inflation

UT report finds spending surge among Tennesseans

Tennesseans are spending more and the state’s gross domestic product is growing — even when adjusted for inflation. That’s according to a new report by the Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville.

Here’s the full release from UT:

KNOXVILLE — Tennesseans are going out and spending money again—a trend signaled by a surge in the state’s inflation-adjusted gross domestic product, which grew 5.6 percent in 2021. Real GDP is projected to continue growing in 2022 at 4.2 percent, according to a report released today by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville.

Consumers are spending more confidently due to a third round of federal stimulus checks and the distribution of effective COVID-19 vaccines, which led to the return of in-person services for many consumers.

“The economic recovery has been incredibly strong so far, and the Tennessee economy seems to be on solid footing,” said Larry Kessler, research associate professor in the Boyd Center and project director for the 2022 Economic Report to the Governor of the State of Tennessee. “Real GDP has already recovered to prepandemic levels due to a strong surge in consumer spending. Employment in the state has been a little slower to recover, but we expect job levels to recover by the first half of 2022.”

The report includes a deep dive into the employment recovery in Tennessee and examines how the recovery differs by age, race, gender, marital status, and education, as well as by industrial sectors and geographic area. The state’s labor force participation rate, which sat at 61.8 percent before the pandemic, is projected to reach only 60.9 percent in 2022 and inch up to 61.4 percent in 2023. There is no single explanation for the slower labor market recovery, but many Tennesseans have reflected on their work–life balance since the pandemic began, and some have decided to switch jobs while others may not be as quick to re-enter the labor force for various reasons.

As of October 2021, the labor force among people aged 55 or older has decreased by nearly 55 percent nationwide since the beginning of the pandemic. Only the 35–44 age group has returned to prepandemic levels. There are still about one million fewer people aged 20–34 in the labor force, and another 800,000 fewer people aged 45–54. These changes could be due to workplace safety concerns as new COVID-19 variants emerge, families opting to live on one income instead of two, childcare issues, or an acceleration in retirements.

Despite the slower labor market recovery, employment in Tennessee is projected to reach prepandemic levels by the second quarter of 2022—a quarter ahead of the nation’s projected labor market recovery. The unemployment rate is projected to settle around 4.7 percent for 2021 and fall to 3.9 percent in 2022.

“Following a record-breaking year in terms of both job commitments and capital investment, the state economy continues its strong recovery,” said Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. “Tennesseans are resilient and the state is open for business, as evidenced by the unemployment rate falling closer to prepandemic levels. This is good news for our businesses, our recruitment efforts, and the Tennessee economy as a whole.”

Nonfarm employment is projected to increase by 2.8 percent for 2021 and 3.1 percent in 2022, recovering to prepandemic levels by the second quarter of 2022. State payrolls will get a boost from the manufacturing sector, which is expected to see an employment increase of 3.8 percent for 2021. The hard-hit leisure and hospitality sector is projected see employment expand by 5.9 percent in 2021 and sharply increase by 10.2 percent in 2022 as consumers continue to get more comfortable with in-person services and rising wages attract more workers. Worker burnout is likely driving a labor force contraction in the education and health services sector, with employment falling by 0.6 percent in 2021, but it should see an uptick of 2.2 percent growth in 2022.

“There are still a number of downside risks to economic growth, including supply chain issues, higher prices, and new COVID-19 cases and variants,” Kessler said. “But the state economy has proven to be very resilient, and we project strong economic growth in the near term.”

The report examines the long-term economic outlook for Tennessee as well as the results of the 2020 census. The state grew faster than the US overall, with the population increasing by 8.9 percent versus the national rate of 7.4 percent. Rising death rates and declining birth rates have led to slower growth over the past three decades, but a strong rate of migration into the state has helped keep population growth from slowing even further. Tennessee added 565,000 people between 2010 and 2020, largely in Middle Tennessee’s Davidson County and the counties surrounding it. Rural areas are experiencing slower or even negative growth across the state.

Since 1975, the Boyd Center for Business and Economic Research, housed within UT’s Haslam College of Business, has provided Tennessee’s governor with an annual economic report that includes an in-depth analysis of state and national trends and forecasts.