Economic Conditions Outlook

April 2024

Welcome to the April 2024 issue of ECO, financed by First Horizon Bank, the Knoxville Chamber’s monthly economic outlook analysis.

Each month, we provide a varied list of economic indicators with subsequent insight into how the data and information may impact the region. A major component of this work is our quarterly survey of businesses in the manufacturing, retail, and service sectors, which we leverage to gauge current economic conditions and gain insights into the economic outlook for the next six months. We also include traditional labor market, housing, sales tax, and airport information as well as impromptu information as it becomes available.

We hope that ECO – financed by First Horizon Bank will help our regional business community make more informed decisions as they run their businesses.

Survey Note: Beginning January 2024 and going forward, the Economic Conditions Outlook (ECO) Survey is being conducted on a quarterly basis instead of monthly.

See Previous Issues

Jump to Analysis:

Airport Freight and Passenger Trends	Labor Market
Consumer Price Index/Inflation Rates	National Employment Report
Creating Successful Internships	National Retail Sales
Housing Market	Population Growth Rates
Job Market	Recent Expansion Announcements
Knox County Business Licenses	State and Local Sales Tax
Knoxville Ranks #24 for AI Job Hotspots	Worker Shortage Update

Economic Survey Results by Industry

Based on the response to the Quarter 2 (April 2024) survey, the evaluation of the level of general business activity and company outlooks are reported as being “the same.” (In the last quarter, the evaluation of the level of general business activity had “worsened” and company outlooks were split between “worsened” and “the same.”)

The Quarter 2 current indicator responses show “increases” in production, capacity utilization, volume of new orders, volume of shipments, average employee workweek, and capital expenditures. “No changes” are reported for the growth rate of orders, unfilled orders, delivery time, finished goods inventories, wages and benefits, and number of employees. The prices paid for raw materials and the prices received for finished goods are evenly split between “increase” and “no change.” (In the last quarter, responses showed “increases” in production, capacity utilization, wages and benefits, and the number of employees. Prices paid for raw materials were split evenly between “increase” and “decrease.” The volume of new orders, growth rate of orders, unfilled orders, volume of shipments, delivery time, finished goods inventories, prices received for finished goods, average employee workweek, and capital expenditures were all evenly split between “increase” and “no change.”)

The six-month outlook in Quarter 2 anticipates “increases” in production, capacity utilization, volume of new orders, volume of shipments, and number of employees. “No changes” are forecasted for unfilled orders, delivery time, wages and benefits, average employee workweek, and capital expenditures. Prices paid for raw materials are evenly split between “increase” and “decrease.” The growth rate of orders, finished goods inventories, and prices received for finished goods are all split between “increase” and “no change.” (The six-month outlook in the last quarter expected “increases” in production, capacity utilization, volume of shipments, and the number of employees. All the other indicators were evenly split between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 2 (April 2024) survey that their evaluation of the level of general business activity and company outlooks have mostly “worsened.” (In the last quarter, the evaluation of the level of general business activity was mostly “the same” and company outlooks were “mixed.”)

The Quarter 2 current indicator responses show mostly “no changes” in internet sales, the number of both full-time and part-time employees, the average employee workweek, and capital expenditures. There are mostly “increases” in wages and benefits and input prices. Inventories are split between “increase” and “no change.” Net sales revenue is “mixed.” (In the last quarter, there were mostly “increases” in net sales revenue, wages and benefits, input prices, and inventories. There were mostly “no changes” in internet sales, the number of full-time and part-time employees, and the average employee workweek. Selling prices and capital expenditures were reported as mostly “decreased.”)

The six-month retail outlook in Quarter 2 projects mostly “increases” in wages and benefits and input prices. Mostly “no changes” are expected in internet sales and the number of both full-time and part-time employees. Net sales revenue is forecasted to mostly “decrease.” The average employee workweek and inventories are mostly split between “increase” and “no change.” Capital expenditures are mostly split between “decrease” and “no change.” Selling prices are “mixed.” (The six-month outlook in the last quarter anticipated mostly “decreases” in net sales revenue, internet sales, the number of full-time and part-time employees, the average employee workweek, and selling prices. Input prices and inventories were expected to mostly “increase.” “No changes” were expected in wages and benefits. Capital expenditures were “mixed.”)

Retail comments indicate that the higher cost of living prices and unavailability of affordable housing have been challenging for workers.

