Economic Conditions Outlook

May 2024

Welcome to the May 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
Best Places to Live Ranking	National Employment Report
Best Places to Start a Career Ranking	National Retail Sales
Consumer Price Index/Inflation Rates	R&D as Share of State GDP
Housing Market	Recent Expansion Announcements
Job Market	State and Local Sales Tax
Knox County Business Licenses	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.

Labor Market Information

The Knoxville MSA’s unemployment rate in April was 2.5% (down from 2.7% in March and up from 2.3% in April 2023.) Knox County’s unemployment rate in April was 2.3% (down from 2.5% in March and up from 2.1% in April 2023.) Tennessee’s unemployment rate was 2.7% in April (down from 3.0% in March and up from 2.6% in last April.) The U.S. unemployment rate was 3.5% in April (down from 3.9% in March and up from 3.1% in last April.)

The size of the total labor force slightly decreased from March to April at the local, state, and national levels. The Knoxville MSA’s labor force decreased 0.4% from 451,048 in March to 449,383 in April. Knox County’s labor force decreased 0.3% from 257,412 in March to 256,566 in April. Tennessee’s labor force decreased 0.4% from 3,429,009 in March to 3,414,545 in April. The national labor force decreased 0.3% from 167,960,000 in March to 167,484,000 in April.

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 April, there were 9,634 unique active job postings in the Knoxville MSA (up 5.7% from March and up 0.6% from last April.) There were 6,248 unique active job postings in Knox County (up 3.7% from March and down 4.6% from this time last year.)

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

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

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

(Source: Lightcast – formerly Emsi Burning Glass)

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 May report shows a net gain of 152,000 in private-sector employment (down from the 192,000 net jobs gain in April.) Industry sectors showing positive job growth in May include Trade/Transportation/Utilities (+55,000), Education and Health Services (+46,000), Construction (+32,000), Financial Activities (+28,000), Other Services (+21,000), and Leisure and Hospitality (+12,000). The industry sectors showing negative job growth in May are Manufacturing (-20,000), Natural Resources and Mining (-9,000), Information (-7,000), and Professional and Business Services (-6,000).

By establishment size, large businesses (with 500+ employees) gained 98,000 jobs, mid-sized businesses (with 50-249 employees) gained 49,000 jobs, mid-sized businesses (with 250-499 employees) gained 30,000 jobs, and “Very Small” businesses (with 1-19 employees) gained 26,000 jobs. The job gains were offset by “Other Small” businesses (with 20-49 employees), which lost 36,000 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 8.1 million jobs to fill and only 5.6 million hires in April, meaning there are 1.4 job openings for every unemployed person.

In April, the largest increases in U.S. job openings were in professional and business services (+122,000), private educational services (+50,000), retail trade (+21,000), and transportation/warehousing/utilities (+2,000).

The largest decreases in job openings were in health care and social assistance (-204,000), accommodation and food services (-97,000), information (-43,000), manufacturing (-30,000), arts/entertainment/recreation (-12,000), other services (-10,000), construction (-8,000), wholesale trade (-8,000), and financial activities (-2,000).

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.

Knoxville Ranks #10 for Best Places to Start a Career

WalletHub, the personal finance website, recently ranked 182 U.S. cities by comparing their relative market strength and overall livability using 26 key metrics that range from the availability of entry-level jobs to the average monthly starting salary to housing affordability. Knoxville ranked #10 overall. Some of the metric rankings for Knoxville were #6 for entry-level jobs per 100k working-age population; #24 for annual job growth rate adjusted for population growth; #25 for average monthly starting salary adjusted for cost of living; #39 for unemployment rate; and #53 for housing affordability. The rest of the top ten cities were #1 Atlanta; #2 Orlando; #3 Salt Lake City; #4 Tampa; #5 Pittsburgh; #6 Portland, ME; #7 Charleston, SC; #8 Austin; and #9 Miami. The rankings for Knoxville’s peer cities were #23 Raleigh; #26 Durham; #32 Huntsville; #35 Chattanooga; #57 Nashville; #136 Lexington; and #139 Memphis. Asheville, NC and Greenville, SC were not listed. You can read more here.

