Economic Conditions Outlook

June 2025

Welcome to the June 2025 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:

Average Annual Pay Showing Significant Growth	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	Intuit Quickbooks SBI
Annual Population Growth Rates	Worker Shortage Update

Economic Survey Results by Industry

Based on the response to the Quarter 2 (April 2025) survey, the evaluation of the level of general business activity and company outlooks have “improved” from the previous quarter. (In the last quarter, the evaluation of the level of general business activity and company outlooks had mostly “improved.”)

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

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

Knoxville area retailers indicated in the Quarter 2 (April 2025) survey that the evaluation of the level of general business activity has “worsened” from the last quarter and company outlooks have stayed “the same.” (In the last quarter, retailers responded that their evaluation of the level of general business activity was mostly “the same” from the last quarter, while their company outlooks had mostly “improved.”)

The Quarter 2 current indicator responses show “increases” in net sales revenue, input prices, selling prices, capital expenditures, and inventories. The numbers of both full-time and part-time employees have “decreased.” “No changes” are reported for internet sales, average employee workweek, and wages and benefits. (In the last quarter, retail responses showed mostly “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” were mostly reported in internet sales, the number of full-time and part-time employees, and the average employee workweek. Capital expenditures and inventories were evenly split between “increase” and “no change.”)

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

Knoxville area service sector businesses report in the Quarter 2 (April 2025) survey that their evaluation of the level of general business activity is mostly split between “worsened” and “the same” from the last quarter, while company outlooks are “mixed.” (The evaluation of the level of general business activity had mostly “improved” from the last quarter, while company outlooks continued to be “mixed” in the last quarter.)

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

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

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 May was 3.0% (up from 2.6% in April and up from 2.6% in May 2024.) Knox County’s unemployment rate in May was 2.8% (up from 2.4% in April and up from 2.4% in May 2024.) Tennessee’s unemployment rate was 3.3% in May (up from 2.9% in April and up from 2.8% in last May.) The U.S. unemployment rate was 4.0% in May (up from 3.9% in April and up from 3.7% in last May.)

The size of the total labor force slightly decreased from April to May at the local, state, and national levels. Knox County’s labor force decreased 0.4% from 261,060 in April to 259,993 in May. The Knoxville MSA’s labor force decreased 0.4% from 464,061 in April to 462,165 in May. Tennessee’s labor force decreased 0.2% from 3,493,841 in April to 3,486,543 in May. The national labor force decreased 0.2% from 170,622,000 in April to 170,216,000 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 9,244 unique active job postings in the Knoxville MSA (down 10.7% from April and down 9.4% from last May.) There were 5,813 unique active job postings in Knox County (down 11.0% from April and down 12.2% 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)

Average Annual Pay Showing Significant Growth

The U.S. Bureau of Labor Statistics recently released the 2024 average annual pay estimates down to the county level. Knox County’s average annual pay is now $64,996 (an increase of $2,441 or 3.9% from the 2023 estimate of $62,555.) From 2014 through 2019, Knox County’s average annual pay has been increasing by an average of 2.4% and then in 2020, it increased by 7.6%, suggesting that the pandemic-induced worker shortage most likely started driving the average pay higher in succeeding years. The Knoxville MSA’s average annual pay increased $2,216 or 3.5% from $63,359 in 2023 to $65,575 in 2024. Tennessee’s average annual pay increased $2,730 or 4.2% from $64,718 in 2023 to $67,448 in 2024.

Knox County’s 3.9% average annual pay growth from 2023 to 2024 ranks fifth highest among the ten peer counties. Average annual pay in Durham County (Durham, NC) grew 7.6% from $91,850 to $98,837; Davidson County (Nashville) grew 5.6% from $78,615 to $83,005; Buncombe County (Asheville, NC) grew 5.0% from $56,015 to $58,790; Greenville County (Greenville, SC) grew 4.6% from $60,441 to $63,213; Wake County (Raleigh, NC) grew 3.7% from $74,085 to $76,806; Madison County (Huntsville, AL) grew 3.5% from $74,466 to $77,092; Fayette County (Lexington, KY) grew 3.0% from $62,553 to $64,437; Shelby County (Memphis) grew 1.8% from $70,165 to $71,429; and Hamilton County (Chattanooga) grew 1.6% from $64,959 to $65,972. You can pull average annual pay estimate data for all other geographic areas here.