Knoxville area service sector businesses report in the Quarter 2 (April 2024) survey that their evaluation of the level of general business activity is mostly “the same.” Company outlooks are almost split evenly between “improved” and “the same.” (The evaluation of the level of general business activity and company outlooks were mostly reported as “the same” in the last quarter.)

The Quarter 2 current indicator responses show mostly “increases” in revenue and input prices. The number of full-time employees, wages and benefits, and capital expenditures are almost split evenly between “increase” and “no change.” The number of part-time employees and selling prices show mostly “no changes.” (In the last quarter, responses showed mostly “no changes” in revenue, the number of full-time and part-time employees, the average employee workweek, wages and benefits, and capital expenditures. Input prices and selling prices had mostly “increased.”)

The six-month outlook in Quarter 2 projects mostly “increases” in revenue, input prices, and capital expenditures. “No changes” are mostly expected in the number of both full-time and part-time employees and the average employee workweek. Selling prices are almost evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “no changes” in the number of part-time employees and the average employee workweek. Revenue, the number of full-time employees, wages and benefits, and input prices were almost evenly split between “increase” and “no change.” Selling prices and capital expenditures were expected to mostly “increase.”)

Service sector comments indicate that some selling prices have not caught up with the higher costs of materials and labor. There appears to be some uncertainty with supplier pricing due mostly to supplier consolidation and private equity acquisitions. Finding qualified employees continues to be a challenge.

Note: We are still growing the number of participating companies, so response totals in some areas may be fairly small. If you are interested in being a participant in our quarterly surveys, please register HERE.

Does Your Business Hire Interns?

In addition to our regular quarterly survey questions, we asked respondents if they hired interns and if not, why. The majority of respondents (56%) said they do hire interns. Some of the forty-four percent of respondents that don’t hire interns said that they did not have enough staff to accommodate interns, while others indicated that they would like to hire them but don’t have any experience in hiring them or don’t know how to go about initiating a program for hiring interns.

Internships can be of great benefit to host employers and students. Interns bring to organizations innovation and insight, assistance for temporary or seasonal projects, and the potential to be valued future employees. In fact, over 51 percent of eligible interns remain or return to host employers’ workforce according to the National Association of Colleges and Employers (NACE). You can find tips on how to create a successful internship and ways to connect with local universities and community colleges here.

Labor Market Information

The Knoxville MSA’s unemployment rate in March was 2.7% (up from 2.6% in February and down from 2.8% in March 2023.) Knox County’s unemployment rate in March was 2.5% (up from 2.4% in February and down from 2.6% in March 2023.) Tennessee’s unemployment rate was 3.0% in March (up from 2.8% in February and down from 3.1% in last March.) The U.S. unemployment rate was 3.9% in March (down from 4.2% in February and up from 3.6% in last March.)

The size of the total labor force slightly increased from February to March at the local, state, and national levels. The Knoxville MSA’s labor force increased 1.4% from 444,661 in February to 451,048 in March. Knox County’s labor force increased 1.6% from 253,407 in February to 257,412 in March. Tennessee’s labor force increased 1.0% from 3,394,112 in February to 3,429,009 in March. The national labor force increased 0.4% from 167,285,000 in February to 167,960,000 in March.

Below is the 13-month unemployment rates trending comparison for the four largest MSA’s in Tennessee –

(Source: U.S. Bureau of Labor Statistics; Tennessee Dept. of Labor & Workforce Development)

Job Market

For the month of March, there were 9,117 unique active job postings in the Knoxville MSA (down 3.7% from February and down 34.2% from last March.) There were 6,027 unique active job postings in Knox County (down 4.5% from February and down 37.2% from this time last year.)

The Top 10 industries (by number of job postings) in the Knoxville MSA in March were –

The Top 10 occupations (by number of job postings) in the Knoxville MSA in March were –

You can view the 13-month job postings trend for Knox County and the Knoxville MSA below.

(Source: Lightcast – formerly Emsi Burning Glass)

Knoxville Ranks #24 on List of Artificial Intelligence (AI) Job Hotspots

Axios ranked 79 metro areas by the number of new AI jobs posted per 100k population. The MSAs had to have at least 500k population and at least 25 AI job postings. The estimates come from the University of Maryland’s job listings platform UMD-LinkUp and research collaborator Outrigger Group, a consultancy/executive firm. Silicon Valley still has the largest concentration of AI workers, but as AI continues to rapidly emerge around the rest of the nation, more surprising metros are becoming AI hotspots.

