Economic Conditions Outlook

August 2024

Welcome to the August 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:

AI's Impact on the Workforce	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 3 (July 2024) survey, the evaluation of the level of general business activity is split evenly between “improved” and “the same” while company outlooks are reported as “improved.” (In the last quarter, the evaluation of the level of general business activity and company outlooks were reported as being “the same.”)

The Quarter 3 current indicator responses show “no changes” for unfilled orders, delivery time, prices received for finished goods, and average employee workweek. Production, capacity utilization, volume of new orders, and growth rate of orders have “increased.” The volume of shipments, finished goods inventories, prices paid for raw materials, wages and benefits, number of employees, and capital expenditures are all split evenly between “increase” and “no change.” (In the last quarter, responses showed “increases” in production, capacity utilization, volume of new orders, volume of shipments, average employee workweek, and capital expenditures. “No changes” were 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 were evenly split between “increase” and “no change.”)

The six-month outlook in Quarter 3 anticipates “increases” in production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, finished goods inventories, wages and benefits, and number of employees. “No changes” are expected for delivery time, prices received for finished goods, and average employee workweek. Unfilled orders, prices paid for raw materials, and capital expenditures are split evenly between “increase” and “no change.” (The six-month outlook in the last quarter expected “increases” in production, capacity utilization, volume of new orders, volume of shipments, and number of employees. “No changes” were forecasted for unfilled orders, delivery time, wages and benefits, average employee workweek, and capital expenditures. Prices paid for raw materials were evenly split between “increase” and “decrease.” The growth rate of orders, finished goods inventories, and prices received for finished goods were all split between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 3 (July 2024) survey that their evaluation of the level of general business activity and company outlooks have mostly “worsened.” (In the last quarter, retailers expressed the same sentiment.)

The Quarter 3 current indicator responses show “no changes” in the number of part-time employees and average employee workweek. Input prices have mostly “increased.” The number of full-time employees, wages and benefits, capital expenditures, and inventories are mostly split between “increase” and “no change.” Net sales revenue, internet sales, and selling prices are mostly split between “decrease” and “no change.” (In the last quarter, responses showed mostly “no changes” in internet sales, the number of both full-time and part-time employees, the average employee workweek, and capital expenditures. There were mostly “increases” in wages and benefits and input prices. Inventories were split between “increase” and “no change.” Net sales revenue was “mixed.”)

The six-month retail outlook in Quarter 3 projects mostly “no changes” in the number of full-time and part-time employees as well as the average employee workweek. Input prices as well as wages and benefits are expected to “increase.” Net sales revenue and selling prices are mostly split between “increase” and “decrease.” Internet sales and capital expenditures are mostly split between “decrease” and “no change.” (The six-month outlook in the last quarter anticipated mostly “increases” in wages and benefits and input prices. Mostly “no changes” were expected in internet sales and the number of both full-time and part-time employees. Net sales revenue was forecasted to mostly “decrease.” The average employee workweek and inventories were mostly split between “increase” and “no change.” Capital expenditures were mostly split between “decrease” and “no change.” Selling prices were “mixed.”)

Knoxville area service sector businesses report in the Quarter 3 (July 2024) survey that their evaluation of the level of general business activity and company outlooks are mostly “the same.” (The evaluation of the level of general business activity was mostly “the same” and company outlooks were almost split evenly between “improved” and “the same” in the last quarter.)

The Quarter 3 current indicator responses show mostly “no changes” in the number of part-time employees, average employee workweek, wages and benefits, and selling prices. The number of full-time employees, input prices, and capital expenditures have mostly “increased.” Revenue is mostly split between “decrease” and “no change.” (In the last quarter, responses showed mostly “increases” in revenue and input prices. The number of full-time employees, wages and benefits, and capital expenditures were almost split evenly between “increase” and “no change.” The number of part-time employees and selling prices showed mostly “no changes.”)

The six-month outlook in Quarter 3 projects mostly “increases” in revenue, the number of full-time employees, input prices, and capital expenditures. Mostly “no changes” are expected in the number of part-time employees, average employee workweek, and wages and benefits. Selling prices are split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “increases” in revenue, input prices, and capital expenditures. “No changes” were mostly expected in the number of both full-time and part-time employees and the average employee workweek. Selling prices were almost evenly split between “increase” and “no change.”)

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 July was 3.2% (down from 3.4% in June and down from 3.5% in July 2023.) Knox County’s unemployment rate in July was 2.9% (down from 3.2% in June and down from 3.1% in July 2023.) Tennessee’s unemployment rate was 3.6% in July (down from 3.7% in June and down from 3.7% in last July.) The U.S. unemployment rate was 4.5% in July (up from 4.3% in June and up from 3.8% in last July.)

