TENNESSEE ECONOMIC OVERVIEW
(July Index as of October 17, 1995)
The indicators of current and future economic activity in Tennessee
suffered setbacks in July, mostly reversing the very positive movement
recorded in June. Tennessee labor market signals echoed the movement of
the indicators and were partly responsible for their decline.
The Tennessee composite index of coincident indicators, a barometer of
current economic conditions in the state, fell in July at a seasonally
adjusted annual rate (SAAR) of 7.8 percent. This decrease in the
Tennessee coincident index is attributable to declines in Tennessee
commercial and industrial electrical consumption and the Memphis
help-wanted index. The Memphis help-wanted index was down
moderately--from 173 to 169, while Tennessee commercial and industrial
electrical consumption reversed a June gain. The only other component of
the Tennessee coincident index, the U.S. composite index of coincident
indicators, was unchanged in July. Although the Tennessee coincident
index was down in July, the decline follows a very positive stride in
June, and the coincident index remains at a level consistent with strong
state economic activity.
The Tennessee composite index of leading indicators, a gauge of
state economic activity six to nine months in the future, also moved
downward in July to partially reverse a positive June showing. This 4.3
percent (SAAR) decline in the Tennessee leading index reflects setbacks
in three of its five components. Most notable was a substantial increase
in initial claims for Tennessee unemployment insurance from 38,400 to
41,800. Continued weeks claimed for Tennessee unemployment insurance,
which is not a component of the Tennessee leading index, also showed a
considerable increase, from 161,600 to 211,700. It should be noted that
movements as large as those seen in July's continued weeks claimed for
unemployment insurance are generally followed by significant adjustments
in ensuing months. Reductions in Tennessee inflation-adjusted taxable
sales and the U.S. composite index of leading indicators also helped to
push the Tennessee leading index down in July. Tennessee
inflation-adjusted taxable sales failed to bolster a robust June
increase, while the U.S. leading index declined 2.3 percent (SAAR). On
the positive side, advances in Tennessee inflation-adjusted taxable
mortgages and total Tennessee construction potentials helped to temper
the fall in the Tennessee leading index. Tennessee inflation-adjusted
taxable mortgages were at their highest level of the year in July, and
total Tennessee construction potentials were up 10.5 percent (SAAR).
--Monthly Percent Change in Tennessee Leading Index
Tennessee labor markets showed some signs of weakness in July, as
evidenced by the increases in unemployment insurance and a state
unemployment rate that was up from 5.0 percent to 5.2 percent. Tennessee
nonagricultural employment saw a negligible decline of 0.3 percent
(SAAR), which can be attributed in large part to an 8.6 percent (SAAR)
drop in Tennessee manufacturing employment. Tennessee manufacturing
workers' average weekly hours, however, were up slightly--by 0.3 percent
(SAAR).
Despite setbacks in both of Tennessee's economic indexes in July
and some negative signals from Tennessee labor markets, the state does
not appear to be in any danger of slipping into a recession anytime
soon. As noted throughout this report, much of the downward movement in
the index components followed significant strides in June. The economic
indicators have seen much tit-for-tat movement over the last year as the
Tennessee economy settles to a more sustainable rate of growth following
the long and hearty recovery from the 1991 recession. The Tennessee
economy is not likely to see large swings in either direction over the
coming months and thus should continue to enjoy a high level of economic
activity.
--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
(July Index as of October 17, 1995)
CHATTANOOGA
The Chattanooga economic index fell at a seasonally-adjusted annual
rate (SAAR) of 7.9 percent in July, failing to bounce back after
significant decreases in the previous three months. The decline in the
Chattanooga index was broadly based, as six of its seven components
suffered setbacks. The most salient of these setbacks was a sharp rise
in initial claims for Chattanooga unemployment insurance from 1,750 to
2,060. Other components impacting negatively on the Chattanooga economic
index were (1) Chattanooga inflation-adjusted taxable sales, which
reversed a June gain; (2) Chattanooga airport passengers, dipping to a
twelve-month low; (3) Chattanooga nonagricultural employment, which has
now declined for 5 consecutive months; (4) Chattanooga commercial and
industrial electrical consumption, which partially reversed a June
advance; and (5) the Tennessee composite index of leading indicators,
which turned downward 4.3 percent (SAAR). On the positive side, a
considerable decline in Chattanooga bankruptcies from 484 to 409
mitigated the drop in the Chattanooga economic index.