The Knoxville MSA ranked #24 in the nation with 13.6 new AI job postings per 100k population. The top ten MSAs by per capita AI job postings were #1 San Jose, CA (142.4); #2 Seattle, WA (74.4); #3 San Francisco, CA (49.3); #4 Austin, TX (39.9); #5 Washington, DC (35.3); #6 Virginia Beach, VA (33.8); #7 Fayetteville, AR (24.7); #8 Richmond, VA (21.2); #9 Palm Bay, FL (21.0); and #10 Raleigh, NC (19.7). Knoxville’s other peer MSAs ranked – #13 Durham-Chapel Hill, NC (18.5); #28 Nashville (11.1); #52 Memphis (6.2); and #77 Greenville, SC (2.8). Asheville, Chattanooga, Huntsville, and Lexington did not meet the criteria to be included in the rankings. You can read the Axios article published on April 16, 2024 here.

ADP National Employment Report®

Each month, ADP, a large-scale payroll and human resources company, in collaboration with the Stanford Digital Economy Lab, releases the National Employment Report®, which provides a high-level look at month-over-month private-sector employment changes across the country.

The April report shows a net gain of 192,000 in private-sector employment (up from the 184,000 net jobs gain in March.) Industry sectors showing positive job growth in April include Leisure and Hospitality (+56,000), Construction (+35,000), Trade/Transportation/Utilities (+26,000), Education and Health Services (+26,000), Professional and Business Services (+22,000), Financial Activities (+16,000), Manufacturing (+9,000), Natural Resources and Mining (+3,000), and Other Services (+3,000). The only industry sector showing negative job growth in April is Information (-4,000).

By establishment size, large businesses (with 500+ employees) gained 98,000 jobs, mid-sized businesses (with 50-249 employees) gained 46,000 jobs, “Very Small” businesses (with 1-19 employees) gained 39,000 jobs, and mid-sized businesses (with 250-499 employees) gained 16,000 jobs. The job gains were offset by “Other Small” businesses (with 20-49 employees), which lost 1,000 jobs.

(Source: ADP)

Worker Shortage Update

The labor shortages are persisting longer than many economists expected. There continues to be high job demand and slower workforce growth resulting in fierce competition for talent and many open jobs going unfilled. According to the latest data from the U.S. Bureau of Labor Statistics (BLS), the nation had 8.5 million jobs to fill and only 5.5 million hires in March, meaning there are 1.5 job openings for every unemployed person.

In March, the largest increases in U.S. job openings were in information (+43,000), wholesale trade (+38,000), accommodation and food services (+34,000), private educational services (+22,000), and transportation/warehousing/utilities (+19,000).

The largest decreases in job openings were in construction (-182,000), financial activities (-144,000), retail trade (-64,000), professional and business services (-41,000), health care and social assistance (-30,000), arts/entertainment/recreation (-24,000), manufacturing (-17,000), and other services (-16,000).

It will take time for this mismatch between labor demand and supply to align. In the meantime, wages will continue to rise as businesses compete to attract talent. You can read the latest job openings summary from BLS here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from March 2023 to March 2024 is 3.5%. This is up from 3.2% in the February 2023 to February 2024 period. Last year, the national inflation rate was 5.0% from March 2022 to March 2023.

The March CPI report marks the twenty-first straight month that year-over-year inflation is below the June 2022 CPI peak high of 9.1%. High prices for some items will likely linger longer.

From a year ago, auto insurance is up 22.2%, auto repair services are up 8.2%, housing prices are up 5.7%, electricity costs are up 5.0%, eating out prices are up 4.2%, gasoline prices are up 1.3%, groceries are up 1.2%, and apparel is up 0.4%.

From a year ago, airline fares are down 7.1%, natural gas prices are down 3.2%, used car prices are down 2.2%, and new vehicle prices are down 0.1%.

On May 1, the Federal Reserve indicated that economic activity has been expanding at a solid pace. Job gains remain strong and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. There has been a lack of further progress toward the Fed’s 2 percent inflation objective in recent months. The Fed is committed to achieving maximum employment and inflation at the rate of 2 percent over the longer run. The Fed will keep the federal funds rate at the current 5 ¼ to 5 ½ percent and continue to monitor all indicators until it has gained confidence that inflation is moving toward the desired 2 percent before considering any future rate cuts. You can read more here.