The size of the total labor force slightly increased from June to July at the local, state, and national levels. The Knoxville MSA’s labor force increased 0.6% from 450,605 in June to 453,425 in July. Knox County’s labor force increased 0.6% from 256,987 in June to 258,647 in July. Tennessee’s labor force increased 0.4% from 3,426,425 in June to 3,438,566 in July. The national labor force increased 0.4% from 169,007,000 in June to 169,723,000 in July.

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 July, there were 9,817 unique active job postings in the Knoxville MSA (up 6.0% from June and down 9.3% from last July.) There were 6,276 unique active job postings in Knox County (up 1.5% from June and down 13.9% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in July 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 August report shows a net gain of 99,000 in private-sector employment (down from the 122,000 net jobs gain in July.) Industry sectors showing positive job growth in August include Education and Health Services (+29,000), Construction (+27,000), Other Services (+20,000), Financial Activities (+18,000), Trade/Transportation/Utilities (+14,000), Leisure and Hospitality (+11,000), and Natural Resources and Mining (+8,000). The industry sectors showing negative job growth in August are Professional and Business Services (-16,000), Manufacturing (-8,000), and Information (-4,000).

By establishment size, large businesses (with 500+ employees) gained 42,000 jobs, mid-sized businesses (with 250-499 employees) gained 36,000 jobs, mid-sized businesses (with 50-249 employees) gained 32,000 jobs, and “Very Small” businesses (with 1-19 employees) gained 3,000 jobs. The job gains were offset by “Other Small” businesses (with 20-49 employees), which lost 12,000 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 7.7 million jobs to fill and only 5.5 million hires in June, meaning there are 1.4 job openings for every unemployed person.

In July, the largest increases in U.S. job openings were in professional and business services (+178,000), other services (+51,000), manufacturing (+31,000), arts/entertainment/recreation (+18,000), information (+1,000), and financial activities (+1,000).

The largest decreases in job openings were in private educational services (-196,000), health care and social assistance (-187,000), transportation/warehousing/utilities (-88,000), wholesale trade (-55,000), construction (-51,000), accommodation and food services (-21,000), and retail trade (-14,000).

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.

The University of Tennessee, Knoxville Ranks #58 Nationally for Articles Published in Scientific Journals

The 2024 Leiden Rankings, produced by the Centre for Science and Technology Studies at Leiden University in the Netherlands, were recently released and ranked universities globally by the number of articles published in scientific journals from 2019-2022 using the bibliographic database Web of Science as the primary source for the journal data.

The University of Tennessee, Knoxville (UTK) ranked #58 in the U.S., dropping one spot from last year’s rankings. The rankings for UTK’s aspirational peers were – #16 Penn State; #27 Purdue; #28 Illinois; #37 Michigan State; #41 North Carolina State; and #54 Georgia. The rankings for UTK’s comparable peers were – #50 Virginia Tech; #55 Colorado; #61 Kentucky; #63 Iowa State; #71 Missouri; #78 Oklahoma; #83 South Carolina; #93 Nebraska; #96 Auburn; and #104 Clemson. You can read more here and here.

National Science Foundation Awards $18 Million Grant to the University of Tennessee, Knoxville for Pandemic Research

The National Science Foundation (NSF) has awarded a seven-year $18 million grant to the University of Tennessee, Knoxville (UTK) to research how, when and why an infection in a population will spread, or cause an epidemic or pandemic, rather than dying out. Nina Fefferman, a Professor of Ecology and Evolutionary Biology at UTK, secured the funding to launch the NSF Center for Analysis and Prediction of Pandemic Expansion (NSF APPEX) in the fall. Fefferman also serves as Director of the National Institute for Modeling Biological Systems and Associate Director of the UT One Health Initiative at UTK. This latest NSF grant builds on Phase I funding previously awarded to Fefferman in 2022 for the NSF Predicting Emergence in Multidisciplinary Pandemic Tipping-points (NSF PREEMPT) that brought together researchers from 17 different academic disciplines to collaborate on a common problem and see if they could accelerate scientific progress. Collaborating institutions on the project include Arizona State University, Bowdoin College, Duke University, EDGE Foundation, Georgia State University, Johns Hopkins University, Massachusetts Institute of Technology, Mount Holyoke College, Tufts University, University of Florida, University of Wyoming, Virginia Commonwealth University, Washington State University, and Yale University. You can read more here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from July 2023 to July 2024 is 2.9%. This is down from 3.0% in the June 2023 to June 2024 period. Last year, the national inflation rate was 3.2% from July 2022 to July 2023.

