ECONOMIC OVERVIEW
(February Index as of April 29, 1996)
The Tennessee economy has demonstrated a renewed strength over the
last few months as indicated by solid performance in both indexes of
state economic activity. The Tennessee composite index of coincident
indicators reached its highest level of the past twelve months in
February, and the Tennessee leading index enjoyed its fourth
consecutive monthly increase.* The upward movement of the economic
indexes was reinforced by generally positive news from the Tennessee
labor market. [*The indicator series include revised data.]
The Tennessee coincident index, which serves as a gauge of current
economic conditions in the state, rose at a seasonally adjusted annual
rate (SAAR) of 8.9 percent in February following a very modest January
setback. The most salient factor in this gain was a substantial jump in
the U.S. composite index of coincident indicators. The 9.5 percent
(SAAR) increase pushed the U.S. coincident index to its highest level
of the past twelve months. The Memphis help-wanted index, which gives
an indication of job availability in the state, rebounded from a
January setback to further boost the Tennessee coincident index. On the
downside, the healthy gain in the Tennessee coincident index was
tempered somewhat by a 10.0 percent (SAAR) decline in Tennessee
commercial and industrial electrical consumption.
The Tennessee composite index of leading indicators, a barometer
for state economic conditions six to nine months in the future, rose
2.3 percent (SAAR) in February. This gain in the Tennessee leading
index resulted from improvements in two of its five components. The
most striking improvement was in the U.S. leading index, which surged
16.7 percent (SAAR). The advance in the U.S. leading index was welcomed
news after a lackluster performance over the last year. Positive
signals from the national labor market reinforced the bright picture
painted by the U.S. leading index. Total Tennessee construction
potentials were also up sharply in February, building upon a January
boost to reach its highest level of the last twelve months. Three
components of the Tennessee leading index suffered setbacks in
February, which served to moderate the gain in the index. Initial
claims for Tennessee unemployment insurance were up considerably for
--Monthly Percent Change in the Tennessee Leading Index
the second consecutive month, rising from 40,500 to 46,600--47 percent
higher than the level of February 1995. Declines in Tennessee
inflation-adjusted taxable sales and mortgages also impacted negatively
on the Tennessee leading index. Tennessee inflation-adjusted taxable
sales were down 8.9 percent (SAAR) following a string of four
consecutive monthly improvements. Tennessee inflation-adjusted taxable
mortgages suffered a more significant decrease, but the retreat
followed a vigorous January surge.
News from the Tennessee labor market was generally very positive
in February, despite the surge in initial claims for Tennessee
unemployment insurance. The state unemployment rate fell from 5.6
percent to 5.4 percent for its first decline in six months. Growth in
Tennessee nonagricultural employment substantiated the improved
unemployment rate, rising 1.6 percent (SAAR) to reverse a January
setback. Nonagricultural employment in the state has advanced in nine
of the last ten months and should help to sustain Tennessee economic
growth in coming months. The swell in initial claims for Tennessee
unemployment insurance was mitigated somewhat by a 17.3 percent (SAAR)
downturn in continued weeks claimed for Tennessee unemployment
insurance. Tennessee manufacturing employment was down 0.5 percent
(SAAR) in February, although average weekly hours in Tennessee
manufacturing firms were up significantly from 38.5 to 40.4. Overall,
the Tennessee labor market remains on a firm footing. One concern is
that initial claims and continued weeks claimed for Tennessee
unemployment insurance remain at levels that are relatively high
compared to those of a year ago. However, if the labor market is able
to tighten over the next few months, unemployment insurance claims
should see improvement.
The emerging economic landscape continues to reveal a mixed bag of
strengths and weaknesses. As the strengths outweigh the weaknesses,
look for the Tennessee economy to continue its growth through the
summer months.
--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
February Index as of April 29, 1996
CHATTANOOGA
The Chattanooga economic index reinforced a January upturn as it
rose at a seasonally adjusted annual rate (SAAR) of 2.6 percent in
February. The Chattanooga economy has shown signs of renewed strength
in early 1996 following a lackluster performance during the latter part
of 1995. This gain in the Chattanooga index was engineered by
improvements in four of its seven components. Initial claims for
Chattanooga unemployment insurance took its third consecutive turn
downward in February, falling from 2,200 to 2,030. Chattanooga
commercial and industrial electrical consumption reached its highest
level of the year, and Chattanooga bankruptcies were down from 552 to
520. Finally, the Tennessee composite index of leading indicators
advanced 2.3 percent (SAAR) to further boost the Chattanooga economic
index. On the downside, three components of the Chattanooga index
suffered setbacks in February, including (1) Chattanooga
inflation-adjusted taxable sales, which reversed a January gain; (2)
Chattanooga airport passengers, which retreated to their lowest level
of the last twelve months and were down sharply from February 1995; and
(3) Chattanooga nonagricultural employment, which was down a modest 0.9
percent following a healthy boost in January.
