TENNESSEE ECONOMIC OVERVIEW
(January Index as of April 4, 1996)
After ending 1995 with a positive outlook for the new year,
indicators of Tennessee economic activity began 1996 with a moderate
dip. Both the coincident and leading indexes suffered declines in
January, setbacks that were driven predominantly by more substantial
retreats in the U.S. indexes and discouraging signals from the
Tennessee labor market. An encouraging signal is that levels for the
components of the Tennessee index remain very strong. However,
January's indicators suggest that the state economy will realize rather
modest growth in the first half of the year.
The Tennessee composite index of coincident indicators, which
serves as a gauge of current economic activity in the state, fell at a
seasonally adjusted annual rate (SAAR) of 2.4 percent in January,
following considerable improvement in the previous two months. The
decline in the Tennessee coincident index was a response to downturns
in the U.S. coincident index and the Memphis help-wanted index. The
U.S. index of coincident indicators slipped 4.0 percent (SAAR) after
enjoying a string of five consecutive gains, and the Memphis
help-wanted index decreased from 127 to 117 to reverse an advance from
the previous month. Total Tennessee construction potentials, on the
other hand, surged in January to temper the decline in the Tennessee
coincident index.
The Tennessee composite index of leading indicators--a barometer
of economic conditions in the state six to nine months in the future--
fell slightly in January at a SAAR of 0.7 percent. The U.S. leading
index failed to build upon a December gain as it turned downward 5.8
percent (SAAR), moving the index to its lowest level of the past twelve
months. Other components impacting negatively on the Tennessee leading
index were Tennessee inflation-adjusted taxable sales and initial
claims for Tennessee unemployment insurance. Tennessee
inflation-adjusted taxable sales decreased after two consecutive months
of substantial improvement. Initial claims for Tennessee unemployment
insurance were up sharply in January, from 34,300 to 39,500 to further
dampen the Tennessee leading index; however, levels of initial
unemployment insurance claims in the state remain relatively moderate
compared with levels over the past twelve months.
--Monthly Percent Change in the Tennessee Leading Index
There was also some very positive news for the Tennessee economy
reflected in January's leading index. Total Tennessee construction
potentials were up significantly and partially reversed a considerable
decline from the previous month. Moreover, Tennessee inflation-adjusted
taxable mortgages enjoyed a vigorous surge.
The Tennessee unemployment rate was unchanged in January,
remaining at 5.6 percent. However, all other labor market signals were
negative for the month. As mentioned above, a large upturn in initial
claims for Tennessee unemployment insurance served to hold back the
Tennessee leading index for the month. The movement in initial claims
was echoed by a marked increase in continued weeks claimed for
Tennessee unemployment insurance--from 177,800 to 223,500. Tennessee
nonagricultural employment suffered a moderate retreat of 1.6 percent
(SAAR), its first setback in nine months. Nonetheless, employment was
up 2.9 percent from January, 1995. Tennessee's manufacturing sector
continued to show some signs of weakening in January as Tennessee
manufacturing employment declined 3.3 percent (SAAR) for its fifth
consecutive loss, while average weekly hours in Tennessee manufacturing
firms fell from 40.8 to 38.5.
Although the Tennessee economy was unable to post broad-based
gains and the labor market reported a lackluster performance for the
month, there is no indication that the state has moved off its path of
moderate growth. Unemployment insurance claims endured substantial
increases in January but are not expected to see persisting increases.
The Tennessee economy has done generally very well over the last few
months and should sustain satisfactory activity over the near term.
Look for labor market signals to remain mixed throughout the spring.
--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
(January Index as of April 4, 1996)
CHATTANOOGA
After a lackluster performance over the last few months, the
Chattanooga economy began to show signs of renewed vigor in January as
the Chattanooga economic index rose at a seasonally adjusted annual rate
(SAAR) of 9.0 percent. An especially encouraging sign is that Chattanooga
was the only major metropolitan area in the state to enjoy an improvement
in their local economic index. Leading the charge for the month was a
considerable boost in Chattanooga employment levels, reflected in a 16.4
percent (SAAR) gain in Chattanooga nonagricultural employment. Initial
claims for Chattanooga unemployment insurance also enhanced the
Chattanooga economic index, falling from 2,230 to 2,150 and continuing a
downward adjustment from the high levels experienced in late 1995. Other
components impacting positively on the Chattanooga index were (1)
Chattanooga inflation-adjusted taxable sales, which more than made up for
a December decline; (2) Chattanooga airport passengers, which turned
upward after dropping substantially in the previous month; and (3)
Chattanooga commercial and industrial electrical consumption, which
enjoyed a healthy increase in January. On the downside, setbacks in two
components served to hold back the advancing Chattanooga economic index.
