Economic Conditions Outlook

January 2025

Welcome to the January 2025 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:

New Overtime Rule	Labor Market
Airport Freight and Passenger Trends	National Employment Report
Consumer Price Index/Inflation Rates	National Retail Sales
Housing Market	Recent Expansion Announcements
Job Market	State and Local Sales Tax
Knox County Business Licenses	UTK Research Foundation Ranking
Knoxville's Brain Drain is Worse than it Appears	Worker Shortage Update

Economic Survey Results by Industry

Based on the response to the Quarter 1 (January 2025) survey, the evaluation of the level of general business activity and company outlooks have mostly “improved” from the previous quarter. (In the last quarter, the evaluation of the level of general business activity had “worsened” and company outlooks were split evenly between “worsened” and “the same.”)

The Quarter 1 current indicator responses show mostly “increases” in the growth rate of orders, prices paid for raw materials, and wages and benefits. “No changes” are mostly reported in unfilled orders, delivery time, finished goods inventories, prices received for finished goods, and average employee workweek. Production, volume of new orders, volume of shipments, and capital expenditures are mostly split between “increased” and “decreased.” The number of employees is mostly split between “increased” and “no change.” Capacity utilization is mostly split between “decreased” and “no change.” (In the last quarter, responses showed “decreases” in production, capacity utilization, volume of new orders, and average employee workweek. Wages and benefits had “increased.” Unfilled orders, delivery time, prices paid for raw materials, prices received for finished goods, and number of employees were evenly split between “decreased” and “no change.” The growth rate of orders, volume of shipments, and capital expenditures were evenly split between “increased” and “decreased.” Finished goods inventories were split between “increased” and “no change.”)

The six-month outlook in Quarter 1 anticipates mostly “increases” in production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, delivery time, prices paid for raw materials, prices received for finished goods, wages and benefits, number of employees, and capital expenditures. “No changes” are expected for unfilled orders, finished goods inventories, and the average employee workweek. (The six-month outlook in the last quarter expected “no changes” in delivery time and prices paid for raw materials. Production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, and average employee workweek were split evenly between “increase” and “decrease.” Unfilled orders, finished goods inventories, prices received for finished goods, number of employees, and capital expenditures were split evenly between “decrease” and “no change.” Wages and benefits were split between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 1 (January 2025) survey that the evaluation of the level of general business activity is mostly “the same” from the last quarter, while their company outlooks have mostly “improved.” (In the last quarter, retailers responded that their evaluation of the level of general business activity and company outlooks were “the same” from the last quarter.)

The Quarter 1 current indicator responses show mostly “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are mostly reported in internet sales, the number of full-time and part-time employees, and the average employee workweek. Capital expenditures and inventories are evenly split between “increase” and “no change.” (In the last quarter, retail responses showed “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” were reported in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories.)

The six-month retail outlook in Quarter 1 projects mostly “increases” in net sales revenue, wages and benefits, input prices, selling prices, and capital expenditures. “No changes” are mostly forecasted for internet sales, the number of part-time employees, and the average employee workweek. The number of full-time employees and inventories are evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” were expected in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories.)

Knoxville area service sector businesses report in the Quarter 1 (January 2025) survey that their evaluation of the level of general business activity has mostly “improved” from the last quarter, while company outlooks continue to be “mixed.” (The evaluation of the level of general business activity had mostly “worsened” and company outlooks were “mixed” in the last quarter.)

The Quarter 1 current indicator responses show mostly “increases” in revenue, wages and benefits, input prices, and capital expenditures. “No changes” are mostly reported for the number of part-time employees, the average employee workweek, and selling prices. The number of full-time employees is “mixed.” (In the last quarter, responses showed mostly “no changes” in the number of full-time and part-time employees, average employee workweek, and wages and benefits. Input prices had mostly “increased.” Capital expenditures were mostly split between “increased” and “no change.” All other indicators were “mixed.”)

The six-month outlook in Quarter 1 projects mostly “increases” in revenue, the number of full-time employees, wages and benefits, input prices, selling prices, and capital expenditures. Mostly “no changes” are expected in the number of part-time employees and the average employee workweek. (The six-month outlook in the last quarter anticipated mostly “increases” in revenue, input prices, and capital expenditures. Mostly “no changes” were expected in the number of part-time employees and average employee workweek. The number of full-time employees, wages and benefits, and selling prices were mostly split between “increase” and “no change.”)

Service sector comments indicate that many service employees are working multiple jobs and asking for more pay due to inflation.

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.

Opportunities and Challenges in 2025 for Local Business

In addition to our regular quarterly survey questions, we asked respondents about what they see as their number one opportunity and number one challenge in the new year.