The Chattanooga unemployment rate has fallen steadily over the
last four months (from 5.8 percent in November) and declined from 5.2
percent to 5.0 percent in February. Other labor market signals were
mixed. On the upside, the downward movement in the Chattanooga
unemployment rate was reinforced by the decrease in initial claims for
Chattanooga unemployment insurance mentioned above. On the downside,
Chattanooga manufacturing employment suffered a 5.2 percent (SAAR)
setback, and Chattanooga nonagricultural employment was down 0.9
percent (SAAR).
The Chattanooga economy appears to have gained steam over the last
couple of months following a lethargic end to 1995. Good news from the
Chattanooga economic index, coupled with generally strong labor market
signals and a declining unemployment rate suggest that Chattanooga will
continue to see healthy economic activity over the next several months.
Look for the Chattanooga unemployment rate to stabilize over the next
few months and for the Chattanooga economy to continue to see moderate
growth.
--Chattanooga Quarterly Economic Index
KNOXVILLE
The Knoxville economic index fell at a seasonally adjusted annual
rate (SAAR) of 9.5 percent in February following a moderate decrease in
January. This decline in the Knoxville index, its fifth of the last six
months, resulted from setbacks in four of its six components. The
Knoxville help-wanted index decreased for the second straight month,
falling from 148 to 131 in February. Other labor market components of
the Knoxville economic index were also negative, including initial
claims for Knoxville unemployment insurance, which were up slightly
from 4,410 to 4,440, and Knoxville nonagricultural employment, which
declined 6.3 percent (SAAR) to reverse a January gain. Finally,
Knoxville inflation-adjusted taxable sales fell to their lowest level
of the past twelve months. On the positive side, two components of the
Knoxville economic index saw improvement, which helped to mitigate the
descent of the index. Knoxville bankruptcies, falling from 611 to 606
in February, began to adjust downward following a surge in the
previous two months. They are expected to decline further over the next
few months. The Tennessee composite index of leading indicators rose
2.3 percent (SAAR) for its fourth consecutive monthly gain.
The Knoxville unemployment rate inched upward from 4.5 percent to
4.6 percent in February, and most other Knoxville labor market signals
were also negative. As mentioned above, declines in Knoxville
nonagricultural employment and the Knoxville help-wanted index, coupled
with an upturn in initial claims for Knoxville unemployment insurance,
helped to push down the Knoxville economic index in February. Despite
this discouraging news, there does not appear as yet to be an
underlying weakness in the Knoxville labor market, as employment levels
remain relatively high. Moreover, Knoxville manufacturing employment
was up 2.5 percent (SAAR) for the month.
The Knoxville economy has had a difficult time engineering
appreciable and sustainable gains over the last several months.
Accordingly, expect slow growth in the coming months.
--Knoxville Quarterly Economic Index
MEMPHIS
The Memphis economic index increased for the seventh consecutive
month in February, proffering a bright near term for the Memphis
economy. The Memphis economic index rose at a seasonally adjusted
annual rate (SAAR) of 2.4 percent, a gain that was engineered by
improvements in three of its five components. The Memphis help-wanted
index rose from 117 to 121 following a January decline. Other
components impacting positively on the Memphis economic index were
Memphis nonagricultural employment and the Tennessee composite index of
leading indicators. Memphis nonagricultural employment was up 2.5
percent (SAAR) to reach its highest level of the past twelve months.
The Tennessee leading index, which rose 2.3 percent (SAAR) in February,
saw its fourth consecutive monthly gain. Setbacks in initial claims for
Memphis unemployment insurance and Memphis new incorporations worked to
restrain the improving Memphis economic index, however. Initial claims
for Memphis unemployment insurance failed to reinforce decreases from
the previous two months, rising from 4,490 to 4,650 in February.
Memphis new incorporations were down 5.8 percent (SAAR), its third
consecutive monthly decline.
The Memphis unemployment rate turned upward from 4.4 percent to
4.7 percent in February after enjoying a steep decline in the previous
two months, but remains well below the 5.1 percent recorded in
November. Other Memphis labor market signals were mixed. As mentioned
above, gains in nonagricultural employment and the Memphis help-wanted
index helped to boost the Memphis economic index, while an increase in
initial unemployment insurance claims served to diminish the gain.