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 loss of 33,000 in private-sector employment (down from the 37,000 net jobs gain in May). Industry sectors showing positive job growth in June include Leisure and Hospitality (+32,000), Manufacturing (+15,000), Trade/Transportation/Utilities (+14,000), Construction (+9,000), Natural Resources and Mining (+8,000), Information (+5,000), and Other Services (+5,000). Industry sectors showing negative job growth in June include Professional and Business Services (-56,000), Education and Health Services (-52,000), and Financial Activities (- 14,000).

By establishment size, large businesses (with 500+ employees) gained 30,000 jobs and mid-sized businesses (with 50-249 employees) gained 12,000 jobs. “Very Small” businesses (with 1-19 employees) lost 29,000 jobs, mid-sized businesses (with 250-499 employees) lost 27,000 jobs, and “Other Small” businesses (with 20-49 employees) lost 18,000 jobs.

(Source: ADP)

Intuit QuickBooks Small Business Index

Each month, Intuit QuickBooks, the accounting software provider for small and medium-sized businesses, releases the Small Business Index Report, which analyzes employment and revenue trends for small businesses in the U.S. with one to nine employees across twelve industry sectors.

In June, there were 12,746,000 people employed by U.S. small businesses with one to nine employees, down 19,400 from May. Jobs were down in eleven of the twelve industry sectors tracked by the Index including Leisure and Hospitality (-5,300), Retail Trade (-4,000), Education and Health Services (-2,400), Manufacturing (-2,000), Professional and Business Services (-1,700), Wholesale Trade (-1,000), Construction (-900), Transportation and Warehousing (-900), Finance and Real Estate (-500), Information (-500), and Utilities (-100). The Agriculture/Natural Resources/Mining sector was unchanged.

Below is the 13-month total employment trend for U.S. small businesses with one to nine employees –

You can access the full report here.

(Source: Intuit QuickBooks)

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 7.8 million jobs to fill and only 5.5 million hires in May, leaving 2.3 million jobs unfilled.

In May, the largest increases in U.S. job openings were in accommodation and food services (+314,000), health care and social assistance (+60,000), transportation/warehousing/utilities (+60,000), financial activities (+58,000), other services (+43,000), manufacturing (+22,000), and construction (+3,000).

The largest decreases in job openings were in retail trade (-71,000), arts/entertainment/recreation (-37,000), professional and business services (-28,000), wholesale trade (-27,000), private educational services (-11,000), and information (-6,000).

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 May 2024 to May 2025 is 2.4%. This is up from 2.3% in the April 2024 to April 2025 period. Last year, the national inflation rate was 3.3% from May 2023 to May 2024.

The May CPI report marks the thirty-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, natural gas prices are up 15.3%, auto insurance is up 7.0%, auto repair services are up 5.1%, electricity costs are up 4.5%, housing prices are up 3.9%, eating out prices are up 3.8%, groceries are up 2.2%, used car prices are up 1.8%, and new vehicle prices are up 0.4%.

From a year ago, gasoline prices are down 12.0%, airline fares are down 7.3%, and apparel is down 0.9%.

The Federal Reserve decided to keep the federal funds rate at 4 ¼ to 4 ½ percent at its Federal Open Market Committee (FOMC) policy-setting meeting June 17-18. The Fed stated that “although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low and labor market conditions remain solid. Inflation remains somewhat elevated.” The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. Uncertainty about the economic outlook has diminished but remains elevated. 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 2.3% for the May 2024 to May 2025 period. This is up from 2.0% in the April 2024 to April 2025 period. Last year, the rate was 3.0% from May 2023 to May 2024.

(Source: U.S. Bureau of Labor Statistics; Consumer Price Index; Not Seasonally Adjusted)

Housing Market

Home sales in East Tennessee increased 3.4% from April to May at a seasonally adjusted annual rate (SAAR) of 20,254. While showing slight month-over-month improvement, this continues the trend of a slower spring season than usual; sales were down 4.8% from May 2024.

May home sales in Knox County also increased over 9.9% over a very slow April but decreased 3.6% from the previous year at a seasonally adjusted annual rate (SAAR) of 8,009.

