Experiences of Businesses Using the Hybrid Work Model
In addition to our regular monthly survey questions, we asked respondents if they had considered using a hybrid work model (combining remote work with in-person work) and if so, what has their experience been using the model.
The majority of respondents (52%) indicated that they did consider using a hybrid work model at their business. Of those businesses that considered a hybrid work model, 75% have implemented the model or already had the model in place for a few years. Most respondents reported that their experience using the hybrid work model has been positive leading to increased sales and productivity. There can be an expensive technology cost that makes it work but most respondents say the cost is worth it. The hybrid model works well for most office staff, IT staff, and individual contributors. It does not work quite as well for employees that have more collaborative roles or jobs that require a lot of on-site work. Some respondents did indicate that their experience has been mixed as some employees effectively use the model while others struggle with the lack of in-person one-on-one social interaction. Businesses that have considered the hybrid work model but have not yet implemented it say that they are still trying to determine which employees would be qualified for remote work and if any qualified employees are willing to negotiate any trade-offs on pay, benefits, or perks as a condition for working remotely.
Respondent reasons for not considering a hybrid work model are that it is not the company’s preference, the majority of employees have a preference for being in the office or on-site and work cannot be performed at home in some industries like manufacturing, retail stores, restaurants, dealerships, mobile services, and repair services.
Labor Market Information
The Knoxville MSA’s unemployment rate in February was 2.8% (this was lower than January’s 3.0% rate and much lower than the 4.3% rate from February 2021.) Knox County’s unemployment rate in February was 2.5% (down from 2.8% in January and down from 3.9% in February 2021.) Tennessee’s unemployment rate was 3.3% in February (down from 3.7% in January and down from 4.9% in last February.) The U.S. unemployment rate was 4.1% in February (down from the 4.4% rate in January and down from the 6.6% unemployment rate recorded last February.)
The size of the total labor force increased from January to February at the local, state, and national levels. The Knoxville MSA’s labor force increased 1.6% (from 437,759 in January to 444,574 in February.) Knox County’s labor force increased 1.6% (from 249,650 in January to 253,576 in February.) Tennessee’s labor force slightly increased 0.9% (from 3,358,265 in January to 3,389,300 in February.) The national labor force slightly increased 0.6% (from 162,825,000 in January to 163,725,000 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)
Data Note: Emsi, our source for job postings data in ECO – financed by First Horizon Bank, has merged with Burning Glass and is now using a new integrated feed for job postings data that allows for further deduplication of job postings, better employer tagging, and improved industry classification. Analysis for the current estimates, top 10 job posting industries, top 10 occupations, and the 13-month job posting trends for Knox County and Knoxville MSA reflect Emsi Burning Glass’ new methodology.
For the month of February, there were 10,999 unique active job postings in the Knoxville MSA (up 10.5% from January and up 47.6% from last February.) There were 7,499 unique active job postings in Knox County (up 9.3% from January and up 48.8% 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: EMSI Job Postings Analytics)
ADP National Employment Report®
Each month, ADP, a large-scale payroll and human resources company releases their National Employment Report®, which provides a high-level look at month-over-month private-sector employment changes across the country.
The February report shows a gain of 475,000 in nonfarm private-sector employment (a significant increase from the 301,000 jobs loss reported in January.) Large firms (500+ employees) posted the largest gain with an increase of 552,000 jobs and midsized businesses (50-499 employees) gained 18,000 jobs. Small businesses (1-49 employees) offset the overall jobs gain by posting a loss of 96,000 jobs.
ADP’s Small Business Report, which further synthesizes the small business landscape, shows that the 96,000 jobs loss was driven mostly by the “Very Small” businesses (1-19 employees) which decreased by 95,000 jobs. “Other Small” businesses (20-49 employees) decreased by 1,000 jobs.
Worker Shortage Update
The labor shortages are persisting longer than many economists expected. From January to February, the Knoxville MSA’s total workforce grew 1.6% while the number of job openings grew 10.5%. There continues to be high job demand and slower workforce growth locally resulting in fierce competition for talent and many open jobs going unfilled. The nation had 11.3 million jobs to fill in February, but only 6.7 million people got hired. 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 more here.
