Opportunities and Challenges for Businesses in 2024
In addition to our regular survey questions, we asked respondents to list what they see as their number one opportunities and challenges in 2024.
Opportunities included: leveraging technology, analyzing the market to target the right clients, cut non-employee operating expenses, sustain or increase sales and profits from 2023, increase manufacturing activity, and improve customer satisfaction.
Challenges included: housing availability and affordability for relocating new employees, childcare availability and affordability for working parents, higher prices and borrowing costs, increased industry competition, availability of skilled workers, and continued economic fears of a possible recession.
Labor Market Information
The Knoxville MSA’s unemployment rate in December was 2.8% (down from 3.1% in November and up from 2.6% in December 2022.) Knox County’s unemployment rate in December was 2.6% (down from 2.9% in November and up from 2.4% in December 2022.) Tennessee’s unemployment rate was 3.0% in December (down from 3.4% in November and up from the 2.9% rate in last December.) The U.S. unemployment rate was 3.5% in December (unchanged from November and up from 3.3% in last December.)
The size of the total labor force slightly decreased from November to December at the local, state, and national levels. The Knoxville MSA’s labor force decreased 0.3% from 450,267 in November to 448,878 in December. Knox County’s labor force decreased 0.3% from 256,490 in November to 255,685 in December. Tennessee’s labor force decreased 0.1% from 3,395,018 in November to 3,392,133 in December. The national labor force decreased 0.8% from 167,977,000 in November to 166,661,000 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 8,944 unique active job postings in the Knoxville MSA (up 14.2% from November and up 12.2% from last December.) There were 5,663 unique active job postings in Knox County (up 6.7% from November and up 67.4% 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)
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 gain of 107,000 in private-sector employment (down from the 164,000 net jobs gain in December.) Industry sectors showing positive job growth in January include Leisure and Hospitality (+28,000), Trade/Transportation/Utilities (+23,000), Construction (+22,000), Education and Health Services (+17,000), Other Services (+9,000), Financial Activities (+7,000), Natural Resources and Mining (+6,000), Manufacturing (+2,000), and Professional and Business Services (+2,000). The only industry sector showing negative job growth in January is Information (-9,000).
By establishment size, mid-sized businesses (with 50-249 employees) gained 53,000 jobs, large businesses (with 500+ employees) gained 31,000 jobs, “Very Small” businesses (with 1-19 employees) gained 19,000 jobs, mid-sized businesses (with 250-499 employees) gained 8,000 jobs, and “Other Small” businesses (with 20-49 employees) gained 6,000 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 9.0 million jobs to fill and only 5.6 million hires in December, meaning there are 1.6 job openings for every unemployed person.
In December, the largest increases in U.S. job openings were in professional and business services (+239,000), health care and social assistance (+63,000), retail trade (+50,000), manufacturing (+48,000), financial activities (+38,000), and educational services (+11,000).
The largest decreases in job openings were in accommodation and food services (-121,000), wholesale trade (-83,000), other services (-46,000), information (-35,000), transportation/warehousing/utilities (-34,000), construction (-21,000), and arts/entertainment/recreation (-9,000).
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 Ranked #41 on WalletHub’s Top 100 Metros for STEM Professionals
WalletHub, the personal finance website, recently ranked the top 100 most populated metropolitan statistical areas (MSAs) to determine the best job markets for STEM (science, technology, engineering, and mathematics) professionals. The MSAs were compared using 21 key metrics across three categories – “Professional Opportunities,” “STEM-Friendliness,” and “Quality of Life.”
The Knoxville MSA ranked #41 overall. By category, Knoxville ranked #27 for professional opportunities, #44 for quality of life, and #53 for “STEM-friendliness.” Knoxville’s peer MSAs ranked as follows – #14 Raleigh, #35 Greenville (SC), #53 Nashville, #84 Chattanooga, and #95 Memphis. Asheville, Durham, Huntsville, and Lexington did not make the rankings due to the population cutoff. The top ten MSAs in the nation were #1 Austin, #2 Seattle, #3 Atlanta, #4 Boston, #5 Sacramento, #6 San Jose, #7 San Francisco, #8 Pittsburgh, #9 Madison (WI), and #10 Minneapolis. You can read the full report here.
Consumer Price Index (CPI – Inflation Rates)
The national inflation rate from December 2022 to December 2023 is 3.4%. This is up from 3.1% in the November 2022 to November 2023 period. Last year, the national inflation rate was 6.5% from December 2021 to December 2022.
The December CPI report marks the eighteenth straight month that year-over-year inflation is below the June 2022 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, auto insurance is up 20.3%, auto repair services are up 7.1%, housing prices are up 6.2%, eating out prices are up 5.2%, electricity costs are up 3.3%, groceries are up 1.3%, new vehicle prices are up 1.0%, and apparel is up 1.0%.
From a year ago, natural gas prices are down 13.8%, airline fares are down 9.4%, gasoline prices are down 1.9%, and used car prices are down 1.3%.