Knoxville falls into the South Size Class B/C (population of 2.5 million or less) grouping. The current inflation rate for this region is 3.7% for the March 2023 to March 2024 period. This is up from 3.5% in the February 2023 to February 2024 period. Last year, the rate was 5.2% from March 2022 to March 2023.

(Source: U.S. Bureau of Labor Statistics; Consumer Price Index, not seasonally adjusted)

Knoxville MSA and Knox County Have the Fourth Fastest Population Growth Rates Compared to Their Respective Peer Communities

The U.S. Census Bureau recently released its July 1, 2023 population estimates for counties and metropolitan statistical areas (MSAs). The estimates show that the Knoxville MSA’s population grew 4.5% (or by 40,368) from July 1, 2020 to July 1, 2023. The current population is now 946,264. The Knoxville MSA includes Anderson, Blount, Campbell, Grainger, Knox, Loudon, Morgan, Roane, and Union Counties. The peer MSAs ranked by population growth rates during this period are #1 Huntsville, AL (6.6%), #2 Raleigh, NC (6.5%), #3 Greenville, SC (4.8%), #4 Knoxville, TN (4.5%), #5 Durham-Chapel Hill, NC (4.1%), #6 Nashville, TN (4.0%), #7 Chattanooga, TN (3.0%), #8 Asheville, NC (2.4%), #9 Lexington, KY (0.5%), and Memphis, TN (which decreased by 0.8%).

Knox County’s current population estimate has passed the half million mark for the first time, standing at 500,669. From July 2020 to July 2023, Knox County grew by 4.2% (adding 20,153 more people). The peer counties ranked by population growth rates during this period are #1 Greenville Co./Greenville, SC (5.8%), #2 Madison Co./Huntsville, AL (5.7%), #3 Wake Co./Raleigh, NC (5.3%), #4 Knox Co./Knoxville, TN (4.2%), #5 Durham Co./Durham, NC (3.5%), #6 Hamilton Co./Chattanooga, TN (3.4%), #7 Buncombe Co./Asheville, NC (2.3%), #8 Davidson Co./Nashville, TN (decreased by 0.5%), #9 Fayette Co./Lexington, KY (decreased by 0.8%), and #10 Shelby Co./Memphis, TN (decreased by 2.1%). It is worth noting that the Nashville MSA grew by a healthy 4% as noted in the MSA rankings, but it appears that more people are starting to move out of Davidson County (the central county). You can access the U.S. Census Bureau’s 2023 population estimates data here.

The below tables show the peer MSAs and counties population growth changes from July 2020 to July 2023 –

Housing Market

Home sales in East Tennessee declined 0.2% from February to March to a seasonally adjusted annual rate (SAAR) of 18,674. By comparison, home sales in Knox County accelerated 1.4% from the previous month to a seasonally adjusted annual rate (SAAR) of 7,662. Compared to the previous year, home sales were down 5.6% in the East Tennessee region.

The median home sales price across the East Tennessee region was $350,497 in March, up 8.5% from a year ago. Knox County’s median home sale price was $380,000, an increase of 7.95% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 19 days or less, down from 28 days the previous month.

Active inventory in the East Tennessee region increased in March, with the total number of active listings up 15% from a year ago.

Apartment rent growth continued to moderate in March, with rents across the Knoxville metro area increasing by just 1.3% from the previous year.

You can subscribe to the East Tennessee REALTORS® monthly Market Pulse Newsletter here.

East Tennessee REALTORS® reports monthly home sales patterns using a seasonally adjusted annualized rate (SAAR), an adjusted rate that takes into account typical seasonal fluctuations in data and is expressed as an annual total. Comparing month-over-month housing market data using this method provides a more accurate depiction of home sales.

(Sources: National Association of REALTORS®; East Tennessee REALTORS®)

(Sources: National Association of REALTORS®; East Tennessee REALTORS®)

(Sources: U.S. Housing & Urban Development – SOCDS – State of the Cities Data Systems; U.S. Census Bureau – Building Permits Survey)

National Retail Sales

The total advance monthly retail sales estimate for March 2024 was $712.659 billion (up 10.8% from February and up 1.3% from last March.)

The retail sectors that showed sales growth from last March were General Merchandise Stores (+7.9%), Electronics and Appliance Stores (+7.5%), Food and Beverage Stores (+4.5%), Non-store Retailers (+4.1%), Clothing Stores (+2.7%), Miscellaneous Stores (+1.8%), Food Services and Drinking Places (+1.7%), and Health and Personal Care Stores (+0.4%).