Memphis manufacturing employment, which accounts for just under twelve
percent of non-farm jobs in Memphis, fell 11.4 percent (SAAR).
A Memphis labor market that remains in reasonably good health,
coupled with the long string of advances in the Memphis economic index,
suggest continued expansion of Memphis economic activity in coming
months. Over the near term, expect the Memphis economy to stay on the
moderate growth path it paved through the early winter months.
--Memphis Quarterly Economic Index
NASHVILLE
The Nashville economy enjoyed a moderate surge in economic
activity in February as evidenced by solid performance in its economic
index and mostly positive news from the local labor markets. The
Nashville economic index rose at a robust seasonally adjusted annual
rate (SAAR) of 13.2 percent to reverse a significant setback
encountered in the previous month. Four of its six components showed
improvement in February. Most noteworthy was a vigorous upswing in the
Nashville help-wanted index from 93 to 124, which negated a substantial
January retreat. Other components impacting positively on the Nashville
economic index were (1) initial claims for Nashville unemployment
insurance, which fell from 5,180 to 5,020; (2) Nashville construction
potentials, which saw a moderate reversal after declining in the
previous two months; and (3) the Tennessee composite index of leading
indicators, which was up 2.3 percent (SAAR) for its fourth consecutive
monthly advance. The only labor market component of the Nashville
economic index to suffer a setback in February was Nashville
nonagricultural employment, which fell for the first time in ten
months. Despite the 2.1 percent (SAAR) decline, Nashville
nonagricultural employment is up a healthy 3.3 percent from a year ago.
Nashville inflation-adjusted taxable sales were down 13.5 percent
(SAAR) to further temper the gain in the Nashville economic index.
The Nashville labor market exhibited mostly positive signals in
February. The Nashville unemployment rate, which was unchanged at 3.3
percent, remains extraordinarily low compared with unemployment rates
for the state and the nation, which were 5.4 percent and 5.5 percent,
respectively, in February. Nashville manufacturing employment was also
unchanged. On the upside, improvements in initial claims for Nashville
unemployment insurance and the Nashville help-wanted index helped to
boost the Nashville economic index for the month. The only negative
signal from the Nashville labor market was the downturn in
nonagricultural employment mentioned above.
The Nashville economy continues to enjoy exceptional economic
growth. Sustained growth at the national, regional and state levels
will help Nashville carry this pattern into the summer months.
--Nashville Quarterly Economic Index
TRI-CITIES
The Tri-Cities economic index made a welcomed turn upward in
February following a somewhat discouraging performance over the last
few months. News from the Tri-Cities labor market was mixed, with some
very positive signals countered by other, rather discouraging trends.
The Tri-Cities economic index rose at a seasonally adjusted annual
rate of 5.6 percent in February following a considerable January
retreat. Improvements in four of the six components were responsible
for this gain. Tri-Cities bankruptcies began to adjust downward after
suffering a steady surge upward over the last several months. Other
components impacting positively on the Tri-Cities economic index were
(1) initial claims for Tri-Cities unemployment insurance, which were
down sharply from 3,140 to 2,550; (2) Tri-Cities commercial and
industrial electrical consumption, which benefited from rather harsh
weather in East Tennessee during the month; and (3) the Tennessee
composite index of leading indicators, which increased 2.3 percent for
its fourth consecutive monthly advance. On the downside, Tri-Cities
inflation-adjusted taxable sales were down to their lowest level of the
last twelve months, and Tri-Cities nonagricultural employment endured a
9.0 percent (SAAR) setback.
The Tri-Cities labor market provided somewhat equivocal reports in
February. The Tri-Cities unemployment rate was down substantially from
5.7 percent to 5.3 percent, a move that was reinforced by a large
retreat in initial claims for Tri-Cities employment insurance. Despite
this very positive news, Tri-Cities nonagricultural employment, the
broadest measure of regional employment, fell for the fourth
consecutive month and was down 0.8 percent from February 1995.
Manufacturing employment also suffered its fourth straight loss,
turning 8.5 percent (SAAR) downward in February.
The Tri-Cities economy appears to be in an economic limbo, not
able to stake out a well-defined upward nor downward trend, as
illustrated by the mixed signals coming out of the local labor market.
The positive performance of the state's economy over the last few
months, coupled with up and down movements in the local economy,
suggest that modest growth is the most likely scenario for the coming
months.
--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, February 1996
Tennessee Economic Overview, Current
CBER Home Page
Last updated April 30, 1996