Economic Conditions Outlook

October 2024

Welcome to the October 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:

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 4 (October 2024) survey, the evaluation of the level of general business activity has “worsened” since the last quarter and company outlooks are split evenly between “worsened” and “the same.” (In the last quarter, the evaluation of the level of general business activity was split evenly between “improved” and “the same” while company outlooks were reported as “improved.”)

The Quarter 4 current indicator responses show “decreases” in production, capacity utilization, volume of new orders, and average employee workweek. Wages and benefits have “increased.” Unfilled orders, delivery time, prices paid for raw materials, prices received for finished goods, and number of employees are evenly split between “decreased” and “no change.” The growth rate of orders, volume of shipments, and capital expenditures are evenly split between “increased” and “decreased.” Finished goods inventories are split between “increased” and “no change.” (In the last quarter, responses showed “no changes” for unfilled orders, delivery time, prices received for finished goods, and average employee workweek. Production, capacity utilization, volume of new orders, and growth rate of orders had “increased.” The volume of shipments, finished goods inventories, prices paid for raw materials, wages and benefits, number of employees, and capital expenditures were all split evenly between “increase” and “no change.”)

The six-month outlook in Quarter 4 anticipates “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 are split evenly between “increase” and “decrease.” Unfilled orders, finished goods inventories, prices received for finished goods, number of employees, and capital expenditures are split evenly between “decrease” and “no change.” Wages and benefits are split between “increase” and “no change.”

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

Knoxville area retailers indicated in the Quarter 4 (October 2024) survey that their evaluation of the level of general business activity and company outlooks are “the same” from the last quarter. (In the last quarter, retailers responded that their evaluation of the level of general business activity and company outlooks had mostly “worsened.”)

The Quarter 4 current indicator responses show “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are reported in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories. (In the last quarter, retail responses showed “no changes” in the number of part-time employees and average employee workweek. Input prices had mostly “increased.” The number of full-time employees, wages and benefits, capital expenditures, and inventories were mostly split between “increase” and “no change.” Net sales revenue, internet sales, and selling prices were mostly split between “decrease” and “no change.”)

The six-month retail outlook in Quarter 4 projects “increases” in net sales revenue, wages and benefits, input prices, and selling prices. “No changes” are expected in internet sales, the number of full-time and part-time employees, average employee workweek, capital expenditures, and inventories. (The six-month outlook in the last quarter anticipated mostly “no changes” in the number of full-time and part-time employees as well as the average employee workweek. Input prices as well as wages and benefits were expected to “increase.” Net sales revenue and selling prices were mostly split between “increase” and “decrease.” Internet sales and capital expenditures were mostly split between “decrease” and “no change.”)

Knoxville area service sector businesses report in the Quarter 4 (October 2024) survey that their evaluation of the level of general business activity has mostly “worsened” since the last quarter and company outlooks are “mixed.” (The evaluation of the level of general business activity and company outlooks were mostly “the same” in the last quarter.)

The Quarter 4 current indicator responses show mostly “no changes” in the number of full-time and part-time employees, average employee workweek, and wages and benefits. Input prices have mostly “increased.” Capital expenditures are mostly split between “increased” and “no change.” All other indicators are “mixed.” (In the last quarter, responses showed mostly “no changes” in the number of part-time employees, average employee workweek, wages and benefits, and selling prices. The number of full-time employees, input prices, and capital expenditures had mostly “increased.” Revenue was mostly split between “decrease” and “no change.”)

The six-month outlook in Quarter 4 projects mostly “increases” in revenue, input prices, and capital expenditures. Mostly “no changes” are expected in the number of part-time employees and average employee workweek. The number of full-time employees, wages and benefits, and selling prices are mostly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “increases” in revenue, the number of full-time employees, input prices, and capital expenditures. Mostly “no changes” were expected in the number of part-time employees, average employee workweek, and wages and benefits. Selling prices were 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.

Recession Sentiment for 2025

In addition to the regular quarterly survey questions, respondents were asked if they think a recession will occur sometime in 2025. A majority of respondents (67%) said “no,” while the remaining third said “yes.” After lowering interest rates at last month’s Fed meeting, the Fed remains cautiously optimistic about delivering a “soft landing” for the U.S. economy.

Labor Market Information

The Knoxville MSA’s unemployment rate in September was 3.3% (up from 3.2% in August and up from 3.2% in September 2023.) Knox County’s unemployment rate in September was 3.1% (up from 3.0% in August and up from 3.0% in September 2023.) Tennessee’s unemployment rate was 3.6% in September (up from 3.5% in August and up from 3.4% in last September.) The U.S. unemployment rate was 3.9% in September (down from 4.4% in August and up from 3.6% in last September.)

