Economic Conditions Outlook

December 2025

Welcome to the December 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:

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	Worker Shortage Update

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Economic Survey Results by Industry

Based on the response to the Quarter 4 (October 2025) survey, the evaluation of the level of general business activity has “worsened” and company outlooks have remained “the same” from the previous quarter. (In the last quarter, the evaluation of the level of general business activity and company outlooks had mostly “improved.”)

The Quarter 4 current indicator responses show “increases” in prices paid for raw materials, prices received for finished goods, wages and benefits, number of employees, and capital expenditures. Production, volume of new orders, volume of shipments, and finished goods inventories show “decreases.” “No changes” are reported for capacity utilization, growth rate of orders, unfilled orders, delivery time, and average employee workweek. (In the last quarter, responses showed mostly increases in production, capacity utilization, volume of new orders, growth rate of orders, unfilled orders, volume of shipments, prices paid for raw materials, prices received for finished goods, wages and benefits, the number of employees, and capital expenditures. “No changes” were mostly reported for the average employee workweek. Delivery time was evenly split between “increase” and “no change.” Finished goods inventories was evenly split between “decrease” and “no change.”)

The six-month outlook in Quarter 4 anticipates “increases” in production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, finished goods inventories, prices paid for raw materials, prices received for finished goods, wages and benefits, number of employees, average employee workweek, and capital expenditures. “No changes” are expected for unfilled orders and delivery time. (The six-month outlook in the last quarter expected mostly “increases” in production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, prices paid for raw materials, prices received for finished goods, wages and benefits, the number of employees, and capital expenditures. “No changes” were mostly expected for unfilled orders, finished goods inventories, and average employee workweek. Delivery time was evenly split between “increase” and “no change.”)

Note: There were no retail responses for the Quarter 4 (October 2025) survey. The analysis below is from Quarter 3 (July 2025).

Knoxville area retailers indicated in the Quarter 3 (July 2025) survey that their evaluation of the level of general business activity and company outlooks are evenly split between “Improved” and “worsened.” (In the last quarter, retailers responded that their evaluation of the level of general business activity had “worsened” from the previous quarter and company outlooks had stayed “the same.”)

The Quarter 3 current indicator responses show “increases” in wages and benefits and input prices. “No changes” are reported in internet sales and inventories. All other indicators are evenly split between “increase” and “no change.” (In the last quarter, retail responses showed “increases” in net sales revenue, input prices, selling prices, capital expenditures, and inventories. The numbers of both full-time and part-time employees had “decreased.” “No changes” were reported for internet sales, average employee workweek, and wages and benefits.)

The six-month retail outlook in Quarter 3 projects “no changes” in internet sales, the numbers of full-time and part-time employees, and average employee workweek. Net sales revenue is evenly split between “increase” and “decrease.” Selling prices, capital expenditures, and inventories are evenly split between “increase” and “no change.” “Increases” are expected in wages and benefits and input prices. (The six-month outlook in the last quarter anticipated “increases” in net sales revenue, input prices, selling prices, and capital expenditures. “No changes” were expected in internet sales, the numbers of full-time and part-time employees, average employee workweek, and wages and benefits. Inventories were expected to “decrease.”)

Knoxville area service sector businesses report in the Quarter 4 (October 2025) survey that their evaluation of the level of general business activity and company outlooks are “the same” from the last quarter. (This sentiment is unchanged from the last quarter.)

The Quarter 4 current indicator responses show “no changes” in revenue, the number of part-time employees, average employee workweek, wages and benefits, input prices, and selling prices. The number of full-time employees and capital expenditures are evenly split between “increase” and “no change.” (In the last quarter, responses showed mostly “increases” in input prices and capital expenditures. The number of full-time employees, wages and benefits, and selling prices were evenly split between “increase” and “no change.” Revenue, the number of part-time employees, and average employee workweek were mostly reported as unchanged.)

The six-month outlook in Quarter 4 projects “no changes” in the number of part-time employees, average employee workweek, input prices, and selling prices. Capital expenditures are expected to “increase.” Future revenue, number of full-time employees, and wages and benefits are evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “increases” in revenue, wages and benefits, input prices, and capital expenditures. “No changes” were mostly expected in the numbers of full-time and part-time employees, and average employee workweek. Selling prices were evenly split between “increase” and “no change.”)