Chattanooga bankruptcies rose from 514 to 552 for the second consecutive
monthly upturn. The Tennessee composite index of leading indicators,
which had experienced gains in the previous two months, suffered a modest
downturn of 0.7 percent (SAAR) in January.
The Chattanooga unemployment rate remained at 5.1 percent for the
third consecutive month, and other labor market signals were all
encouraging. As mentioned above, Chattanooga nonagricultural employment
saw a considerable improvement in January, moving employment levels well
above the previous high for the past twelve months. The decline in
initial unemployment insurance claims in Chattanooga reinforce this gain
in Chattanooga nonagricultural employment. Chattanooga manufacturing
employment was unchanged for the month.
Economic news from Chattanooga was very bright in January as
evidenced by a rejuvenation in the Chattanooga economic index and
sustained strength in the Chattanooga labor market. Expect the
Chattanooga economy to see continued economic growth in coming
months.
--Chattanooga Quarterly Economic Index
KNOXVILLE
The Knoxville economic index failed to reinforce a December gain as
it fell at a seasonally adjusted annual rate (SAAR) of 11.0 percent in
January. This decline in the Knoxville index resulted from setbacks in
all of its six components. Initial claims for Knoxville unemployment
insurance were up from 4,300 to 4,440, partially reversing a December
drop. Knoxville nonagricultural employment decreased 2.3 percent (SAAR)
for its second consecutive (but relatively moderate) monthly downturn.
The remaining labor market component of the Knoxville economic index, the
Knoxville help-wanted index, was down from 159 to 148. Other components
impacting negatively on the Knoxville index were (1) Knoxville
bankruptcies, which jumped from 562 to 611 to the highest level of the
past year; (2) Knoxville inflation-adjusted taxable sales, which failed
to bolster gains made during the holiday shopping season; and (3) the
Tennessee composite index of leading indicators, which declined 0.7
percent.
Signals from the Knoxville labor market were all negative in
January, reinforcing the downturn in the Knoxville economic index.
Although Knoxville nonagricultural employment decreased for the second
straight month, the level of employment in Knoxville remains relatively
high. In addition to the rise in initial claims for Knoxville
unemployment insurance and the slip in the Knoxville help-wanted index
mentioned above, Knoxville manufacturing employment suffered a
significant retreat of 11.4 percent (SAAR). Manufacturing employment in
Knoxville had increased in each of the previous four months, however. The
Knoxville unemployment rate climbed from 4.1 percent to 4.5 percent.
News from the Knoxville economy was somewhat discouraging in
January, although there is no indication of a significant weakening in
local economic conditions. Economic performance in Knoxville generally
has been good over the last few months and the Knoxville labor market has
enjoyed some notable gains. Look for the Knoxville economy to experience
moderate growth throughout the spring.
--Knoxville Quarterly Economic Index
MEMPHIS
The Memphis economic index failed to build upon solid gains
registered in the previous two months as it turned downward at a
seasonally adjusted annual rate (SAAR) of 2.9 percent in January. This
decline in the Memphis economic index resulted from setbacks in the
Memphis help-wanted index and the Tennessee composite index of leading
indicators. The Memphis help-wanted index fell from 127 to 117 to
partially reverse the previous month's gain. The Tennessee leading index
retreated modestly at 0.7 percent (SAAR) following two consecutive
monthly advances. Most components of the Memphis economic index showed
improvement in January, which served to mitigate the decrease. Memphis
nonagricultural employment continued the string of advances established
in August, increasing 1.7 percent in January. Initial claims for Memphis
unemployment insurance enjoyed a moderate decrease of 6.9 percent (SAAR)
to reinforce a more substantial December drop. Finally, Memphis new
incorporations rose from 130 to 137.
The Memphis unemployment rate rose from 4.4 percent to 4.6 percent
in January, but most other labor market signals were positive. Memphis
nonagricultural employment has seen great improvement over the last
several months and the gain in January is in sharp contrast to the loss
in jobs for the overall state economy. Memphis manufacturing employment
also made positive strides in January, increasing a healthy 5.1 percent
(SAAR). Again, this is in contrast to the state's contraction in
manufacturing sector employment. The only negative sign from the labor
market in January was the Memphis help-wanted index, which was down from
127 to 117, as mentioned above.