The Chattanooga labor market did not fare any better than did the
economic index, as Chattanooga saw its unemployment rate increase from
4.7 percent to 4.8 percent, while other Chattanooga labor market signals
were also negative. As mentioned above, the labor market components of
the Chattanooga economic index helped to push the index down in July.
Moreover, Chattanooga manufacturing employment diminished 5.3 percent
(SAAR).
The Chattanooga economy has seen some discouraging news in the last
few months, as evidenced by a string of declines in the economic index
and predominately negative signals from the labor market. The slowdown
in economic activity for the national and state economies does not bode
well for Chattanooga in the near term. While economic conditions are not
expected to worsen appreciably in the coming months, neither is a
resurgence of growth expected. Look for the local economy to continue
its up-and-down path in the near term.
--Chattanooga Quarterly Economic Index
KNOXVILLE
The Knoxville economic index fell at a seasonally adjusted annual
rate (SAAR) of 3.0 percent in July, reinforcing downturns in the
previous three months. A fourth consecutive decline in the Knoxville
economic index, coupled with the fact that the index has fallen in seven
of the last eight months, suggests that the Knoxville economy may be
settling to a lower rate of growth for the coming months. The decrease
in the Knoxville index was engineered by setbacks in four of its six
components, most notably a surge in initial claims for Knoxville
unemployment insurance from 3,790 to 4,800. Other components impacting
negatively on the Knoxville economic index were (1) Knoxville
bankruptcies, which increased from 449 to 486; (2) Knoxville
inflation-adjusted taxable sales, which suffered a moderate downturn to
reverse a June gain; and (3) the Tennessee composite index of leading
indicators, which declined 4.3 percent (SAAR). On the positive side,
Knoxville nonagricultural employment and the Knoxville help-wanted index
both saw considerable improvement in July. Knoxville nonagricultural
employment rose substantially at an SAAR of 17.3 percent, while the
Knoxville help-wanted index surged from 437 to 484.
Despite an increase in the Knoxville unemployment rate from 4.0
percent to 4.2 percent, the Knoxville labor market heralded some very
encouraging news in July. As mentioned above, both Knoxville
nonagricultural employment and the Knoxville help-wanted index saw
healthy increases. None of the large gains in employment accrued to the
Knoxville manufacturing sector, however, which saw its employment
decline 6.7 percent (SAAR).
The strength of the Knoxville labor market mitigates somewhat the
discouraging performance of the Knoxville economic index. The Knoxville
economy, like the national and state economies, should settle into a
more restrained growth path in the ensuing months.
--Knoxville Quarterly Economic Index
MEMPHIS
Although the Memphis economic index nudged downward in July at a
seasonally adjusted annual rate (SAAR) of 0.7 percent, the Memphis
economy showed some signs of rejuvenation after several months of
disappointing performance. The modest decline in the Memphis economic
index was the result of setbacks in three of its five components,
including (1) initial claims for Memphis unemployment insurance, which
increased from 4,590 to 4,700; (2) the Memphis help-wanted index, which
suffered a moderate decrease from 173 to 169; and (3) the Tennessee
composite index of leading indicators, which reversed a June advance
with a 4.3 percent (SAAR) July decline. On the positive side,
improvement in Memphis nonagricultural employment and Memphis new
incorporations helped to mitigate the fall in the Memphis economic
index. Memphis nonagricultural employment saw a 4.9 percent (SAAR) rise,
while Memphis new incorporations saw a slight increase from 144 to 150.
