Economic Conditions Outlook

December 2024

Welcome to the December 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:

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 4 (October 2024) survey, the evaluation of the level of general business activity has “worsened” since the last quarter and company outlooks are split evenly between “worsened” and “the same.” (In the last quarter, the evaluation of the level of general business activity was split evenly between “improved” and “the same” while company outlooks were reported as “improved.”)

The Quarter 4 current indicator responses show “decreases” in production, capacity utilization, volume of new orders, and average employee workweek. Wages and benefits have “increased.” Unfilled orders, delivery time, prices paid for raw materials, prices received for finished goods, and number of employees are evenly split between “decreased” and “no change.” The growth rate of orders, volume of shipments, and capital expenditures are evenly split between “increased” and “decreased.” Finished goods inventories are split between “increased” and “no change.” (In the last quarter, responses showed “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 had “increased.” The volume of shipments, finished goods inventories, prices paid for raw materials, wages and benefits, number of employees, and capital expenditures were all split evenly between “increase” and “no change.”)

The six-month outlook in Quarter 4 anticipates “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 are split evenly between “increase” and “decrease.” Unfilled orders, finished goods inventories, prices received for finished goods, number of employees, and capital expenditures are split evenly between “decrease” and “no change.” Wages and benefits are split between “increase” and “no change.”

(The six-month outlook in the last quarter expected “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” were expected for delivery time, prices received for finished goods, and average employee workweek. Unfilled orders, prices paid for raw materials, and capital expenditures were split evenly between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 4 (October 2024) survey that their evaluation of the level of general business activity and company outlooks are “the same” from the last quarter. (In the last quarter, retailers responded that their evaluation of the level of general business activity and company outlooks had mostly “worsened.”)

The Quarter 4 current indicator responses show “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are reported in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories. (In the last quarter, retail responses showed “no changes” in the number of part-time employees and average employee workweek. Input prices had mostly “increased.” The number of full-time employees, wages and benefits, capital expenditures, and inventories were mostly split between “increase” and “no change.” Net sales revenue, internet sales, and selling prices were mostly split between “decrease” and “no change.”)

The six-month retail outlook in Quarter 4 projects “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are expected in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories. (The six-month outlook in the last quarter anticipated 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 were expected to “increase.” Net sales revenue and selling prices were mostly split between “increase” and “decrease.” Internet sales and capital expenditures were mostly split between “decrease” and “no change.”)

Knoxville area service sector businesses report in the Quarter 4 (October 2024) survey that their evaluation of the level of general business activity has mostly “worsened” since the last quarter and company outlooks are “mixed.” (The evaluation of the level of general business activity and company outlooks were mostly “the same” in the last quarter.)

The Quarter 4 current indicator responses show mostly “no changes” in the number of full-time and part-time employees, average employee workweek, and wages and benefits. Input prices have mostly “increased.” Capital expenditures are mostly split between “increased” and “no change.” All other indicators are “mixed.” (In the last quarter, responses showed 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 had mostly “increased.” Revenue was mostly split between “decrease” and “no change.”)

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

Labor Market Information

The Knoxville MSA’s unemployment rate in November was 3.2% (unchanged from October and up from 3.1% in November 2023.) Knox County’s unemployment rate in November was 3.0% (up from 2.9% in October and up from 2.9% in November 2023.) Tennessee’s unemployment rate was 3.5% in November (unchanged from October and up from 3.4% in last November.) The U.S. unemployment rate was 4.0% in November (up from 3.9% in October and up from 3.5% in last November.)

The size of the total labor force slightly increased from October to November at the MSA and state levels. The Knoxville MSA’s labor force increased 0.1% from 449,641 in October to 450,121 in November. Tennessee’s labor force increased 0.2% from 3,408,844 in October to 3,416,098 in November. Knox County’s labor force was 256,548 in November, statistically unchanged from October. Meanwhile, the national labor force decreased 0.2% from 168,569,000 in October to 168,164,000 in November.

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 November, there were 8,226 unique active job postings in the Knoxville MSA (down 17.1% from October and up 5.1% from last November.) There were 5,178 unique active job postings in Knox County (down 17.2% from October and down 2.4% 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 122,000 in private-sector employment (down from the 146,000 net jobs gain in November.) Industry sectors showing positive job growth in December include Education and Health Services (+57,000), Construction (+27,000), Leisure and Hospitality (+22,000), Other Services (+13,000), Financial Activities (+12,000), Trade/Transportation/Utilities (+8,000), and Information (+5,000). The industry sectors showing negative job growth in December are Manufacturing (-11,000), Natural Resources and Mining (-6,000), and Professional and Business Services (-5,000).

By establishment size, large businesses (with 500+ employees) gained 97,000 jobs, mid-sized businesses (with 250-499 employees) gained 11,000 jobs, and “Other Small” businesses (with 20-49 employees) gained 6,000 jobs. The job gains were offset by mid-sized businesses (with 50-249 employees), which lost 2,000 jobs, and “Very Small” businesses (with 1-19 employees), which lost 1,000 jobs.

(Source: ADP)

Worker Shortage Update

The labor shortages are persisting longer than many economists expected. There continues to be high job demand and slower workforce growth resulting in fierce competition for talent and many open jobs going unfilled. According to the latest data from the U.S. Bureau of Labor Statistics (BLS), the nation had 8.1 million jobs to fill and only 5.3 million hires in November, meaning there are 1.5 job openings for every unemployed person.

In November, the largest increases in U.S. job openings were in professional and business services (+273,000), financial activities (+114,000), health care and social assistance (+44,000), private educational services (+38,000), other services (+22,000), arts/entertainment/recreation (+19,000), construction (+17,000), and wholesale trade (+15,000).