Labor Market Information

Data note – due to the federal government shutdown, October 2025 data has been canceled.

The Knoxville MSA’s unemployment rate in November was 3.4% (up from 3.2% in September and up from 3.2% in November 2024.) Knox County’s unemployment rate in November was 3.2% (up from 3.1% in September and up from 3.0% in November 2024.) Tennessee’s unemployment rate was 3.7% in November (up from 3.5% in September and up from 3.5% in last November.) The U.S. unemployment rate was 4.3% in November (unchanged from September and up from 4.0% in last November.)

Knox County’s labor force slightly decreased 0.1% from 263,395 in September to 263,191 in November. The Knoxville MSA’s labor force slightly increased 0.1% from 468,286 in September to 468,840 in November. Tennessee’s labor force slightly decreased from 3,523,808 in September to 3,523,576 in November. The national labor force slightly increased 0.1% from 171,217,000 in September to 171,467,000 in November.

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

Job Market

For the month of November, there were 7,812 unique active job postings in the Knoxville MSA (down 20.5% from October and down 21.2% from last November.) There were 4,822 unique active job postings in Knox County (down 21.7% from October and down 6.9% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in November 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 December report shows a net gain of 41,000 jobs in private-sector employment (up from the 32,000 net jobs loss in November). Industry sectors showing positive job growth in December include Education and Health Services (+39,000), Leisure and Hospitality (+24,000), Trade/Transportation/Utilities (+11,000), Financial Activities (+6,000), Other Services (+5,000), Construction (+1,000), and Natural Resources and Mining (+1,000). The industry sectors that showed job losses in December were Professional and Business Services (-29,000), Information (-12,000), and Manufacturing (-5,000).

By establishment size, mid-sized businesses (with 50-249 employees) gained 29,000 jobs, mid-sized businesses (with 250-499 employees) gained 5,000 jobs, “Other Small” businesses (with 20-49 employees) gained 5,000 jobs, “Very Small” businesses (with 1-19 employees) gained 4,000 jobs, and large businesses (with 500+ employees) gained 2,000 jobs.

(Source: ADP)

Intuit QuickBooks Small Business Index

Each month, Intuit QuickBooks, the accounting software provider for small and medium-sized businesses, releases the Small Business Index Report, which analyzes employment and revenue trends for small businesses in the U.S. with one to nine employees across twelve industry sectors.

In December, there were 12,923,600 people employed by U.S. small businesses with one to nine employees, up 5,500 from November. Jobs increased in eight of the twelve industry sectors tracked by the Index including Professional and Business Services (+3,600), Finance and Real Estate (+2,100), Manufacturing (+1,600), Agriculture/Natural Resources/Mining (+1,200), Wholesale Trade (+900), Construction (+700), Education and Health Services (+300), and Utilities (+300). The industry sectors in which jobs decreased were Leisure and Hospitality (-3,800), Retail Trade (-800), Transportation and Warehousing (-400), and Information (-100).

Below is the 13-month total employment trend for U.S. small businesses with one to nine employees –

You can access the full report here.

(Source: Intuit QuickBooks)

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 7.1 million jobs to fill and only 5.1 million hires in November, leaving 2.0 million jobs unfilled.

In November, the largest increases in U.S. job openings were in retail trade (+121,000), construction (+90,000), professional and business services (+34,000), and private educational services (+1,000).

The largest decreases in job openings were in accommodation and food services (-148,000), transportation/warehousing/utilities (-108,000), health care and social assistance (-66,000), wholesale trade (-63,000), information (-30,000), other services (-17,000), arts/entertainment/recreation (-13,000), manufacturing (-11,000), 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.

Consumer Price Index (CPI – Inflation Rates)

Data note: due to the federal government shutdown, October data has been canceled.

The national inflation rate from November 2024 to November 2025 is 2.7%. This is down from 3.0% in the September 2024 to September 2025 period. Last year, the national inflation rate was 2.7% from November 2023 to November 2024.

