Automation in Local Business
In addition to our regular monthly survey questions, we asked respondents if they have recently automated (e.g. by robots or other automated equipment) any of their business operations and if so, which operation and if no, why not.
The majority of survey participants (90%) responded that they have not recently automated any of their business operations. Almost half of those respondents (44%) indicated that the reason for not utilizing automation is due to the nature of their business (e.g. regulatory restrictions). Other reasons for not automating include technological capabilities and irrelevance to some operations such as professional relationship-related services.
All the respondents who did recently automate operations said that no jobs were eliminated. Respondents mentioned main manufacturing processes and front desk operations have been automated.
McKinsey Global Industrial Robotics Survey 2022 Results
Results from the 2022 McKinsey Global Industrial Robotics Survey indicate that automated systems will account for 25% of industrial companies’ capital spending over the next five years. Among the industries surveyed, 23% of the retail and consumer goods sector respondents plan to spend more than $500 million on automation over the next five years. Sectors planning on spending $100 million or more on automation include 38% of life sciences, healthcare, and pharmaceuticals, 30% of food and beverages, 27% of logistics and fulfillment, and 23% of automotive.
Some of the benefits of automation include output quality, efficiency, operational uptime, increased productivity, and safety. Routine activities such as picking, packing, sorting, movement from point to point, and quality assurance are already automated in various stages and will likely continue to see significant investment over the next coming years. However, other activities that require higher levels of human input such as assembly, stamping, surface treatment, and welding are less likely to be automated in the near term.
The adoption of automation also has some challenges (some real and some perceived) including the cost of robots, the elimination of jobs, technological readiness, fitting robotics into existing spaces, the potential inability of machines to interface with products, vulnerability to cyberattacks, and finding “holistic, end-to-end solution providers across geographies for the scope of robotics technologies of interest to them (respondents).” The report notes that automation typically does not eliminate jobs but rather leads to changes in workplace roles. Robotics and automation providers will need to help industries to build the capabilities required to automate at scale or provide support for this effort.
You can read the McKinsey report findings here.
Labor Market Information
The Knoxville MSA’s unemployment rate in January was 3.3% (up from 2.6% in December and up from the 3.0% rate in January 2022.) Knox County’s unemployment rate in January was 3.0% (up from 2.4% in December and up from 2.8% in January 2022.) Tennessee’s unemployment rate was 3.5% in January (up from 2.9% in December and down from 3.7% in last January.) The U.S. unemployment rate was 3.9% in January (up from 3.3% in December and down from the 4.4% unemployment rate recorded last January.)
The size of the total labor force slightly increased from December to January at the local, state, and national levels. The Knoxville MSA’s labor force increased 0.1% from 436,643 in December to 437,294 in January. Knox County’s labor force was statistically unchanged, but still slightly increased from 249,013 in December to 249,079 in January. Tennessee’s labor force increased 1.4% from 3,286,597 in December to 3,332,947 in January. The national labor force increased 0.5% from 164,224,000 in December to 165,070,000 in January.
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 January, there were 10,279 unique active job postings in the Knoxville MSA (up 29% from December and up 3.2% from last January.) There were 6,973 unique active job postings in Knox County (up 30.5% from December and up 1.6% from this time last year.)
The Top 10 industries (by number of job postings) in the Knoxville MSA in January were –
The Top 10 occupations (by number of job postings) in the Knoxville MSA in January 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 February report shows a net gain of 242,000 in private-sector employment (up from the 106,000 net jobs gain in January.) Industry sectors showing positive job growth in February include Leisure and Hospitality (+83,000), Financial Activities (+62,000), Manufacturing (+43,000), Education and Health Services (+35,000), Other Services (+34,000), Natural Resources and Mining (+25,000), Information (+9,000), and Trade/Transportation/Utilities (+3,000). Industry sectors posting job losses in February include Professional and Business Services (-36,000) and Construction (-16,000).
