Nonfarm employment in Tennessee will be up 1.7 percent this year and next year. The state’s manufacturing sector will continue to enjoy job gains over the short-term forecast horizon. The unemployment rate should continue to drift down over the year, though there may be some monthly exceptions along the way. Expect the state rate to average 7.8 percent in 2012 and 7.4 percent in 2013. Nominal Tennessee personal income is projected to advance 4.2 percent this year and 4.8 percent in 2013. Taxable sales have shown significant improvement dating back to the first quarter of 2010. Sales growth is expected to be up 7.9 percent in 2012, building on an exceptionally strong quarter. Growth will cool off to 4.7 percent in 2013. The preparation of this report was financed in part by the following agencies: the Tennessee Department of Finance and Administration, the Tennessee Department of Economic and Community Development, the Tennessee Department of Revenue, the Tennessee Department of Labor and Workforce Development, and the Appalachian Regional Commission.