Economic Conditions Outlook

June 2024

Welcome to the June 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 2 (April 2024) survey, the evaluation of the level of general business activity and company outlooks are reported as being “the same.” (In the last quarter, the evaluation of the level of general business activity had “worsened” and company outlooks were split between “worsened” and “the same.”)

The Quarter 2 current indicator responses show “increases” in production, capacity utilization, volume of new orders, volume of shipments, average employee workweek, and capital expenditures. “No changes” are 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 are evenly split between “increase” and “no change.” (In the last quarter, responses showed “increases” in production, capacity utilization, wages and benefits, and the number of employees. Prices paid for raw materials were split evenly between “increase” and “decrease.” The volume of new orders, growth rate of orders, unfilled orders, volume of shipments, delivery time, finished goods inventories, prices received for finished goods, average employee workweek, and capital expenditures were all evenly split between “increase” and “no change.”)

The six-month outlook in Quarter 2 anticipates “increases” in production, capacity utilization, volume of new orders, volume of shipments, and number of employees. “No changes” are forecasted for unfilled orders, delivery time, wages and benefits, average employee workweek, and capital expenditures. Prices paid for raw materials are evenly split between “increase” and “decrease.” The growth rate of orders, finished goods inventories, and prices received for finished goods are all split between “increase” and “no change.” (The six-month outlook in the last quarter expected “increases” in production, capacity utilization, volume of shipments, and the number of employees. All the other indicators were evenly split between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 2 (April 2024) survey that their evaluation of the level of general business activity and company outlooks have mostly “worsened.” (In the last quarter, the evaluation of the level of general business activity was mostly “the same” and company outlooks were “mixed.”)

The Quarter 2 current indicator responses show mostly “no changes” in internet sales, the number of both full-time and part-time employees, the average employee workweek, and capital expenditures. There are mostly “increases” in wages and benefits and input prices. Inventories are split between “increase” and “no change.” Net sales revenue is “mixed.” (In the last quarter, there were mostly “increases” in net sales revenue, wages and benefits, input prices, and inventories. There were mostly “no changes” in internet sales, the number of full-time and part-time employees, and the average employee workweek. Selling prices and capital expenditures were reported as mostly “decreased.”)

The six-month retail outlook in Quarter 2 projects mostly “increases” in wages and benefits and input prices. Mostly “no changes” are expected in internet sales and the number of both full-time and part-time employees. Net sales revenue is forecasted to mostly “decrease.” The average employee workweek and inventories are mostly split between “increase” and “no change.” Capital expenditures are mostly split between “decrease” and “no change.” Selling prices are “mixed.” (The six-month outlook in the last quarter anticipated mostly “decreases” in net sales revenue, internet sales, the number of full-time and part-time employees, the average employee workweek, and selling prices. Input prices and inventories were expected to mostly “increase.” “No changes” were expected in wages and benefits. Capital expenditures were “mixed.”)

Retail comments indicate that the higher cost of living prices and unavailability of affordable housing have been challenging for workers.

Knoxville area service sector businesses report in the Quarter 2 (April 2024) survey that their evaluation of the level of general business activity is mostly “the same.” Company outlooks are almost split evenly between “improved” and “the same.” (The evaluation of the level of general business activity and company outlooks were mostly reported as “the same” in the last quarter.)

The Quarter 2 current indicator responses show mostly “increases” in revenue and input prices. The number of full-time employees, wages and benefits, and capital expenditures are almost split evenly between “increase” and “no change.” The number of part-time employees and selling prices show mostly “no changes.” (In the last quarter, responses showed mostly “no changes” in revenue, the number of full-time and part-time employees, the average employee workweek, wages and benefits, and capital expenditures. Input prices and selling prices had mostly “increased.”)

The six-month outlook in Quarter 2 projects mostly “increases” in revenue, input prices, and capital expenditures. “No changes” are mostly expected in the number of both full-time and part-time employees and the average employee workweek. Selling prices are almost evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “no changes” in the number of part-time employees and the average employee workweek. Revenue, the number of full-time employees, wages and benefits, and input prices were almost evenly split between “increase” and “no change.” Selling prices and capital expenditures were expected to mostly “increase.”)

Service sector comments indicate that some selling prices have not caught up with the higher costs of materials and labor. There appears to be some uncertainty with supplier pricing due mostly to supplier consolidation and private equity acquisitions. Finding qualified employees continues to be a challenge.

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 May was 2.6% (up from 2.5% in April and down from 3.0% in May 2023.) Knox County’s unemployment rate in May was 2.4% (up from 2.3% in April and down from 2.8% in May 2023.) Tennessee’s unemployment rate was 2.8% in May (up from 2.7% in April and down from 3.2% in last May.) The U.S. unemployment rate was 3.7% in May (up from 3.5% in April and up from 3.4% in last May.)

The size of the total labor force slightly decreased from April to May at the local and state levels. The Knoxville MSA’s labor force decreased 0.2% from 449,383 in April to 448,327 in May. Knox County’s labor force decreased 0.2% from 256,566 in April to 256,067 in May. Tennessee’s labor force decreased 0.3% from 3,414,545 in April to 3,404,227 in May. Meanwhile, the national labor force increased 0.1% from 167,484,000 in April to 167,576,000 in May.

