KNOXVILLE, Tenn. (WATE) – One year after the COVID-19 vaccine arrived in Tennessee, a new economic report says its availability, along with a third round of federal stimulus checks, strengthened consumer confidence which, in turn, led to a strong economic recovery in the state.
The 2022 Economic Report to the Governor of the State of Tennessee was released Thursday by the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville. It is the 46th in a series of annual reports that examine the long-term economic outlook for Tennessee as well as the results of the 2020 census. It is compiled by request from state leaders to help keep lawmakers on the same economic page when it comes to planning and budgeting efforts. Short-term, or business cycle-sensitive forecasts, and longer-term or trend forecasts are provided in the report.
“Tennessee real GDP has fully recovered to pre-pandemic levels already and we are projecting very strong growth of 5.6 percent for the 2021 year as a whole, and then a continuation of strong growth of 4.2 percent the following year in 2022 as the labor market continues to recover and supply chain issues are hopefully resolved in the near term,” said said Larry Kessler, research associate professor at the Boyd Center and project director for the economic report.
Consumer spending in the first half of the year was so strong that the supply chain side of the market was unable to keep pace with the demand. The report notes that employment in the state has been slower to recover but is expected to recover by the first half of 2022.
“These are largely temporary issues but in the interim we have seen a pretty dramatic surge in the prices on goods and services and that may have prevented the economy from growing even faster in 2021,” Kessler said during a Dec. 16 press conference.
In Tennessee, there are 55,000 fewer workers on payroll than were there before the pandemic, something Kessler says is “somewhat” expected. The report takes deeper dive into this issue, attributing workplace safety concerns over COVID spread, potential childcare issues and a “pretty dramatic” acceleration into retirements during the pandemic.
“Our expectations are that employment in the state will fully recover to prepandemic levels by the second quarter of 2022, of next year,” Kessler said. “That’s actually a full quarter ahead of the nation’s projected labor market recovery and our stronger growth outlook is largely due to strong employment growth in the manufacturing sector as well as strong projected employment growth in many of the service sectors as consumers continue to shift back to in-person services and rising wage rates attract more workers.”
Kessler notes that the pandemic has given people the time to reflect on their work/live balance, leading some to leave the labor force entirely. Whether that’s temporary or permanent is still to be determined. Others have switched jobs.
“That latter point is especially important for the leisure and hospitality sector, as well as retail trade where a lot of people have left that sector to find other work because of relatively low pay, many of those jobs have a lot of in-person contact and a lot of those workers are being asked to enforce COVID safety protocols which is probably an unappealing task for many of them,” Kessler said.
The unemployment rate in Tennessee fell dramatically over the last year, spiking at 15.8 percent last spring and the annual average for 2022 is projected to fall to 3.9 percent by the end of year.
“The state economy has proven to be incredibly resilient,” Kessler said.
Tennessee’s population has grown faster than the nation as a whole over the last decade, however population growth has slowed dramatically over the past 30 years in both the state and the nation,” Kessler said, adding that a higher death rate due as the population ages as well as a dramatic slowdown in birth rates over the past 30 years.
A “pretty strong” uptick in the number of people moving into the state is keeping the population growth from slowing even further. Most of those moving in are of working age, which will help with economic growth however Kessler warns the overall slowdown in population growth could slow economic growth in the future.
The report notes that the southern region of the U.S., which includes Tennessee, grew by 10.2 percent and added 11.5 million people, half of the nations increase. West Virginia and Mississippi saw population declines, however.
Middle Tennessee has shown some of the strongest population growth, as Davidson County saw a growth of 14.2 percent, or an influx of bout 82,000 people moving in over the past decade. Similar growth is reported around other large metro areas in the state, including Knox and Hamilton counties.
“In contrast, we have consistently seen slower or negative population growth in the more rural areas across the state. Declining rural populations is not new but does seem to be accelerating.” the report notes.
Read the full 188-page report
“Following a record-breaking year in terms of both job commitments and capital investment, the state economy continues its strong recovery,” said Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. “Tennesseans are resilient and the state is open for business, as evidenced by the unemployment rate falling closer to prepandemic levels. This is good news for our businesses, our recruitment efforts, and the Tennessee economy as a whole.”