For opportunities, respondents mentioned improvements in company efficiency through process automation, artificial intelligence (AI), and new software. New customer growth, gaining orders from underperforming facilities, meeting production demand, and local business-friendly policies were also cited as encouraging opportunities.

For challenges, respondents continue to be concerned about inflation, finding qualified and skilled employees, a lack of training for the trades, increased competition, and housing affordability.

Labor Market Information

The Knoxville MSA’s unemployment rate in December was 3.2% (unchanged from November and up from 2.8% in December 2023.) Knox County’s unemployment rate in December was 3.0% (unchanged from November and up from 2.6% in December 2023.) Tennessee’s unemployment rate was 3.5% in December (unchanged from November and up from 3.0% in last December.) The U.S. unemployment rate was 3.8% in December (down from 4.0% in November and up from 3.5% in last December.)

The size of the total labor force slightly decreased from November to December at the local and national levels. The Knoxville MSA’s labor force decreased from 450,121 in November to 449,996 in December. Knox County’s labor force decreased 0.1% from 256,548 in November to 256,244 in December. The national labor force decreased 0.2% from 168,164,000 in November to 167,746,000 in December. Meanwhile, Tennessee’s labor force increased 0.3% from 3,416,098 in November to 3,426,084 in December.

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 December, there were 8,663 unique active job postings in the Knoxville MSA (up 5.3% from November and down 3.1% from last December.) There were 5,488 unique active job postings in Knox County (up 6.0% from November and down 3.1% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in December 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 MSA Ranks #55 on WalletHub’s Top 100 Best Cities for STEM Jobs 2025

WalletHub, the personal financial website, recently released its rankings of the Top 100 Best Cities for STEM (science, technology, engineering, and math) Jobs. The rankings are based on 21 key metrics ranging from per capita job openings for STEM graduates to the median wage growth for STEM jobs.

Not surprisingly, the top five MSAs were Austin, Boston, Seattle, Atlanta, and San Francisco. Knoxville ranked #55. Among Knoxville’s peer MSAs, the rankings were #15 Raleigh, #27 Greenville (SC), #45 Nashville, #88 Chattanooga, and #98 Memphis. (Asheville, Durham, Huntsville, and Lexington were not ranked.) You can read more 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 January report shows a net gain of 183,000 in private-sector employment (up from the 122,000 net jobs gain in December.) Industry sectors showing positive job growth in January include Trade/Transportation/Utilities (+56,000), Leisure and Hospitality (+54,000), Education and Health Services (+20,000), Information (+18,000), Other Services (+15,000), Professional and Business Services (+14,000), Financial Activities (+13,000), Natural Resources and Mining (+4,000), and Construction (+3,000). The only industry sector showing negative job growth in January was Manufacturing, which lost 13,000 jobs.

By establishment size, large businesses (with 500+ employees) gained 69,000 jobs, mid-sized businesses (with 50-249 employees) gained 53,000 jobs, mid-sized businesses (with 250-499 employees) gained 39,000 jobs, “Other Small” businesses (with 20-49 employees) gained 16,000 jobs, and “Very Small” businesses (with 1-19 employees) gained 23,000 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 7.6 million jobs to fill and only 5.5 million hires in December, meaning there are 1.2 job openings for every unemployed person.

In December, the largest increases in U.S. job openings were in arts/entertainment/recreation (+65,000), transportation/warehousing/utilities (+38,000), retail trade (+19,000), and accommodation and food services (+2,000).

The largest decreases in job openings were in professional and business services (-225,000), health care and social assistance (-180,000), financial activities (-166,000), construction (-55,000), information (-13,000), private educational services (-13,000), manufacturing (-11,000), and other services (-6,000). Job openings in wholesale trade were unchanged from last month.

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 December 2023 to December 2024 is 2.9%. This is up from 2.7% in the November 2023 to November 2024 period. Last year, the national inflation rate was 3.4% from December 2022 to December 2023.

The December CPI report marks the thirtieth 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 11.3%, airline fares are up 7.9%, auto repair services are up 6.2%, natural gas prices are up 4.9%, housing prices are up 4.6%, eating out prices are up 3.6%, electricity costs are up 2.8%, groceries are up 1.8%, and apparel is up 1.2%.

From a year ago, gasoline prices are down 3.4%, used car prices are down 3.3%, and new vehicle prices are down 0.4%.