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 May, there were 10,206 unique active job postings in the Knoxville MSA (up 5.9% from April and up 5.7% from last May.) There were 6,624 unique active job postings in Knox County (up 6.0% from April and up 2.2% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in May 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 June report shows a net gain of 150,000 in private-sector employment (down from the 152,000 net jobs gain in May.) Industry sectors showing positive job growth in June include Leisure and Hospitality (+63,000), Construction (+27,000), Professional and Business Services (+25,000), Other Services (+16,000), Trade/Transportation/Utilities (+15,000), Financial Activities (+11,000), and Education and Health Services (+9,000). The industry sectors showing negative job growth in June are Natural Resources and Mining (-8,000), Manufacturing (-5,000), and Information (-3,000).

By establishment size, mid-sized businesses (with 50-249 employees) gained 65,000 jobs, large businesses (with 500+ employees) gained 58,000 jobs, mid-sized businesses (with 250-499 employees) gained 23,000 jobs, and “Very Small” businesses (with 1-19 employees) gained 13,000 jobs. The job gains were offset by “Other Small” businesses (with 20-49 employees), which lost 8,000 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 5.8 million hires in May, meaning there are 1.4 job openings for every unemployed person.

In May, the largest increases in U.S. job openings were in manufacturing (+115,000), health care and social assistance (+78,000), professional and business services (+44,000), information (+24,000), transportation/warehousing/utilities (+16,000), and construction (+2,000).

The largest decreases in job openings were in accommodation and food services (-147,000), private educational services (-34,000), financial activities (-26,000), other services (-16,000), retail trade (-16,000), and wholesale trade (-1,000). Job openings in arts/entertainment/recreation were unchanged.

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’s Brain Drain is Worse than it Appears According to Recent Study

For the last few years, we have been conveying our significant concern about the lack of Knoxville’s growth in the 25 – 54-year-old demographic. This key demographic is largely responsible for a community’s economic fortunes. Unfortunately, new data from Hire A Helper using the U.S. Census Bureau’s Annual Social and Economic Supplement (ASEC) of the Current Population Survey shows that the region’s “brain drain” is worse than it appears.

According to the analysis, the Knoxville area in 2023 had an 8 percent net loss in the number of college-educated people moving into the community. In other words, more residents with a college degree left Knoxville than moved to the area. Equally concerning is the fact that the state of Tennessee, as a whole, had a net loss of 16 percent. These losses are harder to fathom when you consider that the Nashville MSA had a net gain of 97 percent, the second highest in the country, which means that while Nashville essentially had twice as many college-educated people move into the area than it had move out, those substantial numbers were unable to make up for the rest of the state’s losses.

For Knoxville, in particular, these results further emphasize the need to align the types of graduates our educational institutions are producing and the types of jobs we are creating. Our new economic strategic direction, entitled The 2030 Protocol, is designed to address this alignment goal. Through it, we are focused on ensuring that the graduates that we produce have the skills and degrees that our companies need while the businesses are generating the jobs that are sought after by our graduates. By accomplishing this objective, we will reverse this troubling trend and have more college-educated people coming than going, which will have a meaningful, positive impact on our economy.

Most Workers Believe Artificial Intelligence (AI) Will Affect Their Job, but Differ on How

The ADP Research Institute recently surveyed 35,000 private-sector workers in 18 countries asking what role they think AI will play in their work over the next few years. A large majority (85%) of workers worldwide said they think AI will have an impact on their job. Respondents differ on what ways AI will impact their jobs with 28% saying it will replace at least some of their existing job functions, 25% say it will occasionally help with certain tasks, 19% say it will help save time on a daily basis, 13% say it will replace most of their existing job functions, 8% say it will have no impact on their job, and 7% did not know enough about AI to answer. As far as whether AI will increase or decrease employment, the vast majority (94.6%) of businesses that use AI say they can’t attribute any net change in employment to their use of AI. You can read the full report here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from May 2023 to May 2024 is 3.3%. This is down from 3.4% in the April 2023 to April 2024 period. Last year, the national inflation rate was 4.0% from May 2022 to May 2023.

The May CPI report marks the twenty-third 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 20.3%, auto repair services are up 7.2%, electricity costs are up 5.9%, housing prices are up 5.4%, eating out prices are up 4.0%, gasoline prices are up 2.2%, groceries are up 1.0%, apparel is up 0.8%, and natural gas prices are up 0.2%.

From a year ago, used car prices are down 9.3%, airline fares are down 5.9%, and new vehicle prices are down 0.8%.

On June 12, the Federal Reserve indicated that economic activity has been expanding at a solid pace. Job gains remain strong and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. There has been modest progress toward the Fed’s 2 percent inflation objective in recent months. The Fed is committed to achieving maximum employment and inflation at the rate of 2 percent over the longer run. The Fed will keep the federal funds rate at the current 5 ¼ to 5 ½ percent and continue to monitor all indicators until it has gained confidence that inflation is moving toward the desired 2 percent before considering any future rate cuts. 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 3.0% for the May 2023 to May 2024 period. This is down from 3.2% in the April 2023 to April 2024 period. Last year, the rate was 4.4% from May 2022 to May 2023.