In December, the Federal Reserve has indicated that it was likely done hiking interest rates and now forecasts three rate cuts next year, a faster pace than many economists expected, as the inflation rate continues to fall.
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 3.4% for the December 2022 to December 2023 period. This is up from 3.2% in the November 2022 to November 2023 period. Last year, the rate was 6.9% from December 2021 to December 2022.
(Source: U.S. Bureau of Labor Statistics; Consumer Price Index, not seasonally adjusted)
Housing Market
Home sales in East Tennessee declined 7.1% from November to December to a seasonally adjusted annual rate (SAAR) of 16,155. By comparison, home sales in Knox County fell 8.9% from the previous month to a seasonally adjusted annual rate (SAAR) of 6,372. Compared to the previous year, home sales were down 13.5% in the East Tennessee region and down 14.2% from the previous year in Knox County.
Nationally, existing home sales decreased in November to a seasonally adjusted annual rate of 3.78 million — down 1.0% from the previous month and 6.2% from a year ago. Home sales in the South decreased 2.8% from the previous month and 4.4% from a year ago.
The median home sales price in the East Tennessee region was $345,000 in December, up 8.45% from a year ago. Knox County’s median home sale price was $365,000, an increase of 10.8% from a year ago.
Half of the homes sold across the East Tennessee region when under contract sold within 18 days or less, up from 15 days the previous month and 16 days a year ago. 23% of homes sold for more than the asking price, while 11% of homes sold for at least $10,000 over asking and 3.7% sold for at least $25,000 over asking. New construction (i.e., “Never Occupied,” “To Be Built,” “Under Construction,” or “Under Roof”) represented 12.8% of total home sales.
Active inventory in the East Tennessee region increased in December, a typical seasonal trend. Overall, active listings were up 13.1% from a year ago but listings priced under $300,000 were down 21% from the previous year.
Months of inventory, or the number of months it would take to exhaust active listings at the current sales rate, was 2.89 months.
Apartment rent growth continues to decelerate, with rents across the Knoxville metro areas increasing by 3.9% from the previous year in the fourth quarter of 2023. By comparison, rents were up 0.17% nationally.
According to Hancen Sale, Governmental Affairs and Policy Director at East Tennessee REALTORS®, “Total home sales across East Tennessee declined 15.2% from 2022 to 2023, one of the largest year-over-year declines on record. Despite subdued sales activity, the chronic undersupply of housing continues to exert upward pressure on house prices. However, there is good news on the horizon as new listings have picked up, which will give homebuyers more options moving into 2024.”
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)
2024 Housing Market Forecast Released by East Tennessee Realtors®
East Tennessee REALTORS® recently released their 2024 Housing Market Forecast.
Highlights of the report –
Home price growth continues to decelerate but remains above the historic average. Home prices in the Knoxville metropolitan area rose 11.3% from the previous year in the third quarter of 2023, according to the FHFA House Price Index (HPI).
After falling 9% and 15% year-over-year in 2022 and 2023, respectively, home sales are poised to rebound in 2024. Total home sales are expected to return to pre-pandemic levels, with home sales forecasted to increase 11.1% in 2024.
Although affordability conditions remain near a record low, a chronic undersupply of housing continues to exert upward pressure on prices and will provide support for further growth, with home prices forecasted to increase 3.6% in 2024.
After experiencing double-digit increases in 2022, rent growth slowed considerably in the latter half of 2023. Rents in the Knoxville metro area rose 3.9% from the previous year in the fourth quarter of 2023. This deceleration is expected to continue over the next year, with apartment rent growth forecasted to slow to an average of 3.1% in 2024.
Knoxville’s apartment occupancy rate declined throughout 2023 but nonetheless remains among the highest in the country. Occupancy is expected to continue falling as new units become available, with the occupancy rate forecasted to decline to an average of 96.4% in 2024.
You can access the full report here.
National Retail Sales
The total advance monthly retail sales estimate for December 2023 was $771.433 billion (up 8.1% from November and up 2.9% from last December.)
The retail sectors that showed sales growth from last December were Electronics and Appliance Stores (+10.1%), Food Services and Drinking Places (+7.5%), Health and Personal Care Stores (+6.4%), Motor Vehicles and Parts Sales (+6.4%), Non-store Retailers (+5.1%), Miscellaneous Stores (+5.0%), General Merchandise Stores (+3.8%), Food and Beverage Stores (+1.8%), and Clothing Stores (+1.5%).
Retail sectors that showed a decline in sales from last December were Gasoline Stations (-10.4%), Furniture and Home Furnishings Stores (-9.8%), Sporting Goods/Books/Hobby/Music Stores (-6.9%), and Building Materials (-3.9%).
(Sources: U.S. Census Bureau; Advance Monthly Retail Trade Reports, not adjusted)
Tennessee State and Local Sales Tax Collections
The Knoxville MSA region collected $120.074 million in state sales taxes in December (up 2.8% from November and up 4.8% from last December) and Knox County collected $79.019 million in December (up 3.8% from November and up 5.5% from last December.) The state of Tennessee collected $1.156 billion in state sales taxes in December (up 2.3% from November and up 2.9% from last December.)
