Economic Conditions Outlook

March 2025

Welcome to the March 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:

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 1 (January 2025) survey, the evaluation of the level of general business activity and company outlooks have mostly “improved” from the previous quarter. (In the last quarter, the evaluation of the level of general business activity had “worsened” and company outlooks were split evenly between “worsened” and “the same.”)

The Quarter 1 current indicator responses show mostly “increases” in the growth rate of orders, prices paid for raw materials, and wages and benefits. “No changes” are 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 are mostly split between “increased” and “decreased.” The number of employees is mostly split between “increased” and “no change.” Capacity utilization is mostly split between “decreased” and “no change.” (In the last quarter, responses showed “decreases” in production, capacity utilization, volume of new orders, and average employee workweek. Wages and benefits had “increased.” Unfilled orders, delivery time, prices paid for raw materials, prices received for finished goods, and number of employees were evenly split between “decreased” and “no change.” The growth rate of orders, volume of shipments, and capital expenditures were evenly split between “increased” and “decreased.” Finished goods inventories were split between “increased” and “no change.”)

The six-month outlook in Quarter 1 anticipates 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” are expected for unfilled orders, finished goods inventories, and the average employee workweek. (The six-month outlook in the last quarter expected “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 were split evenly between “increase” and “decrease.” Unfilled orders, finished goods inventories, prices received for finished goods, number of employees, and capital expenditures were split evenly between “decrease” and “no change.” Wages and benefits were split between “increase” and “no change.”)

Knoxville area retailers indicated in the Quarter 1 (January 2025) survey that the evaluation of the level of general business activity is mostly “the same” from the last quarter, while their company outlooks have mostly “improved.” (In the last quarter, retailers responded that their evaluation of the level of general business activity and company outlooks were “the same” from the last quarter.)

The Quarter 1 current indicator responses show mostly “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are mostly reported in internet sales, the number of full-time and part-time employees, and the average employee workweek. Capital expenditures and inventories are evenly split between “increase” and “no change.” (In the last quarter, retail responses showed “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” were reported in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories.)

The six-month retail outlook in Quarter 1 projects mostly “increases” in net sales revenue, wages and benefits, input prices, selling prices, and capital expenditures. “No changes” are mostly forecasted for internet sales, the number of part-time employees, and the average employee workweek. The number of full-time employees and inventories are evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” were expected in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories.)

Knoxville area service sector businesses report in the Quarter 1 (January 2025) survey that their evaluation of the level of general business activity has mostly “improved” from the last quarter, while company outlooks continue to be “mixed.” (The evaluation of the level of general business activity had mostly “worsened” and company outlooks were “mixed” in the last quarter.)

The Quarter 1 current indicator responses show mostly “increases” in revenue, wages and benefits, input prices, and capital expenditures. “No changes” are mostly reported for the number of part-time employees, the average employee workweek, and selling prices. The number of full-time employees is “mixed.” (In the last quarter, responses showed mostly “no changes” in the number of full-time and part-time employees, average employee workweek, and wages and benefits. Input prices had mostly “increased.” Capital expenditures were mostly split between “increased” and “no change.” All other indicators were “mixed.”)

The six-month outlook in Quarter 1 projects mostly “increases” in revenue, the number of full-time employees, wages and benefits, input prices, selling prices, and capital expenditures. Mostly “no changes” are expected in the number of part-time employees and the average employee workweek. (The six-month outlook in the last quarter anticipated mostly “increases” in revenue, input prices, and capital expenditures. Mostly “no changes” were expected in the number of part-time employees and average employee workweek. The number of full-time employees, wages and benefits, and selling prices were mostly 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 February was 3.0% (down from 3.5% in January and up from 2.6% in February 2024.) Knox County’s unemployment rate in February was 2.8% (down from 3.3% in January and up from 2.4% in February 2024.) Tennessee’s unemployment rate was 3.5% in February (down from 3.8% in January and up from 2.8% in last February.) The U.S. unemployment rate was 4.5% in February (up from 4.4% in January and up from 4.2% in last February.)

The size of the total labor force slightly increased from January to February at the local, state, and national levels. Knox County’s labor force increased 0.7% from 254,583 in January to 256,280 in February. The Knoxville MSA’s labor force increased 0.6% from 453,739 in January to 456,337 in February. Tennessee’s labor force increased 0.2% from 3,431,226 in January to 3,437,068 in February. The national labor force increased 0.2% from 169,814,000 in January to 170,116,000 in February.

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 February, there were 9,854 unique active job postings in the Knoxville MSA (down 1.5% from January and up 4.1% from last February.) There were 6,453 unique active job postings in Knox County (up 3.4% from January and up 2.3% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in February 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 March report shows a net gain of 155,000 in private-sector employment (up from the 77,000 net jobs gain in February.) Industry sectors showing positive job growth in March include Professional and Business Services (+57,000), Financial Activities (+38,000), Manufacturing (+21,000), Leisure and Hospitality (+17,000), Education and Health Services (+12,000), Other Services (+11,000), Construction (+6,000), and Information (+3,000).