The shortage of skilled labor continues to impact the construction, maintenance, and manufacturing industries. Skillwork™, an employment agency for skilled labor based in Omaha, spotlights eight trends they see for skilled labor in 2022. 1) They expect the labor shortages from the past years to continue and likely accelerate as short-staffed businesses compete to attract, hire, and retain quality tradesmen from a limited pool of skilled trade workers. 2) The “Baby Boomer Exodus” will continue since one-third of current trade workers are over the age of 50 and as they near retirement age, there will not be enough younger skilled replacement workers. 3) The demand for workplace flexibility will continue to grow which means that traditional skilled labor businesses that have often had set shifts, days and times may need to become more flexible by providing split shifts, swappable shifts, flexible PTO, and job sharing. 4) There are some projections that two-thirds of job openings in 2022 will be to replace employees that left for the same or adjacent occupation at a competitor company so businesses that rely on skilled workers should find ways to keep their current workers happy. 5) The “Fourth Industrial Revolution” in the forms of automation, predictive maintenance, artificial intelligence (AI), interconnected systems, and cloud technology is well underway and will likely accelerate in 2022. 6) The rising costs of raw materials and inflation in general will continue to affect the bottom lines of businesses and will drive up wages to keep skilled workers from leaving. 7) The supply chain backlog will continue due to the shortage of off-loaders, longshoremen, and truck drivers and all the ripple effects that go with that. 8) The recently-passed infrastructure spending bill will increase the demand for skilled trade workers to repair bridges, airports, highways, and other infrastructure projects at a time when there are not enough skilled workers to handle current projects. You can read the full Skillwork™ article here.
We can continue to expect more increasing pressure on wages, sign-up bonuses, job flexibility, and childcare options. As a region, we must figure out how we can significantly increase the size of our local labor force through talent attraction (recruiting more people aged 25-54 to our region), talent retention (keeping recent college graduates and people aged 25-54 here), and immigration reform (increasing work visas and the ability to recruit specialized talent from abroad) in order to meet our region’s ever increasing job demand.
Consumer Price Index (CPI – Inflation Rates)
The national inflation rate from February 2021 to February 2022 is 7.9%. This is up from the 7.5% rate from January 2021 to January 2022. Last year, the national inflation rate was 1.7% from February 2020 to February 2021. Higher inflation is primarily being driven by the supply chain disruptions and pent-up consumer demand for goods and has persisted longer than the Feds expected with price increases hitting 40-year highs. Gasoline prices rose 6.6% from January, largely driven by the Russian invasion of Ukraine. Prices for used cars are up 41% from this time last year. Food and housing prices are up 8% and 4.4% respectively from last year. You can read more here.
The Federal Reserve raised the benchmark short-term interest rate at its March meeting for the first time since 2018. After two years of holding the borrowing rate near zero, the Fed voted to raise the key rate to a target range of 0.25% to 0.5% and further signaled that there would be more hikes at the Fed’s six remaining meetings this year to fight inflation. You can read more here. Mortgage rates rose to 4.4% just ahead of the Fed rate hike. 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 8.4% for the February 2021 to February 2022 period. This is up from 7.8% in the January 2021 to January 2022 period. Last year, the rate was 2.1% for February 2020 to February 2021.
(Source: U.S. Bureau of Labor Statistics; Consumer Price Index, not seasonally adjusted)
Home sales in the Knoxville area declined 7.2% in February to a seasonally adjusted annual rate (SAAR) of 24,656. Similarly, home sales in Knox County declined 13.5% from the previous month to a seasonally adjusted annual rate (SAAR) of 8,642. Home sales in the Knoxville area increased 2.0% year-over-year but decreased 13.1% in Knox County.
Nationally, existing-home sales decreased to a seasonally-adjusted annual rate of 6.02 million in February — down 7.2% from the previous month and 2.4% from a year ago. Home sales in the South similarly declined 5.1% from the previous month but increased 3.0% from one year prior.
