The Tennessee and national economies will continue to have sustained growth in 2018, according to a report released today by the University of Tennessee, Knoxville’s Boyd Center for Business and Economic Research.
“The economy is on a roll, and growth should continue into 2018 and beyond,” Matt Murray, associate director of the center and project director for the 2018 Economic Report to the Governor of the State of Tennessee, said.
Murray noted that the current growth cycle is the third-longest expansion since World War II and marks the eighth year of recovery since the Great Recession.
“At this point in the business cycle, we expect to see the pace of expansion slow, with slower employment gains and little further improvement in the unemployment rate,” he said. “Ultimately growth will slow because the economy has restored most activity to very high levels.”
According to the report, consumer spending will continue to be the backbone of economic growth in the United States, with growth of about 2.5 percent expected in 2018 in response to a low unemployment rate and ongoing job gains.
Business investment, in equipment and computer hardware and software, is expected to show modest growth. The nation’s housing market will continue its slow growth in 2018, at only 2.3 percent. Improvement is expected in 2019, with the report predicting 6.1 percent growth.
Other highlights from the report include:
- The Federal Reserve, which hiked interest rates as recently as December 13, will continue to raise rates in 2018 and 2019. Inflation is expected to remain in check.
- Tennessee is projected to see more job growth in both 2018 and 2019, with 1.4 percent and 1.2 percent, respectively. Job growth will slow because of the low unemployment rate and a shrinking pool of available workers.
- The state’s unemployment rate will average 3.1 percent in 2018 and 2019, well below the rate of unemployment for the nation of 3.9 percent and 3.8 percent.
- Job gains in the state’s manufacturing sector are expected to weaken but remain in the black.
The report also looks at the effects of prescription opioid use on county-level labor markets in Tennessee. Evidence shows a causal effect of prescription opioid use on the labor market: higher per capita opioid prescription rates lead to higher county unemployment rates, lower rates of labor force participation and diminished employment-to-population ratios.
Together, the findings indicate that prescription opioids are driving people out of the labor market. This special analysis is intended to draw attention to the opioid crisis by pointing out impacts that go beyond the health status of individuals.
“The economic forecast should help inform public sector analysts framing the budget outlook as well as private sector businesses who are making business plans for 2018 and 2019,” Murray said.
Since 1975, the Boyd Center for Business and Economic Research has provided Tennessee’s governor with an annual economic report that includes an in-depth analysis of state and national economic development trends and forecasts.
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