Knoxville Ranks #29 for Best Places to Live

U.S. News & World Report recently released its 2024-2025 Best Places to Live rankings. The publication selected 150 major cities (metro areas) that have good value, are desirable places to live, have a strong job market, and a high quality of life. Knoxville ranked #29. Peer cities (metros) rankings were #4 Greenville, SC; #6 Raleigh-Durham; #7 Huntsville; #15 Lexington; #17 Asheville; #27 Chattanooga; #50 Nashville; and #122 Memphis. You can read more here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from April 2023 to April 2024 is 3.4%. This is down from 3.5% in the March 2023 to March 2024 period. Last year, the national inflation rate was 4.9% from April 2022 to April 2023.

The April CPI report marks the twenty-second 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 22.6%, auto repair services are up 7.6%, housing prices are up 5.5%, electricity costs are up 5.1%, eating out prices are up 4.1%, apparel is up 1.3%, gasoline prices are up 1.2%, and groceries are up 1.1%.

From a year ago, used car prices are down 6.9%, airline fares are down 5.8%, natural gas prices are down 1.9%, and new vehicle prices are down 0.4%.

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 3.2% for the April 2023 to April 2024 period. This is down from 3.7% in the March 2023 to March 2024 period. Last year, the rate was 5.5% from April 2022 to April 2023.

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

Housing Market

Home sales in East Tennessee increased 14% from March to April to a seasonally adjusted annual rate (SAAR) of 21,290. By comparison, home sales in Knox County accelerated 2.8% from the previous month to a seasonally adjusted annual rate (SAAR) of 7,878. Compared to the previous year, home sales were up 17.2% in the East Tennessee region.

The median home sales price across the East Tennessee region was $354,450 in April, up 9.9% from a year ago. Knox County’s median home sale price was $374,900, an increase of 3.56% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 16 days or less, down from 19 days the previous month.

Active inventory in the East Tennessee region increased in March, with the total number of active listings up 35.2% from a year ago.

Months of inventory, or the number of months it would take to exhaust active listings at the current sales rate, was 2.94 months.

Although housing affordability and availability continues to be a problem across East Tennessee, there are signs that the available rental units are beginning to match the demand. The occupancy rate has decreased to 95.7% from its peak of 98.9% in Q4 2021. This is expected to continue to moderate or decrease as more units come online, especially with 1,564 units becoming available over the next 4 quarters. Although we have seen a slight decline in apartments currently under construction, we are still seeing historic levels of building. As we continue to see the occupancy rate decrease and the supply increase, we also see the effective rent year over year change decrease. This percent change is down 21.4% from the peak during Q3 2022. Though the average rent continues to be $1,448, which is a 55% increase from the pre-pandemic average effective rent.

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: 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 April 2024 was $701.649 billion (down 1.5% from March and up 3.1% from last April.)

The retail sectors that showed sales growth from last April were Non-store Retailers (+9.7%), Food Services and Drinking Places (+5.1%), Gasoline Stations (+4.8%), Motor Vehicles and Parts Sales (+3.1%), Building Materials (+3.0%), Health and Personal Care Stores (+2.8%), Miscellaneous Stores (+2.7%), Electronics and Appliance Stores (+1.0%), and Sporting Goods/Books/Hobby/Music Stores (+0.6%).

Retail sectors that showed a decline in sales from last April were Furniture and Home Furnishings Stores (-6.0%), Clothing Stores (-1.9%), Food and Beverage Stores (-1.5%), and General Merchandise Stores (-1.5%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $130.989 million in state sales taxes in April (up 10.5% from March and up 1.0% from last April) and Knox County collected $85.279 million in April (up 9.5% from March and down 0.2% from last April.) The state of Tennessee collected $1.225 billion in state sales taxes in April (up 11.8% from March and up 0.6% from last April.)

The Knoxville MSA collected $46.868 million in local sales taxes in April (up 9.9% from March and up 1.8% from last April) and Knox County collected $28.734 million (up 8.2% from March and up 0.7% from last April.)