The November CPI report marks the 41^st 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, natural gas prices are up 9.1%, auto repair services are up 6.9%, electricity costs are up 6.9%, eating out prices are up 3.7%, used car prices are up 3.6%, housing prices are up 3.0%, rent is up 3.0%, groceries are up 1.9%, gasoline prices are up 0.9% new vehicle prices are up 0.6%, and apparel is up 0.2%. From a year ago, airline fares are down 5.4%.

The Federal Reserve decided to lower the target range of the federal funds rate by a quarter percentage point to 3 ½ to 3 ¾ percent at its Federal Open Market Committee (FOMC) policy-setting meeting December 9-10. The Fed stated that “economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated.” The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. 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 2.4% for the November 2024 to November 2025 period. This is down from the 3.0% rate in the September 2024 to September 2025 period. Last year, the rate was 2.8% from November 2023 to November 2024.

(Source: U.S. Bureau of Labor Statistics; Consumer Price Index; Not Seasonally Adjusted)

2026 Economic Outlook for Tennessee

The University of Tennessee Boyd Center for Business and Economic Research recently released its annual “Economic Report to the Governor 2026.” The report notes that “the Trump administration has introduced a series of tariffs and trade deals over the last year, which have disrupted trade flows and affected overall economic growth in both the state and the nation.” Businesses and households front-loaded their purchases of foreign goods to get ahead of tariff-driven price increases.

Tennessee’s real GDP (inflation-adjusted gross domestic product, which measures the value of all goods and services domestically produced) grew 1.7% in 2025, compared to 2.7% in 2024 and 3.2% in 2023. The state’s real GDP is expected to grow by 2.0% in 2026, slightly faster than last year, but still slow.

The state’s labor market is cooling with economic uncertainty causing some businesses to put large investments and hiring on hold. Some businesses are also turning to automation and innovation through robotics and artificial intelligence (AI) to reduce the need for hiring. Tennessee’s job growth in 2026 will be slightly faster than 2025 (0.7%), but only at 0.9% (or 31,400 added workers.)

The state’s unemployment rate is expected to average 3.6% for 2025 as a whole and then increase to 3.8% in 2026 and 3.9% in 2027. You can access the full report here.

Knoxville’s Affordability for Middle-Class Families is Better Than Most Peer Metros, Yet Almost 29% of Knoxville’s Middle-Class Families Can’t Afford to Live Here

Brookings recently released an affordability analysis of 160 U.S. metro areas showing that at least 20% of middle-class earners struggle to afford basic necessities such as food, housing, and childcare in their respective metros as of 2023, even after adjusting for local income ranges and price variations. Brookings used cost-of-living estimates from the Economic Policy Institute and demographic data from the U.S. Census Bureau to examine the affordability of middle-class households in 160 metro areas.

Brookings defines the “middle-class” as the middle 60% of income earners, while adjusting for geographic variation and regional price parity. The economic assumption is that this middle segment of earners should be able to afford to live a comfortable life, to varying degrees.

“Affordability” is when a household’s income is equal to or greater than the total cost of living. Nationally, the share of struggling middle-class households differs by race: 27% white, 39% black, 41% Asian, 46% Native American, and 50% Hispanic.

The percent of middle-class families that can afford the basic necessities in the Knoxville MSA is 71.3% and by racial breakdown – 73.8% white, 50.7% black, and 45.2% Hispanic. This means that 28.7% of middle-class families can’t afford to live in the Knoxville area.

The precent of middle-class families that can afford the basic necessities in Knoxville’s peer metros are: 72.5% in Nashville, 68.1% in Huntsville (AL), 67.4% in Memphis, 66.0% in Greenville (SC), 63.0% in Chattanooga, 61.0% in Raleigh, and 58.1% in Asheville. (Lexington, KY and Durham, NC were not among the 160 metros analyzed in this report.) You can read more here.

Housing Market

November home sales in East Tennessee decreased 3.6% from October at a seasonally adjusted annual rate (SAAR) of 18,382, an increase of 2.6% over 2024.