The size of the total labor force slightly increased from August to September at the local level. The Knoxville MSA’s labor force increased 0.1% from 449,321 in August to 449,955 in September. Knox County’s labor force increased 0.2% from 256,417 in August to 256,822 in September. Meanwhile, Tennessee’s labor force decreased 0.3% from 3,418,349 in August to 3,407,556 in September and the national labor force decreased 0.1% from 168,763,000 in August to 168,569,000 in September.

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 September, there were 9,881 unique active job postings in the Knoxville MSA (down 3.3% from August and up 0.2% from last September.) There were 6,221 unique active job postings in Knox County (down 7.2% from August and down 1.1% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in September 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 October report shows a net gain of 233,000 in private-sector employment (up from the 143,000 net jobs gain in September.) Industry sectors showing positive job growth in October include Education and Health Services (+53,000), Trade/Transportation/Utilities (+51,000), Construction (+37,000), Leisure and Hospitality (+37,000), Professional and Business Services (+31,000), Other Services (+21,000), Financial Activities (+11,000), Information (+7,000), and Natural Resources and Mining (+4,000). The only industry sector showing negative job growth in October is Manufacturing (-19,000).

By establishment size, large businesses (with 500+ employees) gained 140,000 jobs, mid-sized businesses (with 50-249 employees) gained 58,000 jobs, mid-sized businesses (with 250-499 employees) gained 28,000 jobs, and “Very Small” businesses (with 1-19 employees) gained 10,000 jobs. The job gains were offset by “Other Small” businesses (with 20-49 employees), which lost 6,000 jobs.

(Source: ADP)

Worker Shortage Update

The labor shortages are persisting longer than many economists expected. There continues to be high job demand and slower workforce growth resulting in fierce competition for talent and many open jobs going unfilled. According to the latest data from the U.S. Bureau of Labor Statistics (BLS), the nation had 7.4 million jobs to fill and only 5.6 million hires in September, meaning there are 1.3 job openings for every unemployed person.

In September, the largest increases in U.S. job openings were in financial activities (+93,000), professional and business services (+77,000), information (+13,000), and private educational services (+3,000).

The largest decreases in job openings were in health care and social assistance (-178,000), accommodation and food services (-102,000), retail trade (-58,000), transportation/ warehousing/utilities (-54,000), construction (-40,000), wholesale trade (-22,000), manufacturing (-10,000), and arts/entertainment/recreation (-9,000). Other services was unchanged from last month.

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.

Highlights From UT Boyd Center’s Summer 2024 Tennessee Business Leaders Survey

The University of Tennessee’s Boyd Center for Business and Economic Research recently released the results of their Summer 2024 (August) Tennessee Business Leaders Survey. The responses show more optimistic economic expectations for the next 12 months for the state’s economy versus the national economy. Statewide, 50% of respondents expect the state’s economy to be “a little better” over the next 12 months, while only 30% say the same about the national economy. 51% of East Tennessee respondents expect the state’s economy to be “a little better” versus only 29% for the national economy. Reasons for respondents being more optimistic about the state’s economy versus the national economy include business investment and government leadership in Tennessee.

Three quarters of statewide respondents think the state is headed in the right direction. Business leaders think the state should prioritize enhancing workforce development, infrastructure (roads, bridges, etc.) development, and technology (high-speed internet/ broadband) development to improve the state’s business climate. Top challenges facing most businesses surveyed include adverse economic conditions, government regulation, and human resources. A 60%+ majority of respondents said there is not an ample supply of local workers trained for their employment needs. To expand the supply of workers, business leaders think the state should improve training and education, enhance childcare options, encourage in-migration (talent attraction), and reduce government safety nets. Among the skills and attributes that job applicants are lacking, respondents cited work ethic, technical skills, realistic expectations regarding compensation, and initiative. The top challenges for attracting and/or retaining workers mostly revolve around housing affordability and availability as well as childcare affordability and availability. You can access the full survey results here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from September 2023 to September 2024 is 2.4%. This is down from 2.5% in the August 2023 to August 2024 period. Last year, the national inflation rate was 3.7% from September 2022 to September 2023.

The September CPI report marks the twenty-seventh 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 16.3%, housing prices are up 4.9%, auto repair services are up 4.9%, eating out prices are up 3.9%, electricity costs are up 3.7%, natural gas prices are up 2.0%, apparel is up 1.8%, airline fares are up 1.6%, and groceries are up 1.3%. From a year ago, gasoline prices are down 15.3%, used car prices are down 5.1%, and new vehicle prices are down 1.3%.