Industry sectors showing negative job growth in March include Trade/Transportation/Utilities (-6,000) and Natural Resources and Mining (-3,000).

By establishment size, large businesses (with 500+ employees) gained 59,000 jobs, “Very Small” businesses (with 1-19 employees) gained 42,000 jobs, mid-sized businesses (with 50-249 employees) gained 34,000 jobs, “Other Small” businesses (with 20-49 employees) gained 10,000 jobs, and mid-sized businesses (with 250-499 employees) gained 9,000 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 March, there were 12,050,800 people employed by U.S. small businesses with one to nine employees, down 0.81% from February and down 8.0% from last March. Jobs were down across all but one of the twelve industry sectors tracked by the Index including Education and Health Services (-19,700), Professional and Business Services (-16,400), Retail Trade (-14,200), Leisure and Hospitality (-13,100), Manufacturing (-13,100), Transportation and Warehousing (-5,700), Finance and Real Estate (-5,200), Construction (-4,600), Information (-3,700), Wholesale Trade (-3,000), and Utilities (-100). The only sector showing positive job growth from last month was Agriculture/Natural Resources/Mining (+1,000).

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

Average real monthly revenue in March for U.S. small businesses with one to nine employees was $50,870 (in 2017 dollars) per business, a 0.83 percent increase from February and a 2.7 percent decrease from last March. The index is deflated to 2017 dollars to remove the impact of inflation and track real changes in revenue and is also seasonally adjusted. Industry sectors showing revenue growth in March include Wholesale Trade (+4.12%), Education and Health Services (+2.53%), Transportation and Warehousing (2.40%), Professional and Business Services (+1.45%), Utilities (+0.87%), Information (+0.56%), Manufacturing (+0.47%), and Financial Activities (+0.28%). Industry sectors showing a decline in revenue in March include Agriculture/Natural Resources and Mining (-2.36%), Retail Trade (-2.17%), Leisure and Hospitality (-0.2%), and Construction (-0.06%).

Below is the 13-month average real monthly revenue 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 7.6 million jobs to fill and only 5.4 million hires in February, leaving 2.2 million jobs unfilled.

In February, the largest increases in U.S. job openings were in professional and business services (+134,000), construction (+22,000), transportation/warehousing/utilities (+18,000), information (+14,000), private educational services (+13,000), and other services (+2,000).

The largest decreases in job openings were in retail trade (-126,000), financial activities (-80,000), wholesale trade (-56,000), health care and social assistance (-46,000), accommodation and food services (-34,000), manufacturing (-31,000), and arts/entertainment/recreation (-27,000).

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.

University of Tennessee’s Tickle College of Engineering Ranked #52 on 2025 Best Graduate Schools List

U.S. News and World Report recently released its 2025 Best Graduate Schools List. Among the several graduate schools and programs at the University of Tennessee – Knoxville (UTK), the Tickle College of Engineering ranked #52 overall and #29 among public universities. The school’s nuclear engineering graduate program was tied nationally at #3 and ranked #2 among public universities. Overall graduate engineering school rankings for UTK’s comparable peers were #20 University of Colorado – Boulder, #31 Virginia Tech, #49 Iowa State, #59 (tie) Auburn University, #64 Clemson University, #81 University of South Carolina, #97 University of Kentucky, #101 (tie) University of Nebraska – Lincoln, #101 University of Oklahoma, and #106 University of Missouri – Columbia. Overall graduate engineering school rankings for UTK’s aspirational peers were #5 Purdue University, #7 University of Illinois – Urbana-Champaign, #27 North Carolina State University, #31 Penn State University, #59 (tie) Michigan State University, and #111 University of Georgia. You can access more graduate schools and programs rankings here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from February 2024 to February 2025 is 2.8%. This is down from 3.0% in the January 2024 to January 2025 period. Last year, the national inflation rate was 3.2% from February 2023 to February 2024.

The February CPI report marks the thirty-second 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 11.1%, natural gas prices are up 6.0%, auto repair services are up 5.8%, housing prices are up 4.2%, eating out prices are up 3.7%, electricity costs are up 2.5%, groceries are up 1.9%, used car prices are up 0.8%, and apparel is up 0.6%.

From a year ago, gasoline prices are down 3.1%, airline fares are down 0.7%, and new vehicle prices are down 0.3%.