The median home sales price across the East Tennessee region was $370,000 in May, up 1.3% from a year ago. Knox County’s median home sale price held steady at $400,000, an increase of 3% from a year ago. Price appreciation has slowed considerably so far in 2025.

Half of the homes sold across the East Tennessee region went under contract in 19 days or less, up from 13 days last year.

Active inventory in the East Tennessee region was up 40.3% from the previous year.

Months of inventory for East Tennessee, or the number of months it would take to exhaust active listings at the current sales rate, stayed steady at 3.9 months.

You can subscribe to the East Tennessee REALTORS® monthly Market Pulse Newsletter here.

East Tennessee REALTORS® recently released its State of Housing 2025 Report. Highlights of the report include positive signs of a gradual housing market recovery with the existing home inventory returning to 2019 levels. The good news is that inventory has increased from only 614 homes for sale at the worst point of the housing crisis in 2022 to over 6,000 homes listed for sale in 2025. The bad news is that there is now an inventory mismatch with most new homes getting bigger and more expensive. Nearly 60% of potential homebuyers are competing for less than 15% of the inventory due to affordability. The current need is for more homes for low to mid-range household income buyers. You can access and download the full report 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 2025 was $753.158 billion (up 4.2% from April and up 1.4% from last May.)

The retail sectors that showed sales growth from last May were Furniture and Home Furnishings Stores (+10.2%), Health and Personal Care Stores (+6.6%), Food Services and Drinking Places (+5.3%), General Merchandise Stores (+3.0%), Clothing Stores (+2.8%), Non-store Retailers (+2.7%), Food and Beverage Stores (+1.6%), and Motor Vehicles and Parts Sales (+0.5%).

Retail sectors that showed a decline in sales from last May were Gasoline Stations (-6.9%), Miscellaneous Stores (-6.4%), Building Materials (-3.7%), Sporting Goods/Books/Hobby/Music Stores (-2.5%), and Electronics and Appliance Stores (-1.1%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $136.083 million in state sales taxes in May (down 0.6% from April and up 4.1% from last May) and Knox County collected $88.281 million in May (down 0.4% from April and up 5.0% from last May.) The state of Tennessee collected $1.257 billion in state sales taxes in May (down 1.0% from April and up 5.1% from last May.)

The Knoxville MSA collected $49.474 million in local sales taxes in May (down 0.5% from April and up 7.3% from last May) and Knox County collected $30.212 million (down 0.6% from April and up 7.1% from last May.)

(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.

June 10, 2025 – SkyNano, a Knoxville area based leader in sustainable materials innovation, has been awarded a $1.25 million U.S. Air Force contract to develop technologies that will establish a domestic, sustainable, and low-cost supply chain for battery-grade graphite. SkyNano will collaborate with American Energy Technologies Company (ATEC) and Eonix Energy Company on the 21-month project. You can read more here.

June 17, 2025 – Howmet Aerospace Inc., a leading global provider of advanced engineered solutions for the aerospace and transportation industries, announced plans to create an additional 217 new jobs at its Morristown plant on top of the 50 new jobs previously announced in July 2024. The company currently employs more than 1,000 people in Hamblen County. You can read more here.

Knox County Business Licenses

New business licenses issued in May 2025 by Knox County are down 6.5% from April and are up 1.6% from May 2024.

A total of 259 new business licenses were issued in May 2025 compared to 277 in April and 255 in May 2024. The top industry sectors for which business licenses were issued in May 2025 were services, 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 323,713 passengers in May (up 13.2% from April’s passenger traffic of 286,013 and up 12.8% from May 2024.)

The total freight recorded in May at TYS was 5,038,317 pounds (up 1.9% from April and down 24.8% 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 2,555,035 (down 1.7% from the May 2024 daily passenger average of 2,598,621 and up 6.2% 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) , “Industry-wide domestic traffic expanded 2.1% YoY in May. This was slower than the increase in April despite several major markets experiencing accelerated growth. The 1.7% YoY contraction in the US domestic market, the world’s largest in RPK (Revenue-Passenger-Kilometers) terms, is the main reason for this poor performance. Economic uncertainty and a reduction in government travel have impacted the US domestic market. It also explains the decline in the total RPK carried by North American airlines in May. The US domestic PLF (Passenger Load Factor) dropped 3.1 percentage points YoY, as capacity increased 2.0%.” You can read more here.

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