Despite a moderate downturn in the Memphis economic index in
January, the performance of the Memphis economy over the last few months
points to sustained growth in the near term. The Memphis labor market
continues to exude strength, which should help to keep the Memphis
economy on course in the months to come.
--Memphis Quarterly Economic Index
NASHVILLE
The Nashville economic index fell at a seasonally adjusted annual
rate (SAAR) of 15.0 percent in January following a considerable advance
over the previous two months. This decline in the Nashville index
resulted from setbacks in five of its six components. The most notable of
these setbacks were in initial claims for Nashville unemployment
insurance and the Nashville help-wanted index. Initial unemployment
insurance claims were up from 4,640 to 5,090, but only partially reversed
the substantial improvement enjoyed in the prior two months. The
Nashville help-wanted index retreated from 123 to 93, it lowest level of
the past twelve months. Other components impacting negatively on the
Nashville economic index were (1) Nashville taxable sales, which failed
to build upon the gains made over the holiday shopping season; (2)
Nashville construction potentials, which were down from 151 to 143 in
January; and (3) the Tennessee composite index of leading indicators,
which fell a very moderate 0.7 percent (SAAR). On the positive side,
Nashville nonagricultural employment added to its string of seven
consecutive monthly advances, increasing 3.1 percent (SAAR). Nashville
nonagricultural employment has seen much improvement over the last year
and is 3.9 percent higher than the level in January, 1995.
In contrast to the upturn in initial claims for Nashville
unemployment insurance and relatively large decline in the Nashville
help-wanted index mentioned above were improvements in other aspects of
Nashville labor market in January. Nashville nonagricultural employment
surpassed the highest level attained in 1995 due to sustained employment
growth over the past several months.The unemployment rate in Nashville
remains exceptionally low relative to other areas of the state, with the
unemployment rate decreasing from 3.6 percent to 3.5 percent in January.
Moreover, manufacturing employment in Nashville was up 1.2 percent
(SAAR). Nashville's growth in overall employment and manufacturing
employment is in contrast to the trend for the state as a whole.
Although the Nashville economic index suffered a fairly substantial
decline in January, a strong labor market and the overall solid
performance of the Nashville economic indicators in the last few months
suggests that there is no reason for alarm. Look forward to continued,
although more subdued, growth through spring.
--Nashville Quarterly Economic Index
TRI-CITIES
The Tri-Cities economic index fell at a seasonally adjusted annual
rate (SAAR) of 17.8 percent in January, pushing the index to its lowest
level of the year. The most salient factor in this substantial downturn
in the Tri-Cities index was initial claims for Tri-Cities unemployment
insurance, which skyrocketed from 2,220 to 3,110. As discussed below,
other Tri-Cities labor market signals were also very discouraging,
reinforcing the concern over the sharp increase in initial unemployment
insurance claims. Spikes in initial claims for unemployment insurance in
the Tri-Cities will not likely persist for an extended period of time,
but do amplify concerns over the direction of the local economy. Setbacks
in four of the five remaining components of the Tri-Cities economic index
aggravated the situation for the month, including (1) Tri-Cities
bankruptcies, which were up from 562 to 611; (2) Tri-Cities
inflation-adjusted taxable sales, which retreated after enjoying gains in
the previous two months; (3) Tri-Cities nonagricultural employment, which
was down for the third consecutive month, slipping 5.2 percent (SAAR) in
January; and (4) the Tennessee composite index of leading indicators,
which experienced a modest decrease of 0.7 percent (SAAR). The only
positive note for the month was an advance in Tri-Cities commercial and
industrial electrical consumption, which helped to mitigate the decline
in the Tri-Cities economic index.
The Tri-Cities unemployment rate rose sharply, from 4.8 percent to
5.5 percent in January, echoing the negative movement in initial claims
for Tri-Cities unemployment insurance and Tri-Cities nonagricultural
employment noted above. In addition, Tri-Cities manufacturing employment
was down 4.3 percent (SAAR) for the month. It should be noted that the
Tri-Cities unemployment rate has been fairly erratic over the past year,
ranging from 4.3 percent to 5.8 percent. In isolation of other labor
market trends, the month's increase in the unemployment rate might be
little cause for concern. But the overall slack on labor market raises
pessimism regarding near-term economic prospects.
Unfortunately, there was little positive news coming from the
Tri-Cities economy in January. The local economy's weakness, coupled with
somewhat slower statewide economic growth, suggests further growing pains
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 theTennessee economic indices.
Economic Indicator Tables: TN, US, and MSAs,
January 1996
Tennessee Economic Overview, Current
CBER Home Page
Last updated April 19, 1996