Retail sectors that showed a decline in sales from last March were Sporting Goods/Books/Hobby/Music Stores (-12.3%), Furniture and Home Furnishings Stores (-10.0%), Building Materials (-8.2%), Gasoline Stations (-2.7%), and Motor Vehicles and Parts Sales (-0.2%).

(Sources: U.S. Census Bureau; Advance Monthly Retail Trade Reports, not adjusted)

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $118.584 million in state sales taxes in March (up 11.9% from February and up 7.6% from last March) and Knox County collected $77.882 million in March (up 14.0% from February and up 7.4% from last March.) The state of Tennessee collected $1.096 billion in state sales taxes in March (up 6.8% from February and up 6.3% from last March.)

The Knoxville MSA collected $42.638 million in local sales taxes in March (up 5.1% from February and up 8.9% from last March) and Knox County collected $26.563 million (up 7.9% from February and up 8.3% from last March.)

(Source: Tennessee Department of Revenue)

Recent Business Expansions and New Business Announcements in the Knoxville Region

In this section of ECO, we share announcements of businesses that are expanding their existing operations or locating a new facility in the Knoxville region. If you would like to share your business expansion announcement with us, please send your info to [email protected].

New and existing industries continue to invest in the Knoxville region.

April 2, 2024 – VOITAS Group, a German automotive engineering and electric vehicle (EV) charging equipment manufacturer, announced they will establish their North American headquarters in Riverview Tower in downtown Knoxville. With operations in Germany and Poland, the company serves the automotive industry with engineering expertise in electronics, wiring systems, software development, and consulting. VOITAS Group will create at least 30 new engineering jobs. You can read more here and here.

April 10, 2024 – Protomet Corporation, a Loudon-based engineering and manufacturing company, announced a $25 million expansion that will create 250 new jobs as it acquires and retrofits the former Albahealth building in Rockwood (Roane County). This will be the company’s fourth engineering and manufacturing facility in East Tennessee, bringing total employment to over 500. Protomet serves the automotive, boating, and homeland security industries. You can read more here and here.

April 22, 2024 – Greenheck Group, a Wisconsin-based industrial ventilation equipment manufacturer, announced the selection of Knoxville for its fourth corporate campus at Midway Business Park. The company’s ventilation equipment goes into large commercial spaces like schools, malls, office buildings, and industrial plants. The $300 million corporate campus will create 440 new jobs and occupy the whole 336-acre business park located off I-40 in East Knox County. The campus will include manufacturing and warehousing facilities as well as a main office and dedicated space for training and research and development. You can read more here and here.

Knox County Business Licenses

New business licenses issued in March 2024 by Knox County are up 19.2% from February and are down 3.5% from March 2023.

A total of 273 new business licenses were issued in March 2024 compared to 229 in February and 283 in March 2023. The top industry sectors for which business licenses were issued in March 2024 were services, retail, construction, and non-classified establishments.

Below is a chart showing the 13-month trend of business licenses issued by Knox County.

(Sources: Knox County Clerk)

McGhee Tyson Airport (TYS) Passenger and Freight Trends

The Metropolitan Knoxville Airport Authority recorded 244,261 passengers in March (up 24.3% from February’s passenger traffic of 196,519 and up 9.4% from March 2023.)

The total freight recorded in March at TYS was 6,007,875 pounds (down 0.4% from February and down 9.7% from last March.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in March was 2,489,280 (up 6.7% from the March 2023 daily passenger average of 2,333,418 and up 5.4% from the pre-COVID March 2019 average of 2,360,683.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA), “Industry-wide air passenger traffic, measured in revenue passenger-kilometers (RPK), increased by 13.8% year-on-year (YoY) in March 2024. This month saw a lower annual growth rate in comparison to February 2024, a natural development considering that the industry is now seeing record levels of passenger traffic while rising above the historical record of 2019. In the US, passenger traffic increased by 2.6% over the year while the seasonally adjusted figures remained broadly in line with the positive trend the country has seen over the last three years.” You can read more here.

(Sources: Metropolitan Knoxville Airport Authority; U.S. Transportation Security Administration; International Air Transport Association)

Notice: This survey is copyrighted by its owner, and permission to use such copyrighted materials must be obtained from the owner and cannot be obtained from the Knoxville Chamber. Reproduction or distribution of this survey, in whole or in part, is expressly prohibited without the written permission of the content owner.

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