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 March 18-19. The Fed stated that recent indicators suggest that economic activity has continued to expand at a solid pace, labor market conditions have remained solid, the unemployment rate has stabilized at a low level in recent months, and inflation remains somewhat elevated. The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. The uncertainty around the economic outlook has increased. Most economists are expecting two more quarter percentage point cuts this year. 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 February 2024 to February 2025 period. This is down from 2.9% in the January 2024 to January 2025 period. Last year, the rate was 3.5% from February 2023 to February 2024.

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

Housing Market

Home sales in East Tennessee decreased 4.7% from January to February at a seasonally adjusted annual rate (SAAR) of 17,582. Looking at total home sales for the first two months of the year, 2025 shows a slight increase over 2024 – about 0.3%. Home sales in Knox County were also flat, slightly decreasing 1% from the previous year at a seasonally adjusted annual rate (SAAR) of 6,815.

The median home sales price across the East Tennessee region was $360,000 in February, up 1.8% from a year ago. Knox County’s median home sale price was $400,000, an increase of 4.7% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 41.5 days or less, up from 28 days last year and 37 days last month.

Active inventory in the East Tennessee region was up 35.1% 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, increased to 5 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 February 2025 was $639.123 billion (down 4.3% from January and down 0.7% from last February.)

The retail sectors that showed sales growth from last February were Furniture and Home Furnishings Stores (+6.0%), Health and Personal Care Stores (+3.3%), General Merchandise Stores (+1.4%), and Non-store Retailers (+0.6%).

Retail sectors that showed a decline in sales from last February were Electronics and Appliance Stores (-8.4%), Building Materials (-5.9%), Sporting Goods/Books/Hobby/Music Stores (-4.4%), Gasoline Stations (-3.7%), Miscellaneous Stores (-3.6%), Clothing Stores (-2.8%), Food Services and Drinking Places (-1.1%), Food and Beverage Stores (-0.6%), and Motor Vehicles and Parts Sales (-0.3%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $113.928 million in state sales taxes in February (down 19.2% from January and up 7.5% from last February) and Knox County collected $72.900 million in February (down 22.2% from January and up 6.7% from last February.) The state of Tennessee collected $1.086 billion in state sales taxes in February (down 22.5% from January and up 5.7% from last February.)

The Knoxville MSA collected $43.019 million in local sales taxes in February (down 21.8% from January and up 6.0% from last February) and Knox County collected $26.180 million (down 23.1% from January and up 6.3% from last February.)

(Source: Tennessee Department of Revenue)

Tennessee Ranked Fourth for Lowest Tax Burden in the U.S.

WalletHub, the personal finance website, recently released its 2025 Tax Burden by State report. The report measures three types of taxes by state – property taxes, individual income taxes, and sales and excise taxes as a share of total personal income in the state. Tennessee ranked #47 overall, making it the fourth lowest tax burden state. While Tennessee ranked 47^th for property tax burden and 43^rd for individual income tax burden, the state does have one of the highest sales and excise tax burdens ranking #7. The top five states with the highest tax burdens are #1 Hawaii, #2 New York, #3 Vermont, #4 California, and #5 Maine. The only states that had a lower tax burden than Tennessee were #48 New Hampshire, #49 Wyoming, and #50 Alaska. You can read more 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.

March 17, 2025 – Realty Executives Associates (REA), one of East Tennessee’s leading real estate firms, announced record-breaking numbers and significant expansions as the firm closed out 2024 and looks forward to continued growth in 2025. In 2024, REA welcomed 234 new agents, bringing its total to over 1,100 real estate professionals across East Tennessee. The firm also expanded its footprint with the opening of four new offices, further solidifying its presence in key markets. REA achieved $3.4+ billion in local sales volume, making 2024 a historic year and securing its position as the #1 real estate firm in the region for the 45th consecutive year. You can read more here.

Knox County Business Licenses

New business licenses issued in February 2025 by Knox County are down 43.5% from January and are down 1.3% from February 2024.

A total of 226 new business licenses were issued in February 2025 compared to 400 in January and 229 in February 2024. The top industry sectors for which business licenses were issued in February 2025 were services, retail, construction, 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 220,840 passengers in February (down 5.0% from January’s passenger traffic of 232,533 and up 12.4% from February 2024.)

The total freight recorded in February at TYS was 4,424,678 pounds (down 2.5% from January and down 26.6% from last February.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in February was 2,234,995 (up 0.5% from the February 2024 daily passenger average of 2,224,388 and up 8.1% from the pre-COVID February 2019 average of 2,068,336.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA) , “…the passenger load factor in the US was 2.5 percentage points lower than a year ago, and RPK (Revenue Passenger-Kilometer) shrunk by 4.2%. Consumer confidence in the country has recently dropped, and in February 2025, it plummeted to a level close to those observed in late 2022 after decreasing for three consecutive months. These developments reflect the current concerns of US consumers regarding policy and economic factors.” You can read more here.

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