UT Report: Economy shows signs of strength in 2014

UT Report: Economy shows signs of strength in 2014

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"We've got several years to go before housing activity gets to where it was to before the recession started," said Dr. Matt Murray, the author of the study. "We've got several years to go before housing activity gets to where it was to before the recession started," said Dr. Matt Murray, the author of the study.
The recovering housing market is helping the overall economy. The recovering housing market is helping the overall economy.
"Real estate and home building and construction - most of those companies, they need trucks, so, that's how our business has increased as well," said Lance Cunningham, "Real estate and home building and construction - most of those companies, they need trucks, so, that's how our business has increased as well," said Lance Cunningham,

By MIKE KRAFCIK
6 News Reporter

KNOXVILLE (WATE) - It might be a surprise to learn the economy is actually looking up, despite cuts in government spending and a payroll tax increase. 

Despite the sequester, which has slowed consumer spending, the economy is poised for strong growth in both 2014 and 2015, a University of Tennessee report says. 

The trends show real optimism on the state and national level. 

Driving the growth are improved job creation, surging vehicle sales and a recovering housing market, according to the spring 2013 Tennessee Business and Economic Outlook.

Nick Rose recently bought his first home in North Knox County with his wife. With an improving economy, Rose said it was the right time to pull the trigger.

"The market just happened to be in a very fortunate position, where the interest rates were very opportune. We managed to find a place close to where we wanted to," said Rose.

The housing market in Knox County has seen about 12% increase in the last year.

"Right now, we're seeing multiple offers on homes, which we haven't seen in a long time," said Sharon Laing, a Knoxville-based realtor.

The numbers of new home building permits being issued are also increasing.

In the first four months of 2013, there have been 293 residential building permits in Knox County, an increase of 34% from the same period in 2012, according to the Home Builders Association of Greater Knoxville.

Tim Neal, the president of the association, says number of permits issued in 2013 are on pace to exceed 1,000.

It's an encouraging increase, he says, but it falls of pre-recession numbers. For instance, 2,790 permits were issued in 2007.  

"We've got several years to go before housing activity gets to where it was to before the recession started," said Matt Murray, the associate director of the UT Center for Business and Economic Research and the report's author.

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. Automobile sales are tied strongly to local real estate trends.

"Real estate and home building and construction - most of those companies, they need trucks, so, that's how our business has increased as well," said Lance Cunningham, the owner of Lance Cunningham Ford. 

The study predicts unemployment will drop for the third year in a row in 2014.

The national unemployment rate dropped to 7.7% in first quarter of the year and is expected to average 7.6% this year, compared to 7.8% in 2012. It is predicted to fall to 7.2% in 2014.

Tennessee's economy improved in recent quarters, notably in its unemployment rate.

The state unemployment rate is projected to average 7.8% this year, compared to 8% last year.

It is expected to fall to 7.5% 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 12th position across all states for first quarter economic performance.

This index is a composite that includes personal income growth, employment growth and population growth.

"With good growth in employment, continued growth in manufacturing employed, and continued growth in personal income for the state, that's likely to outperform the national economy," said Murray

The study predicts by 2016, auto sales will likely be restored to the levels that prevailed in 2006. 

The Tennessee Business and Economic outlook isn't always exactly on track.

In 2007 and 2008, the report projected positive economic growth in the same year the nation was hit with a recession.

Murray said the forecast is not too accurate when there are sudden changes in the economy, but tends to be on point when there is positive growth.

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