TENNESSEE ECONOMIC OVERVIEW
(April Index as of July 15, 1996)
The Tennessee composite index of coincident indicators fell at
a seasonally adjusted annual rate (SAAR) of 7.1 percent in April
following five months of considerable improvement. Renewed
strength in the national economy, however, coupled with the
month's improvement in the Tennessee composite index of leading
indicators, suggests that the Tennessee economy has a brighter
road ahead.
The decline in the coincident index, which serves as a gauge
of current activity in the state, resulted from downturns in
Tennessee commercial and industrial electrical consumption and
the Tennessee help-wanted index. Tennessee commercial and
industrial electrical consumption, which serves as a measure of
industrial activity in the state, decreased for the third
consecutive month, but only moderately at 3.9 percent (SAAR). The
Memphis help-wanted index suffered a more substantial setback,
falling from 130 to 114 and suggesting a potential decline in
state-wide job availability. On a more positive note, the U.S.
composite index of coincident indicators rose 4.1 percent (SAAR),
which worked to temper the fall in the Tennessee index.
The Tennessee leading index, which serves as a barometer for
state economic activity six to nine months in the future, rose
6.4 percent (SAAR) for its sixth consecutive monthly gain. The
Tennessee leading index had seen lackluster performance in late
1995 but has since rebounded with great strength, proffering a
bright near term for the Tennessee economy. The advance in the
Tennessee leading index was engineered by improvements in four of
its five components. The national analog to the Tennessee leading
index, the U.S. composite index of leading indicators, was up 3.6
percent (SAAR) for its third consecutive increase.
This
rise in the U.S. leading index was amplified by third quarter
1995 reports of solid growth in U.S. gross domestic product (4.2
percent SAAR) and personal income (3.0 percent SAAR) (neither of
which impacts the Tennessee leading index directly), as well as
more recent news of a strengthening national economy. A strong
U.S. economy is likely to provide additional fuel to the growing
state economy in coming months. Tennessee inflation-adjusted
taxable mortgages rose sharply for the second straight month,
heralding good news for the Tennessee housing market. This
positive news was reinforced by a vigorous April upswing in total
Tennessee construction potentials from 504.2 to 595.0. Finally,
initial claims for Tennessee unemployment insurance fell from
46,800 to 43,800, a welcomed decline following a consistent rise
over the past year. On the downside, Tennessee inflation-adjusted
taxable sales declined 19.8 percent (SAAR) to reverse a March
upswing, mitigating the advance in the Tennessee leading index.
April's news from the Tennessee labor market was mixed, but
mostly negative. Continued weeks claimed for Tennessee
unemployment insurance (UI) surged in April to its highest level
of the past twelve months. This steep rise in continued UI claims
gives some cause for concern given the steady increase in both
continued and initial claims for Tennessee UI over the past year.
Initial UI claims were up 55.8 percent from April, 1995, despite
the retreat mentioned above, while continued weeks claimed for
Tennessee UI were up 47.3 percent. Other discouraging news came
from Tennessee nonagricultural employment, which declined 10.6
percent to partially reverse a March increase. On a brighter
note, the decline in nonfarm jobs in Tennessee comes on the heels
of substantial improvement over the past year, and Tennessee
nonagricultural employment remains 2.8 percent above the April,
1995 level. Furthermore, the state unemployment rate fell from
5.1 percent to 4.9 percent, putting an additional positive spin
on the level of aggregate employment in the state. Tennessee
manufacturing employment was down 8.0 percent (SAAR), but the
setback was tempered somewhat by a 3.5 percent increase in the
average weekly hours of Tennessee manufacturing workers. Weakness
in the state's manufacturing sector tends to be concentrated in
nondurable goods manufacturing (especially textiles and apparel).
Although labor market news was generally discouraging in
April, there were some very positive signs as well. If the
Tennessee economy continues forward with the solid performance it
has seen over the last few months, the state is likely to see a
tightening labor market and a downward adjustment in unemployment
insurance claims.
Despite the setback in current activity and some potential
weaknesses in the state labor market, the Tennessee economy
appears poised for continued growth in coming months, buoyed by a
strong resurgence in national economic activity and continued
strength in the Tennessee composite index of leading indicators.