The July CPI report marks the twenty-fifth 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 18.6%, housing prices are up 5.1%, electricity costs are up 4.9%, auto repair services are up 4.6%, eating out prices are up 4.1%, natural gas prices are up 1.5%, groceries are up 1.1%, and apparel is up 0.2%.

From a year ago, used car prices are down 10.9%, airline fares are down 2.8%, gasoline prices are down 2.2%, and new vehicle prices are down 1.0%.

Optimism is building for the Fed to make its first interest rate cut at its Federal Open Market Committee (FOMC) policy-setting meeting September 17-18. The assessment of the nation’s job-market health will help determine how big of an interest rate cut will be made. Most analysts expect a quarter-point rate reduction but improving job market data may help make the case for a larger rate reduction. 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 2.7% for the July 2023 to July 2024 period. This is unchanged from the June 2023 to June 2024 period. Last year, the rate was 3.2% from July 2022 to July 2023.

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

Housing Market

Home sales in East Tennessee increased 5.2% from June to July to a seasonally adjusted annual rate (SAAR) of 18,148. By comparison, home sales in Knox County increased 3.9% from the previous month to a seasonally adjusted annual rate (SAAR) of 6,915. Compared to the previous year, home sales were up 9.3% in the East Tennessee region.

The median home sales price across the East Tennessee region was $374,950 in July, up 7.13% from a year ago. Knox County’s median home sale price was $390,000, an increase of 4.03% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 15 days or less, up from 13 days the previous month.

Active inventory in the East Tennessee region increased in July, with the total number of active listings up 43.2% 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 3.58 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

The total advance monthly retail sales estimate for July 2024 was $724.070 billion (up 2.9% from June and up 3.0% from last July.)

The retail sectors that showed sales growth from last July were Non-store Retailers (+8.7%), Electronics and Appliance Stores (+7.2%), Health and Personal Care Stores (+5.2%), Building Materials (+4.2%), Furniture and Home Furnishings Stores (+4.0%), General Merchandise Stores (+2.6%), Food Services and Drinking Places (+2.1%), Motor Vehicles and Parts Sales (+1.9%), Food and Beverage Stores (+1.6%), and Clothing Stores (+0.8%).

Retail sectors that showed a decline in sales from last July were Sporting Goods/Books/Hobby/Music Stores (-5.2%), Miscellaneous Stores (-3.5%), and Gasoline Stations (-0.3%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $130.393 million in state sales taxes in July (down 2.0% from June and up 2.2% from last July) and Knox County collected $82.905 million in July (down 3.3% from June and down 0.2% from last July.) The state of Tennessee collected $1.238 billion in state sales taxes in July (up 0.8% from June and up 0.9% from last July.)

The Knoxville MSA collected $46.577 million in local sales taxes in July (down 0.7% from June and up 2.4% from last July) and Knox County collected $27.980 million (down 2.1% from June and up 0.3% from last July.)

(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.

July 22, 2024 – Howmet Aerospace Inc., a Pittsburgh-based leading global provider of advanced engineered solutions for the aerospace and transportation industries, announced a $27.9 million expansion of its Morristown plant that will create 50 new jobs. The company currently employs 900 people in Hamblen County making engine and turbine components, fastening systems, forged wheels, and more. You can read more here.

Knox County Business Licenses

New business licenses issued in July 2024 by Knox County are down 16.3% from June and are down 13.5% from July 2023.

A total of 211 new business licenses were issued in July 2024 compared to 252 in June and 244 in July 2023. The top industry sectors for which business licenses were issued in July 2024 were services, retail, construction, non-classified establishments, and Finance/Insurance/Real Estate.

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 325,957 passengers in July (statistically unchanged from June’s passenger traffic of 326,027 and up 17.9% from July 2023.)

The total freight recorded in July at TYS was 6,161,362 pounds (up 4.2% from June and up 5.5% from last July.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in July was 2,710,613 (up 5.7% from the July 2023 daily passenger average of 2,565,530 and up 4.6% from the pre-COVID July 2019 average of 2,592,486.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA) , “The industry’s air passenger traffic, measured in Revenue Passenger-Kilometer (RPK), grew healthily in July 2024 while maintaining the trend of a smooth transition towards lower conventional figures. Volumes continued to soar above previous months and years. Yearly growth stood at 9.4% while 0.7% in Month on Month (MoM) terms, based on seasonally adjusted data.” 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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