The median home sales price in the Knoxville area was $305,000 in February — up 24% from one year ago. Knox County’s median home sale price was $310,500 – up 19.4% from one year ago.
Forty-three percent of homes sold for over asking price in February, compared to 36% the previous month. 26.5% of homes sold for at least $10,000 over asking price and 12% sold for at least $25,000 over asking price. New construction (i.e., “Never Occupied,” “To Be Built,” “Under Construction,” or “Under Roof”) represented 9.3% of total home sales, though move-in ready homes accounted for only 23% of all new construction sales.
In the Knoxville area, total inventory was down around 41% from a year ago and more than 68% from pre-pandemic levels. Inventory in Knox County was down 59% year-over-year. Half of homes sold in the Knoxville area were on the market for 5 days or less, down from 11 days in February 2021. Months of inventory, or the number of months it would take to exhaust active listings at the current sales rate, rose to 0.8 months.
According to Hancen Sale, Governmental Affairs and Policy Director at the Knoxville Area Association of Realtors®, “Despite mortgage rates increasing at a historic pace and concerns about broad-based inflation, Knoxville’s housing market has yet to slow down. As KAAR’s recent 2022 State of Housing Report noted, tight inventory conditions have created a self-reinforcing cycle where potential sellers are weary of putting their home on the market due to concerns about finding a new home. Prices have continued to rise as a result and are likely to grow another 10 to 15 percent in the next year, which will further erode housing affordability. One thing cannot be overstated: Knoxville is amid a full-fledged housing crisis.” You can read the full 2022 State of Housing Report from KAAR here.
Knoxville Area Association of REALTORS® (KAAR) reports monthly home sales patterns using a seasonally adjusted annualized rate (SAAR), an adjusted rate that takes into account typical seasonal fluctuations in data and is expressed as an annual total. Comparing month-over-month housing market data using this method provides a more accurate depiction of home sales.
(Sources: National Association of Realtors®; Knoxville Area Association of Realtors)
(Sources: U.S. Housing & Urban Development – SOCDS – State of the Cities Data Systems; U.S. Census Bureau – Building Permits Survey)
National Retail Sales
The total advance monthly retail sales estimate for February 2022 was $577.318 billion (down 0.6% from January and up 17.5% from last February.)
All retail sectors (except Electronics and Appliances) showed growth from this time last year. The retail sectors that showed the greatest growth from last February were Gasoline Stations (+39.4%), Food Services and Drinking Places (+36.4%), Clothing Stores (+35.6%), Miscellaneous Stores (+25.3%), Motor Vehicles and Parts (+18.1%), Sporting Goods/Books/Hobby/Music Stores (+15.9%), General Merchandise Stores (+13.4%), Building Materials Stores (+12.4%), Furniture and Home Furnishing Stores (+11.2%), and Non-store Retailers (+10.9%).
Retail sectors seem to continue to benefit from pent up customer demand and increasing leisure travel despite rising inflation.
(Sources: U.S. Census Bureau; Advance Monthly Retail Trade Reports, not adjusted)
Tennessee State and Local Sales Tax Collections
The Knoxville MSA region collected $97.973 million in state sales taxes in February (down 21.9% from January and up 9.4% from last February) and Knox County collected $63.671 million in February (down 23.2% from January and up 9.6% from last February.) The state of Tennessee collected $933.794 million in state sales taxes in February (down 25.2% from January and up 10% from last February.)
The Knoxville MSA collected $35.985 million in local sales taxes in February (down 24.7% from January and up 11.5% from last February) and Knox County collected $22.171 million (down 24.7% from January and up 11% from last February.)
(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 firstname.lastname@example.org.
New and existing industries continue to invest in the Knoxville region.