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

Housing Market

Home sales in East Tennessee declined 0.1% from April to May, a seasonally adjusted annual rate (SAAR) of 21,271. By comparison, home sales in Knox County accelerated 5.3% from the previous month to a seasonally adjusted annual rate (SAAR) of 8,294. Compared to the previous year, home sales were up 5.2% in the East Tennessee region.

The median home sales price across the East Tennessee region was $365,000 in May, up 8.96% from a year ago. Knox County’s median home sale price was $388,000, an increase of 1.2% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 13 days or less, down from 16 days the previous month.

Active inventory in the East Tennessee region increased in May, with the total number of active listings up 44.2% 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 3.17 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 May 2024 was $742.945 billion (up 5.9% from April and up 2.8% from last May.)

The retail sectors that showed sales growth from last May were Food Services and Drinking Places (+7.3%), Non-store Retailers (+5.8%), Electronics and Appliance Stores (+5.4%), General Merchandise Stores (+4.7%), Clothing Stores (+3.2%), Motor Vehicles and Parts Sales (+2.3%), Food and Beverage Stores (+1.9%), Gasoline Stations (+1.5%), and Health and Personal Care Stores (+1.4%).

Retail sectors that showed a decline in sales from last May were Building Materials (-5.8%), Furniture and Home Furnishings Stores (-3.6%), Sporting Goods/Books/Hobby/Music Stores (-3.3%), and Miscellaneous Stores (-0.4%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $130.701 million in state sales taxes in May (down 0.2% from April and up 7.2% from last May) and Knox County collected $84.105 million in May (down 1.4% from April and up 6.4% from last May.) The state of Tennessee collected $1.195 billion in state sales taxes in May (down 2.4% from April and up 3.4% from last May.)

The Knoxville MSA collected $46.129 million in local sales taxes in May (down 1.6% from April and up 5.7% from last May) and Knox County collected $28.211 million (down 1.8% from April and up 5.1% from last May.)

(Source: Tennessee Department of Revenue)

The University of Tennessee Research Foundation Ranked #61 on Top 100 List of U.S. Universities Granted Utility Patents

The National Academy of Inventors (NAI) recently released its Top 100 U.S. Universities Granted Utility Patents rankings using calendar year 2023 data provided by the U.S. Patent and Trademark Office.

The University of Tennessee (UT) Research Foundation was tied with the University of New Mexico at #61 with 28 utility patents each. UT’s comparable peers ranked – #21 Colorado; #41 South Carolina; #42 Iowa State; #46 Nebraska; #58 Kentucky; #65 Missouri; #78 Oklahoma; #87 Auburn; and #98 Clemson. (Virginia Tech was not ranked.) UT’s aspirational peers ranked – #4 Purdue; #23 Illinois; #40 NC State; #49 Michigan State; #53 Penn State; and #90 Georgia.

The top ten universities overall by number of utility patents granted were #1 University of California (546); #2 Massachusetts Institute of Technology (365); #3 University of Texas System (235); #4 Purdue University (201); #5 Stanford University (199); #6 Harvard University (186); #7 Arizona State University (170); #8 California Institute of Technology (156); and tied at #9 Johns Hopkins University (142) and University of Florida Research Foundation (142). You can see the full list 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.

June 5, 2024 – MESA ASSOCIATES, a woman minority-owned full-service multi-discipline engineering, procurement, and construction management firm, acquired the assets of Connecticut-based NuSTREEM and relocated them to their West Knox County facility. NuSTREEM has been on the cutting edge of small-scale hydroelectric power production technology and has developed an innovative and modular generating unit that can generate 250,000 watts of power. Mesa Technologies, a local sister company of Mesa Associates, will manufacture and assemble 25 to 50 hydropower generators per year in Knoxville. The company did not disclose the size of its investment or the number of new jobs it would bring to Knox County, but the new technology will add to the Knoxville region’s prominence as an energy technology hotspot. You can read more here, here, and here.

Knox County Business Licenses

New business licenses issued in May 2024 by Knox County are down 11.1% from April and are up 8.1% from May 2023.

A total of 255 new business licenses were issued in May 2024 compared to 287 in April and 236 in May 2023. The top industry sectors for which business licenses were issued in May 2024 were services, construction, retail, and non-classified establishments.

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 286,934 passengers in May (up 20.3% from April’s passenger traffic of 238,421 and up 19.5% from May 2023.)

The total freight recorded in May at TYS was 6,700,385 pounds (up 11.6% from April and up 0.5% from last May.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in May was 2,590,846 (up 6.9% from the May 2023 daily passenger average of 2,423,969 and up 7.7% from the pre-COVID May 2019 average of 2,406,094.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA), U.S. domestic traffic was still on the rise in May with annual growth of 6.0%. 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.

Connect with resources to support the operation and expansion of your business in Knox County.

Request Information