The Knoxville MSA collected $44.709 million in local sales taxes in December (up 10.2% from November and up 3.4% from last December) and Knox County collected $27.837 million (up 11.0% from November and up 5.0% from last December.)
(Source: Tennessee Department of Revenue)
Tennessee Ranks #10 for Best State to Start a Business
WalletHub, the personal finance website, recently ranked the best states to start a business. The 50 states were compared using 25 metrics across three categories – business environment, access to resources, and business costs. Tennessee ranked #10 overall. By category, Tennessee ranked #7 for business environment, #26 for business costs, and #30 for access to resources. The rest of the top ten states were #1 Utah, #2 Georgia, #3 Florida, #4 Idaho, #5 Nevada, #6 Arizona, #7 Colorado, #8 Texas, and #9 North Carolina. You can read the full report 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.
February 2, 2024 – BioPet Laboratories, an animal genomics testing lab, and its PooPrints dog waste management service, announced the opening of its new worldwide headquarters in the Bearden area of West Knoxville. The new 21,000-square-foot facility features state-of-the-art DNA testing and identification instruments that will accelerate BioPet’s rapid-results DNA analysis capabilities and further the development of additional DNA and animal genomics testing services. The company expects to add 30 to 40 more jobs. You can read more here.
Knox County Business Licenses
New business licenses issued in December 2023 by Knox County are down 43.5% from November and are up 26.6% from December 2022.
A total of 100 new business licenses were issued in December 2023 compared to 177 in November and 79 in December 2022. The top industry sectors for which business licenses were issued in December 2023 were services, retail, non-classified establishments, and construction.
Below is a chart showing the 13-month trend of business licenses issued by Knox County.
(Sources: Knox County Clerk)
U.S. Department of Energy Awards Over $1 Million in Vouchers to Local Startups
The U.S. Department of Energy (DOE) announced the award of six local vouchers collectively worth over $1 million on January 22 at the Spark Innovation Center at the University of Tennessee Research Park. The local awards are part of the $10 million voucher program created by DOE to help tech startups develop complicated technology and commercialize it before running out of money. The vouchers are funded by the “Bipartisan Infrastructure Law. The six startup voucher recipients include three local companies – EKAMOR Resource Corporation (Cookeville), Electro-Active Technologies (Knoxville), and FC Renew (Knoxville), as well as three out-of-state startups that will be working with Oak Ridge National Laboratory – Dimensional Energy (Ithaca, NY), Elyte Energy (Dover, DE), and KVA Technologies (Encinitas, CA). You can read more here and 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 2023, there were 16 SBIR awards in the state of Tennessee (of which 11 or 69% of the awards were in the Knoxville area). There were also two STTR grant recipients in Tennessee (one of which was 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 2023 in the Knoxville area were Analysis and Measurement Services Corp., Cryomagnetics (1), Cryomagnetics (2), FC Renew, Millennitek (1), Millennitek (2), MOBIUS PBC (1), MOBIUS PBC (2), SkyNano, Veracity Nuclear (1), and Veracity Nuclear (2).
The Knoxville area STTR grant recipient for 2023 was Richard Fisher, who received a $275,000 STTR Phase I award for a “Multifunctional Lipid Nanoparticle Delivery System for Targeted Delivery of Vascular RNA Therapeutics.” The University of Tennessee Health Science Center in Memphis is the partnering research institution.
The Knoxville MSA received a total of 56 SBIR awards over the past five years and ranks fourth among its ten peer MSAs. Huntsville ranks #1 with 385 SBIR awards, followed by Durham-Chapel Hill with 270 and Raleigh-Cary with 170. Below is a chart showing the five-year SBIR award totals for all the peer MSAs.
The Knoxville MSA received a total of 12 STTR awards over the past five years, resulting in a three-way tie for fourth place with Lexington (KY) and Greenville (SC) 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 97), Durham-Chapel Hill (with 69), and Raleigh-Cary (with 51). 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)
McGhee Tyson Airport (TYS) Passenger and Freight Trends
The Metropolitan Knoxville Airport Authority recorded 235,552 passengers in December (down 6.5% from November’s passenger traffic of 251,833 and up 16.4% from December 2022.)
The total freight recorded in December at TYS was 7,017,532 pounds (up 14.7% from November and up 0.6% 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 2,340,714 (up 9.7% from the December 2022 daily passenger average of 2,133,271 and up 3.1% 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), “U.S. domestic traffic increased 9.6% YoY and 0.4% over December 2019 revenue passenger-kilometers (RPKs). This is a large variation in perspective to the last months, especially in comparison to November 2023 when growth over the latest pre-pandemic year had reached 9.2%. In December 2019, domestic RPKs had increased by 9.9% YoY thus standing out from the previous observations of the pre-Covid years. Consequently, this market has not seen any sign of slowdown.” You can read more here.
(Sources: Metropolitan Knoxville Airport Authority; U.S. Transportation Security Administration; International Air Transport Association)