Look for sustained economic expansion in the near term.
TENNESSEE PERSONAL INCOME
93/II 93/III 93/IV 94/I 94/II
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 93469 94765 96362 97882 99514
% Chg Prev Qtr SAAR.............. 8.75 5.66 6.91 6.46 6.84
% Chg Same Qtr Last Yr........... 6.25 6.47 4.63 6.94 6.47
TN Personal Income (MIL 87 $) (1).. 73947 74736 75578 76530 77202
% Chg Prev Qtr SAAR.............. 6.36 4.34 4.58 5.13 3.56
% Chg Same Qtr Last Yr........... 3.56 3.87 2.50 5.10 4.40
----------------------------------------------------------------------
94/III 94/IV 95/I 95/II 95/III
----------------------------------------------------------------------
TN Personal Income (MIL $) (1)..... 101120 104035 104783 106136 107761
% Chg Prev Qtr SAAR.............. 6.61 12.04 2.91 5.27 6.27
% Chg Same Qtr Last Yr........... 6.71 7.96 7.05 6.65 6.57
TN Personal Income (MIL 87 $) (1).. 77845 79720 79865 98823 99964
% Chg Prev Qtr SAAR.............. 3.37 9.99 0.73 134.43 4.70
% Chg Same Qtr Last Yr........... 4.16 5.48 4.36 28.01 28.41
----------------------------------------------------------------------
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
(April Index as of July 15, 1996)
CHATTANOOGA
The Chattanooga economic index inched upward at a seasonally
adjusted annual rate (SAAR) of 0.1 percent in April for its
fourth consecutive monthly gain. Although the April advance was
very modest, five of seven components improved. Initial claims
for Chattanooga unemployment insurance were down for the
fifth-straight month, falling from 1,900 to 1,780 in April. Other
components showing improvement in April were (1) Chattanooga
inflation-adjusted taxable sales, which surged to its highest
level of the year; (2) Chattanooga airport passengers, which
extended a March upturn but remained well below the levels posted
in the previous year; and (3) Chattanooga commercial and
industrial electrical consumption, which rebounded strongly
following a March downturn. The Chattanooga economic index also
benefited from a solid advance in the Tennessee composite index
of leading indicators, which rose 6.4 percent (SAAR) for its
sixth consecutive monthly upswing. Overall, the Tennessee economy
has exhibited much strength over the last several months, which
should help to keep the Chattanooga economy on its recently
reestablished growth path.
Despite the generally positive news from the Chattanooga
economy in April, significant setbacks in Chattanooga
nonagricultural employment and Chattanooga bankruptcies worked to
mitigate the positive influence of other index components.
Chattanooga nonagricultural employment failed to reinforce a
substantial March gain and turned downward 15.3 percent (SAAR),
despite the other mostly positive reports from the Chattanooga
labor market detailed below. Chattanooga bankruptcies surged from
513 to 605--up almost 50 percent over the April 1995 level of
407.
As mentioned above, Chattanooga nonagricultural employment
declined in April, but other labor market signals were very
positive. Most noteworthy is a very sharp decline in the
Chattanooga unemployment rate from 4.9 percent to 4.3 percent,
the lowest level of the past year. Additional good news was
heralded by initial claims for Chattanooga unemployment
insurance, which also descended sharply in April. On the
downside, Chattanooga manufacturing employment fell 10.5 percent
(SAAR) to reinforce the negative movement in nonagricultural
employment.
Although the Chattanooga economic index saw only a negligible
gain in April, the positive performance in the index over the
last four months suggests that the Chattanooga economy may be
coming back on track after suffering eight declines in the prior
nine-month period. A strong Chattanooga economy should strengthen
local labor market reports in the near term.