Signals from the Memphis labor market were mostly negative in July
as the Memphis unemployment rate increased from 4.7 percent to 4.8
percent. As mentioned above, the increase in initial claims for Memphis
unemployment insurance and the decline in the Memphis help-wanted index
helped to hold down the economic index, while gains in Memphis
nonagricultural employment gave the index support. None of these gains
in nonagricultural employment accrued to the manufacturing sector in
Memphis, however, which saw a slight decline in employment of 1.2
percent (SAAR).
Despite mostly negative signals from the economic index and the
local labor market, overall economic conditions in Memphis remain quite
strong. Relatively low rates of unemployment, coupled with high levels
of economic activity, should sustain the local economy in the months to
come. While improvements in economic conditions will be increasingly
difficult to engineer in the coming months, it is unlikely that the
local economy will slip into a serious downturn. Expect more up and down
movement in the index as the economy moves into fall.
--Memphis Quarterly Economic Index
NASHVILLE
The Nashville economic index fell in July at a seasonally adjusted
annual rate (SAAR) of 10.3 percent, exactly reversing a June advance.
This decline in the Nashville index was broadly based, as all of its six
components suffered setbacks. The most notable of these setbacks was a
very sharp increase in initial claims for Nashville unemployment
insurance from 4,980 to 5,890. The two remaining labor market components
of the Nashville economic index, Nashville nonagricultural employment
and the Nashville help-wanted index, both retreated from significant
upswings in June. Nashville nonagricultural employment fell 5.5 percent
(SAAR) while the Nashville help-wanted index declined modestly from 293
to 287. The remaining components of the Nashville economic index are
Nashville construction potentials, which were down from 135 to 128, and
the Tennessee composite index of leading indicators, which decreased 4.3
percent (SAAR).
The Nashville unemployment rate increased from 3.3 percent to 3.7
percent in July, but remains well below the state unemployment rate of
5.2 percent. Other signals from the Nashville labor market were also
negative. In addition to the setbacks in Nashville nonagricultural
employment, initial claims for Nashville unemployment insurance and the
Nashville help-wanted index mentioned above, Nashville manufacturing
employment saw a moderate decline of 4.7 percent (SAAR).
Although news from the Nashville economy was disappointing in July,
the local economy continues to enjoy sustained--and by some measures,
unprecedented--rates of growth. Despite the noticeable uptick in the
unemployment rate in July, overall economic conditions should remain
healthy into the winter months. Anticipate a slow ascent in the area
unemployment rate, coupled with modest but subdued economic growth.
--Nashville Quarterly Economic Index
TRI-CITIES
The Tri-Cities economic index failed to hold onto a very
substantial June gain as it fell at a seasonally adjusted annual rate of
14.6 percent in July. This decline in the Tri-Cities economic index
arose from setbacks in five of its six components. Initial claims for
Tri-Cities unemployment insurance suffered the most poignant setback,
increasing from 2,130 to 2,600. Other components impacting negatively on
the Tri-Cities economic index in July were (1) Tri-Cities bankruptcies,
which mostly reversed a considerable June improvement by rising from 449
to 486; (2) Tri-Cities inflation-adjusted taxable sales, which saw a
moderate setback; (3) Tri-Cities commercial and industrial electrical
consumption, which partially reversed a June advance; and (4) the
Tennessee composite index of leading indicators, which declined 4.3
percent (SAAR). On a very positive note, Tri-Cities nonagricultural
employment surged vigorously at an SAAR of 26.9 percent to temper the
fall in the Tri-Cities economic index.
The Tri-Cities unemployment rate saw a considerable increase in
July--from 4.8 percent to 5.2 percent, on par with the statewide
unemployment rate. Despite this change in the unemployment rate and a
discouraging number of initial claims for Tri-Cities unemployment
insurance, the Tri-Cities labor market shows some salient signs of
strength. In addition to the large advance in Tri-Cities nonagricultural
employment mentioned above, Tri-Cities manufacturing employment held
steady at a solid 53,300.
Despite a setback in the Tri-Cities economic index in July, the
labor market remains very strong and should sustain the Tri-Cities
economy.
--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 usiness
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, July 1995
Tennessee Economic Overview, Current
CBER Home Page
Last updated October 18, 1995