Strong economic growth in Tennessee and the United States is expected to continue for the 10th straight year in 2020, although that growth will continue to slow as it did in 2019. The likelihood of a recession remains very low, according to a report released today by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville.
“The economy’s unprecedented and record-breaking growth streak is expected to continue through the year and into 2021,” said Matt Murray, associate director of the center and project director for the 2020 Economic Report to the Governor of the State of Tennessee. The report, produced annually by the Boyd Center at the request of the state, includes a look at the national economy, short- and long-term outlooks for the Tennessee economy, and a special section examining the impact of poor health among Tennesseans on the state’s economy.
In the decade of recovery since the Great Recession, the Tennessee economy has created 496,300 jobs—a growth rate of 1.8 percent, ahead of the pace of job creation for the nation. After peaking above 10 percent in 2009, Tennessee’s unemployment rate drifted down and bottomed out in February 2019 at 3.2 percent, also better than the national rate.
“One of the most remarkable features of this ongoing expansion has been the unemployment rate,” Murray said.
In 2019, similar to last year, the state’s inflation-adjusted gross domestic product grew by 2.7 percent. That is still behind the nation’s 2.9 percent growth. The state’s inflation-adjusted gross domestic product is expected to see slower growth of 2.1 percent next year, largely mirroring slower growth in the national economy.
“The last decade was a period of strong growth built on the heels of the Great Recession,” Murray added. “The next decade is expected to see slightly slower growth unless productivity improves.”
The state’s labor market is experiencing healthy gains, though the margin between the unemployment rate and job growth continues to narrow.
Tennessee had two consecutive years of non-farm job gains below 2 percent, and non-farm jobs are projected to grow by 0.9 percent in 2020. This is slower than the 1.4 percent pace of job growth in 2019, but still means more new jobs for Tennesseans.
“Tennessee has continued to see an uptick in job creation in 2019,” said Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. “Our state’s strong job growth and low unemployment rate showcase how well Tennessee’s economy is performing this year and we hope to continue this positive momentum in 2020. We appreciate all of the work the Boyd Center has done to forecast not only what economic trends we will see this year in Tennessee but also across the country, and look forward another successful year for our economy.”
The report’s special section this year highlights poor health as an economic problem for Tennessee. Those in poor health are less likely to be part of the state’s labor force, hurting families and the overall state economy.
In Tennessee, workers are more likely to leave the labor force before retirement age. About 20 percent of Tennesseans aged 50 to 59 are not working, which is well above the national average of 12 percent. This is attributed to more chronic illnesses and higher rates of smoking, obesity, and sedentary lifestyles.
The report also found that investing in public health could increase labor force participation and make the state more attractive to existing and new industries while helping workers and their families.
Other projections from the report include:
• Despite three rate cuts in 2019 to help stimulate the economy, the Federal Reserve is expected to raise interest rates toward the end of 2020.
• With exports down and imports up, the US trade deficit grew to $653 billion. For context, this is more than three times the value of all exported consumer goods.
• The service sectors in Tennessee have experienced the strongest gains, with employment in professional and business services expanding by 28.8 percent and jobs in leisure and hospitality increasing by 28.7 percent since 2007. Conversely, employment levels are down in information, manufacturing, and the mining, logging, and construction sectors.
• Slower economic growth will mean slower growth in sales tax revenues.
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.
Erin Hatfield (865-974-6086, firstname.lastname@example.org)
Matt Murray, associate director of UT’s Boyd Center for Business and Economic Research, serves as project director for the 2019 Economic Report to the Governor of the State of Tennessee.