KNOXVILLE
The Knoxville economic index failed to hold onto a vigorous March
surge, sliding downward at a seasonally adjusted annual rate
(SAAR) of 11.8 percent in April. The decrease in the Knoxville
index was very broadly based, as all but one of its six
components suffered setbacks. Most notable among these setbacks
was a swelling of Knoxville bankruptcies, which were up sharply
from 618 to 710, the highest level of the year. This news is
especially discouraging given that Knoxville bankruptcies have
seen an overall increase of 73.8 percent since April 1995. Other
components impacting negatively on the Knoxville economic index
in April were (1) initial claims for Knoxville unemployment
insurance, which rose from 4,190 to 4,330 to partially reverse a
March decline; (2) Knoxville inflation-adjusted taxable sales,
which nudged downward following a surge in the previous month;
(3) Knoxville nonagricultural employment, which declined 11.7
percent (SAAR) in April but has seen fairly consistent
improvement over much of the year; (4) and the Knoxville
help-wanted index, which failed to reinforce a substantial March
gain. On the positive side, a 6.4 percent (SAAR) boost in the
Tennessee composite index of leading indicators served to temper
the fall in the Knoxville index.
The Knoxville unemployment rate fell from 4.3 percent to 4.0
percent in April, its best showing of the past year. The
Knoxville unemployment rate continues to compare favorably with
the statewide unemployment rate of 4.9 percent. All other
Knoxville labor market signals were negative in April, despite
the solid improvement in the unemployment rate. As mentioned
above, an upturn in initial claims for unemployment insurance and
setbacks in nonagricultural employment and the help-wanted index
helped to push down the Knoxville economic index for the month.
It should be noted, however, that all of these setbacks came on
the heels of considerable improvement in the previous month.
April reports may in fact reflect an adjustment from March's
stalwart performance rather than potential weakness in the
Knoxville labor market. Knoxville manufacturing employment was
down 2.4 percent (SAAR).
Knoxville labor markets will have to be monitored over the
next few months before a definitive trend can be articulated. If
the Knoxville economy sees improvement over the near term,
Knoxville labor markets will benefit, and labor market signals
should improve. The question is how will the Knoxville economy
perform in coming months. Aside from exceptional gains in March,
the Knoxville economic index has been relatively sluggish in the
past year. Renewed strength in the national economy, however,
coupled with a state economy that continues to perform well,
should pull the Knoxville economy in the direction of slow, but
sustained growth through the summer months.
MEMPHIS
The Memphis economic index fell at a seasonally adjusted
annual rate of 14.8 percent in April, failing to extend a long
string of eight consecutive monthly advances. Three of the five
Memphis components saw improvement, despite the overall decline
in the index. Memphis nonagricultural employment suffered a
vigorous setback of 23.5 percent (SAAR) in April following a
consistent rise over the past year. Nonetheless, Memphis
nonagricultural employment remains 1.6 percent higher than the
level achieved in April 1995. The Memphis help-wanted index also
suffered a significant decline, falling from 130 to 114, its
lowest level of the year. The remaining labor market component of
the Memphis economic index, initial claims for unemployment
insurance, fell from 4,530 to 4,490 to help temper the retreat in
the economic index. Other components impacting positively on the
Memphis economic index in April were new incorporations, which
surged from 129 to 145, and the Tennessee composite index of
leading indicators, which advanced 6.4 percent (SAAR) for its
sixth consecutive monthly gain. Recent improvement in the state
economy should help to sustain the Memphis economy in the coming
months.
The Memphis unemployment rate inched downward from 4.3 percent
to 4.2 percent, but other labor market signals were mostly
negative. As mentioned above, the April decline in the Memphis
economic index came entirely at the hands of setbacks in Memphis
nonagricultural employment and the Memphis help-wanted index.
Moreover, the decline in Memphis nonagricultural employment was
reinforced by a 9.2 percent (SAAR) decrease in Memphis
manufacturing employment. A bright spot was initial claims for
Memphis unemployment insurance, which built upon a considerable
March downturn and served to hold back the retreat in the Memphis
economic index. Although some negative signals emanated from the
Memphis labor market in April, the underlying strength of the
Memphis economy suggests a bright near term for Memphis workers.
The Memphis economy has enjoyed a strong year of solid growth,
and the April downturn in the economic index may reflect an
adjustment in a Memphis economy that has seen a surge in activity
in recent months. Only time will tell if April's decline in the
Memphis economic index represents a significant turn of events or
is merely a glitch on a solid growth path. For now, expectations
are that the Memphis economy will continue to experience moderate
growth through the summer months, which should keep Memphis labor
markets relatively tight.