The largest decreases in job openings were in accommodation and food services (-102,000), information (-89,000), manufacturing (-56,000), transportation/warehousing/utilities (-36,000), and retail trade (-4,000).

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 MSA Close to National Average for Share of Labor Force Working From Home

According to the U.S. Census Bureau’s 2023 American Community Survey (ACS) one-year estimates, 13.8% of the nation’s workers aged 16 and over work from home. This is most likely one of the lasting impacts of post-pandemic life. The share of the working age population that works from home varies greatly by MSA from Boulder, CO with the highest share at 28.1% to Beaumont, TX with the lowest share at 4%.

The share of the Knoxville MSA’s working age population that work from home is 13.2%. The share among Knoxville’s peer MSAs are Raleigh (24.5%), Durham-Chapel Hill (19.5%), Nashville (17.4%), Asheville (16.3%), Huntsville (14.5%), Chattanooga (13.0%), Greenville, SC (11.8%), Lexington, KY (10.7%), and Memphis (9.3%).

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from November 2023 to November 2024 is 2.7%. This is up from 2.6% in the October 2023 to October 2024 period. Last year, the national inflation rate was 3.1% from November 2022 to November 2023.

The November CPI report marks the twenty-ninth 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 12.7%, auto repair services are up 5.7%, housing prices are up 4.7%, airline fares are up 4.7%, eating out prices are up 3.6%, electricity costs are up 3.1%, natural gas prices are up 1.8%, groceries are up 1.6%, and apparel is up 1.1%.

From a year ago, gasoline prices are down 8.1%, used car prices are down 3.4%, and new vehicle prices are down 0.7%.

The Federal Reserve cut the target range for the federal funds rate for a third straight time by ¼ percentage point to 4 ¼ to 4 ½ percent at its Federal Open Market Committee (FOMC) policy-setting meeting December 18. The Fed stated that recent indicators suggest that economic activity has continued to expand at a solid pace, labor market conditions have generally eased since earlier in the year, the unemployment rate has moved up but remains low, and inflation has made progress toward the Committee’s 2 percent objective though 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 is attentive to the risks to both sides of its dual mandate. Most economists are now expecting just two rate cuts in 2025, down from the four cuts predicted back in September. 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 2.8% for the November 2023 to November 2024 period. This is up from 2.5% in the October 2023 to October 2024 period. Last year, the rate was 3.2% from November 2022 to November 2023.

Housing Market

Home sales in East Tennessee increased 1.7% from October to November, a seasonally adjusted annual rate (SAAR) of 17,924. Compared to the previous year, home sales were up 2.2% in the East Tennessee region. By comparison, home sales in Knox County increased 2.7% from the previous month to a seasonally adjusted annual rate (SAAR) of 7,383.

The median home sales price across the East Tennessee region was $375,000 in November, up 7.7% from a year ago. Knox County’s median home sales price was $402,000, an increase of 10.9% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 21 days or less, no change from the previous month.

Active inventory in the East Tennessee region decreased in November, a typical seasonal pattern, with the total number of active listings up 26% 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 2.42 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 November 2024 was $736.535 billion (up 0.9% from October and up 3.2% from last November.)

The retail sectors that showed sales growth from last November were Furniture and Home Furnishings Stores (+8.1%), Motor Vehicles and Parts Sales (+6.9%), Food Services and Drinking Places (+5.1%), General Merchandise Stores (+5.1%), Non-store Retailers (+3.7%), Sporting Goods/Books/Hobby/Music Stores (+2.4%), Food and Beverage Stores (+2.3%), Building Materials (+1.9%), Clothing Stores (+1.8%), and Health and Personal Care Stores (+0.3%).

Retail sectors that showed a decline in sales from last November were Electronics and Appliance Stores (-6.1%), Gasoline Stations (-5.8%), and Miscellaneous Stores (-1.8%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $135.308 million in state sales taxes in November (up 6.8% from October and up 15.9% from last November) and Knox County collected $87.384 million in November (up 8.6% from October and up 14.8% from last November.) The state of Tennessee collected $1.237 billion in state sales taxes in November (up 5.8% from October and up 9.4% from last November.)

The Knoxville MSA collected $49.476 million in local sales taxes in November (up 5.9% from October and up 22.0% from last November) and Knox County collected $30.252 million (up 6.3% from October and up 20.6% 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.

November 20, 2024 – RobotLAB, an artificial intelligence (AI) and robotics business solutions company, opened a new office location at 5416 S. Middlebrook Pike in Knoxville. The new location’s operations will include sales, tailored programming, onsite integration, and repairs for its robots. RobotLAB’s robots will help Knoxville area businesses that want to increase automation and operational efficiency in areas like cleaning, delivery, and customer service. You can read more here.

Knox County Business Licenses

New business licenses issued in November 2024 by Knox County are down 30.7% from October and are down 5.6% from November 2023.

A total of 167 new business licenses were issued in November 2024 compared to 241 in October and 177 in November 2023. The top industry sectors for which business licenses were issued in November 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)

McGhee Tyson Airport (TYS) Passenger and Freight Trends

The Metropolitan Knoxville Airport Authority recorded 290,450 passengers in November (down 16.2% from October’s passenger traffic of 346,467 and up 15.3% from November 2023.)

The total freight recorded in November at TYS was 4,994,395 pounds (down 12.6% from October and down 18.4% 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 2,396,185 (up 0.2% from the November 2023 daily passenger average of 2,390,263 and up 5.3% 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) , “Signs of stable growth (in domestic Revenue Passenger-Kilometer) were shown in all markets, while the US saw a deeper contraction in November compared to the prior month. Indeed, data confirms that the US air traffic growth has slowed since June 2024. This trend mainly reflects lower low-cost carrier activity, while mainline carriers have continued to see growth over the same period. RPK contracted 2.7% YoY in the US.” You can read more here.

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