Falling unemployment rates, an increase in vehicle sales, and a long-awaited rebound in the residential housing market are all indications that the national and state economies are making a comeback.
Despite sequestration of federal spending and a payroll tax increase that have slowed consumer spending, the economy is poised for strong growth in both 2014 and 2015, according to the spring 2013 Tennessee Business and Economic Outlook released today.
The study, prepared by UT's Center for Business and Economic Research (CBER), predicts the trajectory of the state and national economies by examining many economic and fiscal factors and trends.
"The economy has finally found a firm footing," said Matt Murray, CBER associate director and the report's author. "This will be the third year of payroll employment growth and a falling unemployment rate following the Great Recession."
The national unemployment rate dropped to 7.7 percent in first quarter of the year and is expected to average 7.6 percent this year, compared to 7.8 percent in 2012. It is predicted to fall to 7.2 percent in 2014.
Additionally, payroll employment for the nation is projected to be up 1.5 percent this year and 1.6 percent next year, according to the report.
"These modest employment gains will help support modest reductions in the unemployment rate," Murray said.
Vehicle sales are inching closer to pre-recession levels, according to the report. They bottomed out at 10.4 million vehicle sales in 2009 but are rebounding. Sales are expected to total 15.3 million vehicles this year and 15.7 million next year. By 2016, sales will likely be restored to the levels that prevailed in 2006.
The residential housing market is showing major improvement in housing prices and in the sale of existing and new homes, according to the report. This comes after a long string of losses between 2006 and 2011.
The nation's manufacturing sector is expected to continue to see job gains as well.
Tennessee's economy improved in recent quarters, notably in its unemployment rate. The state unemployment rate is projected to average 7.8 percent this year compared to 8.0 percent last year. It is expected to fall to 7.5 percent in 2014, according to the report.
The state outperformed the United States in many measures.
Last year, Tennessee's personal income, nonfarm employment, and manufacturing employment all grew more strongly than the nation's, while the state's annual unemployment rate rested below the national unemployment rate, according to the report.
The first quarter of 2013 showed Tennessee performing better than most states. An index of economic momentum released by State Policy Reports placed Tennessee in the twelfth position across all states for first quarter economic performance. This index is a composite that includes personal income growth, employment growth, and population growth.
Tennessee's manufacturing sector employment growth in the first quarter was more than twice as large as the growth recorded for the nation.
The state economy will see a modest slowdown in growth into the third quarter of the year. Growth will accelerate as the year comes to a close, setting the stage for sustained economic expansion through 2015.
-Tennessee nonfarm employment is expected to be up 1.7 percent in 2013 and 1.8 percent in 2014.
-Professional and business services enjoyed the strongest growth and will continue to lead employment gains outside the manufacturing sector, followed closely by leisure and hospitality services.
-Manufacturing will see employment growth continue into 2015. Jobs in the state's industrial sector will be up 1.6 percent this year and next year. Employment losses will continue to take place in nondurable goods manufacturing.
-Personal income in the state is expected to advance at a 3.3 percent rate in 2013, with growth improving to 4.4 percent in 2014.