March 2, 2022 – Ultra Safe Nuclear Corporation (USNC), a Seattle-based manufacturer of inherently safe nuclear fuels and a global leader in the deployment of micro reactors, announced plans to open a new Pilot Fuel Manufacturing (PFM) facility in the East Tennessee Technology Park in Oak Ridge. The company will invest $17 million and create 31 new jobs over the next five years. This new pilot facility will specialize in manufacturing refractory ceramic (silicon carbide) materials and USNC’s Fully Ceramic Microencapsulated (FCM®) nuclear fuel, which is designed for use in USNC’s Micro Modular Reactor (MMR™) and other advanced reactors. You can read more here.
March 16, 2022 – ATC Drivetrain, a Farmington Hills, Michigan-based “remanufacturer” of automotive parts, announced it is investing $8.3 million to open a new transmission plant at 3015 East Governor John Sevier Highway near the Forks-of-the-River industrial park. The plant will provide 218 new manufacturing jobs over the next five years. The company specializes in remanufacturing “like new” automotive parts like transmissions and engines. This new facility will help the company grow its remanufacturing and battery life cycle management businesses. ATC Drivetrain also has two manufacturing plants in Oklahoma City as well as operations in Europe and Asia. You can read more here.
March 25, 2022 – KaTom Restaurant Supply, a wholesale food service and equipment supplier, announced it will invest $7.5 million in its warehouse fulfillment center in Kodak (Sevier County). The 100,000-square-foot warehouse expansion will create 120 new jobs over the next five years. You can read more here.
March 25, 2022 – Parker Trutec MMI, a metal coating and heat treating company, announced it will invest $12 million to build a new 54,000-square-foot manufacturing and distribution facility at the I-40 Industrial Park in Kodak resulting in 48 new jobs. You can read more here.
March 28, 2022 – Furrow Automotive Group announced it will invest $17 million to build a new 23,000-square-foot Land Rover Knoxville dealership and a new 20,000-square-foot Knoxville Motor Company BodyWerks collision center at 10580 Parkside Drive in West Knoxville creating 40 new jobs. The company is expanding its footprint due to increased customer demand. The new collision center will be larger than the current Mercedes-Benz of Knoxville collision center, which will be transitioned to service Mercedes Sprinter Vans. The new Land Rover Knoxville dealership will be double the size of the current dealership located at 10215 Parkside Drive, which will be converted into a Furrow pre-owned vehicle dealership. The new campus is expected to open sometime this fall. You can read more here.
Knox County Business Licenses
New business licenses issued in February 2022 by Knox County are up 1.8% from February 2021 during the pandemic and are down 8.8% from the pre-pandemic February 2019 count.
A total of 229 new business licenses were issued in February 2022 compared to 225 in February 2021 and 251 in February 2019. The top industry sectors for which business licenses were issued in February 2022 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 147,168 passengers in February (up 7.9% from January’s passenger traffic of 136,409 and up 77.9% from COVID-ravaged February 2021 but down 5.2% from pre-COVID February 2019.)
The total freight recorded in February at TYS was 6,159,014 tons (up 5.3% from January and up 5.1% 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 1,733,143 (up 95.1% from the February 2021 daily passenger average of 888,109 but still down 15.6% from the pre-COVID February 2019 average of 2,054,480.) You can view the daily TSA checkpoint travel numbers here.
According to the International Air Transport Association (IATA), “Global air travel was negatively impacted by the Omicron disruptions at the start of 2022 but was nevertheless significantly better than at the beginning of 2021. Industry-wide revenue passenger-kilometers (RPKs) rose by 82.3% year-on-year (YoY) in January 2022, but month-on-month (MoM) RPKs fell by 4.9%. In the U.S. domestic market, the RPK growth rate slowed in January to 35.5% YoY. Putting the annual comparison aside, traffic levels declined 14% in the U.S. The U.S. market was substantially affected by flight cancellations and staff shortages related to COVID quarantines. Seat capacity in the U.S. was also disrupted by a complicated 5G rollout and by heavy snowstorms which led to additional flight cancellations and power outages at airports.” You can read more here.
(Sources: Metropolitan Knoxville Airport Authority; U.S. Transportation Security Administration; International Air Transport Association)