The Federal Reserve decided to keep the federal funds rate at 4 ¼ to 4 ½ percent at its Federal Open Market Committee (FOMC) policy-setting meeting January 29. The Fed stated that recent indicators suggest that economic activity has continued to expand at a solid pace, labor market conditions have remained solid, the unemployment rate has stabilized at a low level in recent months, and inflation remains somewhat elevated. The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. The committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the committee will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Most economists are expecting just two rate cuts in 2025, most likely in June and December. 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 3.0% for the December 2023 to December 2024 period. This is up from 2.8% in the November 2023 to November 2024 period. Last year, the rate was 3.4% from December 2022 to December 2023.

Housing Market

Home sales in East Tennessee increased 3.4% from November to December, rebounding to a seasonally adjusted annual rate (SAAR) of 18,528. Compared to the previous year, home sales were up 14.5% in the East Tennessee region, defying the seasonally expected winter slump. By comparison, home sales in Knox County increased 10.8% from the previous year at a seasonally adjusted annual rate (SAAR) of 6,972.

The median home sales price across the East Tennessee region was $374,000 in December, up 8.41% from a year ago. Knox County’s median home sale price was $391,225, an increase of 7.2% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 30 days or less, up from 21 days the previous month.

Active inventory in the East Tennessee region decreased in December, a typical seasonal pattern, with the total number of active listings up 27% from a year ago.

Months of inventory for East Tennessee, or the number of months it would take to exhaust active listings at the current sales rate, was 2.14 months.

According to the latest market summary report from Apartment List, rent growth in the Knoxville metropolitan statistical area – Anderson, Blount, Campbell, Grainger, Knox, Loudon, Morgan, Roane and Union counties – has continued to slow, with overall rent growth decreasing 0.9% over the 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: 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 December 2024 was $794.912 billion (up 7.9% from November and up 3.0% from last December.)

The retail sectors that showed sales growth from last December were Furniture and Home Furnishings Stores (+12.3%), Non-store Retailers (+9.2%), Motor Vehicles and Parts Sales (+6.1%), Health and Personal Care Stores (+5.2%), General Merchandise Stores (+1.1%), Food Services and Drinking Places (+0.5%), and Clothing Stores (+0.1%).

Retail sectors that showed a decline in sales from last December were Sporting Goods/Books/Hobby/Music Stores (-3.9%), Miscellaneous Stores (-2.3%), Building Materials (-2.0%), Electronics and Appliance Stores (-1.8%), Gasoline Stations (-1.5%), and Food and Beverage Stores (-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 $127.534 million in state sales taxes in December (down 5.7% from November and up 6.2% from last December) and Knox County collected $83.679 million in December (down 4.2% from November and up 5.9% from last December.) The state of Tennessee collected $1.193 billion in state sales taxes in December (down 3.5% from November and up 3.2% from last December.)

The Knoxville MSA collected $47.822 million in local sales taxes in December (down 3.3% from November and up 7.0% from last December) and Knox County collected $29.372 million (down 2.9% from November and up 5.5% from last December.)

(Source: Tennessee Department of Revenue)

Tennessee Ranked 12th Best State to Start a Business in 2025

WalletHub, the personal financial website, compared the 50 states using 25 key indicators of startup success across the three categories of business environment, access to resources, and business costs. Tennessee ranked #12. The top five states were Florida, Georgia, Utah, Texas, and Idaho. Peer states ranked as follows – #10 Kentucky, #13 South Carolina, #15 North Carolina, and #17 Alabama. 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.

January 22, 2025 – Cemex USA, a Houston-based leading supplier of concrete and building materials, announced that the U.S. Department of Energy’s Office of Fossil Energy and Carbon Management will provide funding for a project that will develop a pioneering carbon capture, removal, and conversion test center at its cement plant in Knoxville. The project is one of five selected to share $101 million to begin and continue developing test centers for cement plants and power facilities. You can read more here.

Knox County Business Licenses

New business licenses issued in December 2024 by Knox County are down 46.7% from November and are down 11.0% from December 2023.

A total of 89 new business licenses were issued in December 2024 compared to 167 in November and 100 in December 2023. The top industry sectors for which business licenses were issued in December 2024 were services, non-classified establishments, construction, and retail.

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

(Sources: Knox County Clerk)

Intuit QuickBooks Releases Small Business Index Annual Report 2025

Intuit QuickBooks recently released its Small Business Index annual report for 2025. The report analyzes employment and revenue trends for small businesses with 1 to 9 employees across twelve industry sectors from October 2023 to October 2024. Overall, U.S. small business employment declined by 51,200 jobs (or 0.39%), leaving 12,978,300 people employed by small businesses with 1 to 9 employees. This was the largest year-over-year decline in small business employment since 2015, but data show that there have been some signs of recovery since February 2024. Small manufacturing businesses lost 20,600 jobs, more than any other sector.