November home sales in Knox County decreased 5.1% month over month, down 9.4% from 2024, a seasonally adjusted annual rate (SAAR) of 6,687.

The median home sales price across the East Tennessee region was $365,000 in November, down 2.6% from 2024. Knox County’s median home sale price rose to $392,500, down 4.5% from 2024.

Half of the homes sold across the East Tennessee region went under contract in 35 days or less, up from 21 days last year.

Active inventory in the East Tennessee region was up 16.2% from the previous year.

Months of inventory for East Tennessee, or the number of months it would take to exhaust active listings at the current sales rate, increased to 5.2 months.

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

Data note – due to the federal government shutdown, November 2025 data is delayed.

The total advance monthly retail sales estimate for October 2025 was $745.244 billion (up 5.1% from September and up 2.1% from last October.)

The retail sectors that showed sales growth from last October were Non-store Retailers (+6.0%), Health and Personal Care Stores (+5.6%), Clothing Stores (+3.7%), Electronics and Appliance Stores (+3.5%), Food Services and Drinking Places (+2.7%), Sporting Goods/Books/Hobby/Music Stores (+2.4%), General Merchandise Stores (+2.3%), Food and Beverage Stores (+2.0%), Gasoline Stations (+0.9%), and Miscellaneous Stores (+0.3%).

Retail sectors that showed a decline in sales from last October were Building Materials (-5.6%), Furniture and Home Furnishings Stores (-0.3%), and Motor Vehicles and Parts Sales (-0.1%).

(Source: U.S. Census Bureau; Advance Monthly Retail Trade Reports; Not Adjusted)

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $136.081 million in state sales taxes in November (up 0.5% from October and up 0.6% from last November) and Knox County collected $86.876 million in November (up 0.6% from October and down 0.6% from last November.) The state of Tennessee collected $1.287 billion in state sales taxes in November (up 3.2% from October and up 4.1% from last November.)

The Knoxville MSA collected $51.330 million in local sales taxes in November (up 3.0% from October and up 3.7% from last November) and Knox County collected $30.977 million in November (up 1.6% from October and up 2.4% from last November.)

(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.

January 5, 2026 – Orano Federal Services and American Centrifuge Operating, two uranium enrichment companies with an Oak Ridge presence, each received $900 million from the U.S. Department of Energy (DOE) to help strengthen domestic enrichment services over the next decade. Orano announced plans for a multibillion-dollar uranium enrichment center in Oak Ridge. The company will use the new DOE money to expand domestic low enrichment uranium (LEU) capacity, which is essential for fueling the nation’s 94 commercial reactors. American Centrifuge Operating is a subsidiary of Centrus Energy Corporation and will use its new $900 million funding to create domestic HALEU (a specialized fuel required for next-generation reactors) enrichment capacity. You can read more here.

Knox County Business Licenses

New business licenses issued in November 2025 by Knox County are down 24.2% from October and are up 19.8% from November 2024.

A total of 200 new business licenses were issued in November 2025 compared to 264 in October and 167 in November 2024. The top industry sectors for which business licenses were issued in November 2025 were services, retail, construction, and non-classified establishments.

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

(Source: Knox County Clerk)

McGhee Tyson Airport (TYS) Passenger and Freight Trends

The Metropolitan Knoxville Airport Authority recorded 289,461 passengers in November (down 19.2% from October’s passenger traffic of 358,247 and down 0.3% from November 2024.)

The total freight recorded in November at TYS was 3,825,621 pounds (down 28.1% from October and down 23.4% from last November.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in November was 2,378,836 (down 0.7% from the November 2024 daily passenger average of 2,396,185 and up 4.5% from the pre-COVID November 2019 average of 2,275,320.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA), “After a single month of traffic growth in October, momentum in the US weakened again in November. Domestic RPK (revenue-passenger-kilometers) declined by 1.8% YoY, with November marking the first month in which airline operations were affected by FAA emergency measures linked to the prolonged government shutdown. Capacity edged slightly higher, and utilization dropped, with the load factor falling to 79.6%, the lowest among the major domestic markets.” You can read more here.

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