(Source: Tennessee Department of Revenue)

Tennessee Ranks #35 for Research and Development as Share of State GDP

According to new experimental statistics recently released by the U.S. Bureau of Economic Analysis (BEA), research and development (R&D) activity accounted for 2.3% of the U.S. economy in 2021. The new experimental statistics provide information on the contribution of R&D to GDP (known as R&D value added), compensation, and employment for the nation, all 50 states, and the District of Columbia from 2017 to 2021. In the state statistics, R&D was attributed to the state where the R&D was performed. The BEA calculated R&D as a share of each state’s gross domestic product (GDP) and then ranked them. Tennessee ranked #35 with R&D accounting for 0.9% of state GDP. The top ten states by R&D share of GDP were #1 New Mexico (6.3%); #2 Washington (5.0%); #3 Massachusetts (4.9%); #4 California (4.8%); #5 District of Columbia (4.0%); #6 Michigan (3.8%); #7 New Hampshire (3.5%); #8 Delaware (3.4%); #9 New Jersey (2.9%); and tied at #10 were Connecticut (2.7%) and Maryland (2.7%). States with Knoxville’s peer communities ranked as follows – #12 North Carolina (2.5%); #27 Alabama (1.4%); #32 South Carolina (1.1%); and #36 Kentucky (0.8%). You can read more here.

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.

May 3, 2024 – Beehive Industries, an additive manufacturer that makes jet engines and parts using 3D printing, expanded to a new 60,000-square-foot facility at 10505 Murdock Drive in West Knox County. The $4 million expansion will add 100 new jobs in manufacturing, engineering, and machining. In late 2022, Knox County Commission approved a $39,500 grant for Beehive to train workers for jobs with a paying average of $74,000 per year. You can read more here.

May 8, 2024 – Holocene, a Knoxville-based start-up that specializes in carbon capture, hosted a ribbon cutting ceremony at its Papermill Drive facility to spotlight its inaugural device that can extract 10 tons of carbon per year directly from the air. The pilot device sucks in air, captures the carbon dioxide in liquid form, solidifies it and then turns it back into gas that can be pumped underground. In addition to offsetting carbon emissions from power plants and the transportation sector, this technology can be used to remove carbon left over from the past century and a half. By 2026 or 2027, the company aims to remove anywhere from 2,100 to as much as 5,000 tons of carbon dioxide per year, with the ultimate goal of removing millions of tons by 2030 or 2031. Holocene was part of the 2022 cohort of the “Innovation Crossroads” program operated by Oak Ridge National Laboratory (ORNL). From a year ago, the company has grown from three employees to 15. You can read more here and here.

May 21, 2024 – PPG Industries, a Pittsburgh-based manufacturer and distributor of paints, coatings, and specialty materials, announced a new plant location in Loudon. This will be PPG’s first new U.S. manufacturing facility in 15 years. The new 250,000-square-foot facility will have dedicated space for warehousing and paint and coatings production. The company will invest $225 million, create 129 new jobs, and produce more than 11 million gallons of paint and coatings annually. Construction is expected to begin in August with completion in 2026. You can read more here and here.

Knox County Business Licenses

New business licenses issued in April 2024 by Knox County are up 5.1% from March and are up 12.5% from April 2023.

A total of 287 new business licenses were issued in April 2024 compared to 273 in March and 255 in April 2023. The top industry sectors for which business licenses were issued in April 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 238,421 passengers in April (down 2.4% from March’s passenger traffic of 244,261 and up 11.4% from April 2023.)

The total freight recorded in April at TYS was 6,004,519 pounds (down 0.1% from March and down 3.0% from last April.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in April was 2,460,711 (up 5.7% from the April 2023 daily passenger average of 2,328,296 and up 5.3% from the pre-COVID April 2019 average of 2,337,050.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA), “In April 2024, industry-wide air passenger traffic surged by 11.0% YoY, measured in RPK. Despite a slight slowdown from the previous two months, the annual growth rate remains in the double digits, with an impressive growth streak which began 36 months ago. Notably, the industry continues to surpass pre-Covid levels.” 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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