Average real revenue declined by $11,850 per small business. This is the third consecutive year that showed a small business revenue decline overall. Only two sectors, wholesale trade and finance and real estate, showed revenue growth from October 2023 to October 2024. However, monthly data between February 2024 to October 2024 showed revenue growth in every industry sector (except for utilities), suggesting that 2024 was generally a better year for small business revenue than 2023.

You can access the full report here.

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Funding

The Small Business Innovation Research (SBIR) program is a federal funding program that awards grants or contracts to small businesses to conduct research and development (R&D). Recipient projects must meet specific R&D needs of the federal government and must have commercialization potential. The program is coordinated by the Small Business Administration (SBA).

The Small Business Technology Transfer (STTR) program is very similar to the SBIR program except that the STTR requires the small business to partner with a research institution which must be awarded a minimum of 30% of the total grant funds.

SBIR/STTR grants are awarded annually to nearly 5,000 startups and small businesses throughout the nation. In 2024, there were 54 SBIR awards in the state of Tennessee (of which 21 or 39% of the awards were in the Knoxville area). There were also eight STTR grant recipients in Tennessee (four of which were in the Knoxville area).

Below is a table showing the five-year history of SBIR/STTR awards in Tennessee and the Knoxville MSA –

The SBIR grant recipients for FY 2023-2024 in the Knoxville area were Analysis and Measurement Services Corp., Cryomagnetics Inc., Daxor Corp. (1), Daxor Corp. (2), Daylyte Inc., Endeavor Composites Inc., Millennitek LLC (1), Millennitek LLC (2), Millennitek LLC (3), MOBIUS PBC (1), MOBIUS PBC (2), Perseus Materials Inc., SkyNano LLC (1), SkyNano LLC (2), Statheros LLC (1), Statheros LLC (2), Statheros LLC (3), Statheros LLC (4), Ultrasonic Technology Solutions LLC, Veracity Nuclear LLC (1), and Veracity Nuclear LLC (2).

The Knoxville area STTR grant recipients for FY 2023-2024 were American Nanotechnologies, Richard Fisher, SkyNano LLC (1), and SkyNano LLC (2).

The Knoxville MSA received a total of 59 SBIR awards over the past five years and ranks fourth among its ten peer MSAs. Huntsville ranks #1 with 394 SBIR awards, followed by Durham-Chapel Hill with 288 and Raleigh-Cary with 176. Below is a chart showing the five-year SBIR award totals for all the peer MSAs.

The Knoxville MSA received a total of 14 STTR awards over the past five years, tied for fourth place with Lexington (KY) among the peer MSAs. Similar to the SBIR award totals, the top three peer MSAs for receiving STTR awards over the past five years are Huntsville (with 99), Durham-Chapel Hill (with 59), and Raleigh-Cary (with 61). Below is a chart showing the five-year STTR award totals for all the peer MSAs.

In addition to the federal SBIR/STTR grants, Launch Tennessee (LaunchTN) has a grant-matching program for SBIR/STTR recipient businesses to further help entrepreneurs advance the commercialization of technology across the state. Requirements for receiving state matching funds are that the business be based in Tennessee for at least the next 24 months and commit to semi-annual reporting to LaunchTN. You can read more here.

(Source: SBIR.gov)

The University of Tennessee’s Tickle College of Engineering Awarded $20 Million U.S. Department of Energy Grant

The University of Tennessee, Knoxville’s Tickle College of Engineering was recently awarded a $20 million grant from the U.S. Department of Energy for a groundbreaking project known as the Integrated Materials Program to Accelerate Chamber Technologies (IMPACT), which aims to revolutionize the design and manufacturing of high-performance materials for fusion energy systems. Other institutions that are involved in the project include Oak Ridge National Laboratory, Stony Brook University, University of Michigan, Northwestern University, Massachusetts Institute of Technology, University of California – Santa Barbara, Idaho National Laboratory, University of Miami, and UCLA. You can read more here.

McGhee Tyson Airport (TYS) Passenger and Freight Trends

The Metropolitan Knoxville Airport Authority recorded 293,579 passengers in December (up 1.1% from November’s passenger traffic of 290,450 and up 24.6% from December 2023.)

The total freight recorded in December at TYS was 4,411,035 pounds (down 11.7% from November and down 37.1% from last December.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in December was 2,496,288 (up 6.6% from the December 2023 daily passenger average of 2,340,714 and up 10.0% from the pre-COVID December 2019 average of 2,270,160.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA) , “US domestic RPK (Revenue Passenger-Kilometer) contracted in October and November 2024 due to operational challenges faced by the largest low-cost carriers. In December, RPK increased by 6.4% YoY, reversing the trend as the country saw exceptional demand for air travel.” You can read more here.

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