By establishment size, large businesses (with 500+ employees) gained 160,000 jobs, mid-sized businesses (with 50-249 employees) gained 77,000 jobs, and mid-sized businesses (with 250-499 employees) gained 71,000 jobs. “Very Small” businesses (with 1-19 employees) lost 56,000 jobs and “Other Small” businesses (with 20-49 employees) lost 5,000 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 10.8 million jobs to fill in January and only 6.4 million hires, meaning there are approximately two job openings for every unemployed person.
In January, the largest increases in U.S. job openings were in professional and business services (+95,000), wholesale trade (+50,000), other services (+43,000), and information (+35,000).
The largest decreases in job openings were in construction (-240,000), accommodation and food services (-204,000), financial activities (-151,000), and retail trade (-94,000).
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)
The national inflation rate from January 2022 to January 2023 is 6.4%. This is down from the 6.5% rate from December 2021 to December 2022. Last year, the national inflation rate was 7.5% from January 2021 to January 2022.
The January CPI report marks the seventh straight month that year-over-year inflation is below the June CPI peak high of 9.1%. While this continues to be an encouraging sign that runaway inflation may be winding down, high prices will likely linger longer.
From a year ago, natural gas prices are up 26.7%, airline fares are up 25.6%, electricity costs are up 11.9%, groceries are up 11.3%, eating out prices are up 8.2%, housing prices are up 7.9%, new vehicle prices are up 5.8%, and gasoline prices are up 1.5%. Used car prices are down 11.6% from last year. You can read more here.
To bring down inflation, the Federal Reserve has increased its benchmark interest rate several times this year. Higher interest rates mean higher borrowing costs throughout the economy. The Fed needs to be careful to not slow the economy down to the point that it triggers a recession.
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 6.9% for the January 2022 to January 2023 period. This is unchanged from the December 2021 to December 2022 period. Last year, the rate was 7.8% for January 2021 to January 2022.
(Source: U.S. Bureau of Labor Statistics; Consumer Price Index, not seasonally adjusted)
Housing Market
Home sales in the Knoxville area increased 1.8% from December to January to a seasonally adjusted annual rate (SAAR) of 18,783. Conversely, home sales in Knox County decreased 8.5% from the previous month to a seasonally adjusted annual rate (SAAR) of 6,802. Compared to the previous year, home sales were down 23.6% in the Knoxville area and 33% in Knox County.
Nationally, existing-home sales decreased in January for the 12th consecutive month to a seasonally adjusted annual rate of 4.00 million — down 0.7% from the previous month and 36.9% from a year ago. Home sales in the South increased 1.1% from the previous month but were down 36.6% from a year ago.
The median home sales price in the Knoxville area was $316,000 in January, an increase of 6.3% from one year ago. Knox County’s median home sale price was $338,810 – up 9.29% from one year ago.
Eighteen percent of homes sold for over-asking price in January, down from 23% the previous month. 7% of homes sold for at least $10,000 over asking and 2.5% sold for at least $25,000 over asking. New construction (i.e., “Never Occupied,” “To Be Built,” “Under Construction,” or “Under Roof”) represented 12.6% of total home sales.
Active inventory in the Knoxville area continued to fall throughout January after reaching a seasonal peak last fall. Overall, active listings are up 100.5% year-over-year but remain around 40% below pre-pandemic levels. Inventory in Knox County was up 105% year-over-year in January. Half of homes sold in the Knoxville area were on the market for 25 days or less, up from 16 days the previous month.
Months of inventory, or the number of months it would take to exhaust active listings at the current sales rate, was 1.91 months.
Knoxville’s rental market continued to outpace the U.S. average in terms of both rent growth and occupancy in January, as prolonged under-building over the past decade continues to place upward pressure on housing costs. Effective rents in the Knoxville metro area were up 12.72% year-over-year in January 2023, outpacing the 4.99% growth nationally. Rent growth over the past year was highest among Class A units (17.07%) and lowest among Class C units (6.84%). Knoxville’s rental occupancy rate remains among the highest in the nation at 96.5%, compared to 94.8% nationally. The occupancy rate was 95.9% for Class A, 96.1% for Class B, and 97.8% for Class C.