NASHVILLE
The Nashville economic index fell at a seasonally adjusted
annual rate (SAAR) of 1.0 percent in April, failing to build upon
advances in the previous two months. This modest decline in the
Nashville index resulted from setbacks in three of its six
components. Nashville nonagricultural employment had seen much
improvement over the last year, but has fallen twice in the last
three months, retreating a substantial 13.8 percent (SAAR) in
April. Still, the level of nonfarm jobs in Nashville was up 2.4
percent from the April 1995 level. Other labor market components
of the Nashville economic index were also negative. Initial
claims for Nashville unemployment insurance rose slightly from
5,100 to 5,120 following a more substantial increase in March.
The Nashville help-wanted index nudged downward from 117 to 116.
On the up side, three components helped to prop up the Nashville
economic index in April. Impacting positively on the Nashville
index were (1) Nashville inflation-adjusted taxable sales, which
increased 9.4 percent (SAAR); (2) Nashville construction
potentials, which surged from 133 to 150 and were up 10.8 percent
over April 1995; and (3) the Tennessee composite index of leading
indicators, which advanced 6.4 percent (SAAR) to its highest
level of the year.
The Nashville labor market remains very tight, as reflected by
an unemployment rate that fell from 3.2 percent to 3.0 percent in
April. Other labor market signals were negative. All three labor
market components of the Nashville economic index suffered
setbacks in April and were responsible for the index's downward
movement. Furthermore, Nashville manufacturing employment fell
4.7 percent (SAAR) for its first decline in seven months. Given
the extremely low unemployment rate in Nashville, however, the
less than stellar performance of other labor market signals gives
no cause for immediate alarm. Buoyed by a Nashville economy that
has seen a resurgence in early 1996, the coming months should
continue to be bright for Nashville workers. Look for the
Nashville economy to grow at a moderate pace over the next few
months and for local labor markets to remain strong.
TRI-CITIES
The Tri-Cities economic index fell at a seasonally adjusted
annual rate (SAAR) of 16.0 percent in April, failing to reinforce
positive strides registered in the previous two months. The
substantial decline in the Tri-Cities index resulted from
setbacks in four of its six components. Most notable of these
setbacks were surges in bankruptcies and unemployment insurance
claims. Tri-Cities bankruptcies skyrocketed from 618 to 710, up
73.8 percent from April 1995. This upward trend in bankruptcies
is not expected to continue much longer, however, and some
downward movement is anticipated in the near term. Initial claims
for Tri-Cities unemployment insurance increased from 2,190 to
2,560 following considerable improvement in the previous two
months. Other components impacting negatively on the Tri-Cities
economic index were Tri-Cities commercial and industrial
electrical consumption, which decreased for the second
consecutive month, and Tri-Cities nonagricultural employment,
which suffered a significant downturn of 20.8 percent (SAAR)
after advancing 10.9 percent (SAAR) in March. There was also some
positive movement in index components in April. The Tennessee
composite index of leading indicators rose 6.4 percent (SAAR) for
its sixth consecutive monthly gain. Renewed strength in the state
economy is likely to give a needed boost to the Tri-Cities
economy in coming months. Other good news was heralded by
Tri-Cities inflation-adjusted taxable sales, which advanced to
their highest level of the last twelve months.
Signals from the Tri-Cities labor market were discouraging in
April, reinforcing the retreat of the economic index. As
mentioned above, a decline in Tri-Cities nonagricultural
employment and a considerable increase in initial claims for
Tri-Cities unemployment insurance helped to diminish the
Tri-Cities economic index. Moreover, manufacturing employment
declined 2.2 percent (SAAR). The Tri-Cities unemployment rate,
which had seen much improvement over the past year, rose rather
sharply from 4.8 percent to 5.1 percent.
Although it has suffered ups and downs along the way, for the
most part the Tri-Cities economic index has been declining over
the last twelve months and was down 3.0 percent from April 1995.
It is still too early to tell whether the Tri-Cities faces leaner
months ahead. The local labor market is beginning to show some
signs of weakening, but the employment picture is likely to
tighten should the Tri-Cities economy get back on a more vigorous
growth path.
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, April
1996
Current Tennessee Economic Overview
CBER Home Page
Last updated July 17, 1996