According to Hancen Sale, Governmental Affairs and Policy Director at the Knoxville Area Association of Realtors®,“The pace of home sales increased for the second consecutive month in January, largely due to a brief decline in mortgage rates. Overall demand, however, remains significantly below 2022 levels and the sharp increase in rates over the last few weeks suggests home sales are likely to remain sluggish in the coming months. As of now, there are no indications of a substantial supply surge on the horizon, meaning Knoxville’s heavily supply-constrained market is likely to remain relatively competitive despite lower-than-usual demand. Knoxville’s housing market is in the early stages of what is expected to be a prolonged recovery.”
You can also subscribe to KAAR’s monthly Market Pulse Newsletter here.
Knoxville Area Association of REALTORS® (KAAR) 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®; Knoxville Area Association of 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 January 2023 was $627.311 billion (down 16.3% from December and up 8% from last January.)
The retail sectors that showed the greatest growth from last January were Food Services and Drinking Places (+31.3%), Non-store Retailers (+21.8%), Health and Personal Care Stores (+6.3%), Sporting Goods/Books/Hobby/Music Stores (+5.5%), Miscellaneous Stores (+4.8%), and Gasoline Stations (+4.5%).
Retail sectors that showed the greatest decline in sales from last January were Electronics and Appliance Stores (-8.3%), Building Materials Stores (-0.8%), and General Merchandise Stores (-0.8%).
(Sources: U.S. Census Bureau; Advance Monthly Retail Trade Reports, not adjusted)
Tennessee State and Local Sales Tax Collections
The Knoxville MSA region collected $131.286 million in state sales taxes in January (up 14.6% from December and up 4.7% from last January) and Knox County collected $88.033 million in January (up 17.5% from December and up 6.2% from last January.) The state of Tennessee collected $1.317 billion in state sales taxes in January (up 17.3% from December and up 5.5% from last January.)
The Knoxville MSA collected $50.765 million in local sales taxes in January (up 17.4% from December and up 6.3% from last January) and Knox County collected $31.497 million (up 18.8% from December and up 6.9% from last January.)
(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.
February 27, 2023 – Apex Bank is under contract to purchase the former Discovery office campus at 9721 Sherrill Boulevard in West Knoxville for an undisclosed amount. The closing date is March 31. The 33-acre campus includes the 155,500 square-foot, four-story office tower and 189,000 square-foot Knoxville Technical Center for a total of 344,500 square feet with several amenities including a wellness center, fitness center, cafeteria, and lake view. Apex Bank will move its corporate headquarters and national mortgage-servicing division from 430 Montbrook Lane to their new campus beginning April 1. The company will occupy 50,000 to 60,000 square feet of space and lease out the remaining space. You can read more here and here.
Knox County Business Licenses
New business licenses issued in January 2023 by Knox County are down 10% from January 2022 and are down 22.4% from the pre-pandemic January 2019 count.
A total of 380 new business licenses were issued in January 2023 compared to 422 in January 2022 and 490 in January 2019. The top industry sectors for which business licenses were issued in January 2023 were services, non-classified establishments, retail, and construction.
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 178,026 passengers in January (down 12% from December’s passenger traffic of 202,243 and up 30.5% from January 2022.) This month’s passenger estimate is up 11.3% from pre-COVID January 2019.
The total freight recorded in January at TYS was 6,104,862 pounds (down 12.5% from December and up 4.4% from last January.)
According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in January was 1,953,172 (up 32.3% from the January 2022 daily passenger average of 1,476,875 and up 3.3% from the pre-COVID January 2019 average of 1,890,451.) You can view the daily TSA checkpoint travel numbers here.
According to the International Air Transport Association (IATA), “The US domestic market continued its robust recovery in January. Domestic revenue passenger kilometers (RPKs) climbed 26.8% YoY and stood 3.1% above levels achieved in January 2019.” You can read more here.
(Sources: Metropolitan Knoxville Airport Authority; U.S. Transportation Security Administration; International Air Transport Association)