The Federal Reserve cut the target range for the federal funds rate by half a percentage point to 4 ¾ to 5 percent at its Federal Open Market Committee (FOMC) policy-setting meeting September 17-18. This interest rate cut was the first cut since 2020 and was higher than the quarter-point rate reduction most analysts were anticipating last month. The Fed made the higher rate cut due to the progress made on inflation moving toward the committee’s 2% objective and the balance of economic risks. The committee will continue to monitor economic data and make further adjustments to the federal funds rate in the future as appropriate. 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 2.1% for the September 2023 to September 2024 period. This is unchanged from the August 2023 to August 2024 period. Last year, the rate was 4.0% from September 2022 to September 2023.

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

Housing Market

Home sales in East Tennessee decreased 7.8% from August to September to a seasonally adjusted annual rate (SAAR) of 17,046. By comparison, home sales in Knox County decreased 9% from the previous month to a seasonally adjusted annual rate (SAAR) of 6,656. Compared to the previous year, home sales were down 1.0% in the East Tennessee region.

The median home sales price across the East Tennessee region was $371,250 in September, up 9.19% from a year ago. Knox County’s median home sales price was $404,950, an increase of 11.4% from a year ago.

Half of the homes sold across the East Tennessee region went under contract in 20 days or less, no change from the previous month.

Active inventory in the East Tennessee region increased in September, with the total number of active listings up 38.3% 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 3.82 months.

The rental market continued to moderate in Q3 2024 thanks in part to the increase in units available. 1,815 units were completed in the year ending with Q3 2024 with 1,447 expected to be completed in the next four quarters. These new units brought online in the past year increased the overall inventory by 3.4%, however by Q3 2025 we anticipate demand to outpace supply by over 550 units. The annual effective rent change in Knoxville has continued to decrease each quarter since Q1 2023. In Q3 2024, the annual change in effective rent change decreased over 1% compared to the prior quarter with only a 1.3% increase. The average rent slightly increased in Q3 to $1,512. This is only a $30 increase over Q2 2024 and continues to show a decrease in rent growth in the Knoxville area.

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 September 2024 was $681.456 billion (down 7.5% from August and down 0.3% from last September.)

The retail sectors that showed sales growth from last September were Non-store Retailers (+6.3%), Health and Personal Care Stores (+3.7%), Miscellaneous Stores (+3.2%), Food Services and Drinking Places (+3.1%), General Merchandise Stores (+0.8%), and Food and Beverage Stores (+0.2%).

Retail sectors that showed a decline in sales from last September were Gasoline Stations (-11.8%), Sporting Goods/Books/Hobby/Music Stores (-6.7%), Electronics and Appliance Stores (-4.8%), Motor Vehicles and Parts Sales (-4.1%), Furniture and Home Furnishings Stores (-2.3%), Clothing Stores (-1.8%), and Building Materials (-0.9%).

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

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $136.077 million in state sales taxes in September (up 3.1% from August and up 10.5% from last September) and Knox County collected $87.881 million in September (up 4.7% from August and up 9.5% from last September.) The state of Tennessee collected $1.229 billion in state sales taxes in September (up 0.5% from August and up 8.2% from last September.)

The Knoxville MSA collected $48.159 million in local sales taxes in September (up 1.5% from August and up 18.4% from last September) and Knox County collected $29.400 million (up 2.9% from August and up 13.6% from last September.)

(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.

September 19, 2024 – Safire Technology Group announced it has received $8 million in new financing from a partnership led by Stamford, CT-based Canaan Partners that will be used to further expand the company’s Knoxville R&D operations and relationship with Oak Ridge National Laboratory (ORNL). The new funding will help further the continued development of SAFIRE™, the world’s only patented and proprietary drop-in additive for lithium-ion batteries that prevents fires in electrical vehicle (EV) crashes or ballistic events. You can read more here.

October 11, 2024 – Anderson-DuBose Company, an international food distributor, announced the location of a new distribution facility in Jefferson City that will create 80 new jobs. The company is a major distributor for McDonald’s and the new facility will support up to 450 restaurant locations in the region. You can read more here.

Knox County Business Licenses

New business licenses issued in September 2024 by Knox County are up 9.3% from August and are up 29.0% from September 2023.

A total of 271 new business licenses were issued in September 2024 compared to 248 in August and 210 in September 2023. The top industry sectors for which business licenses were issued in September 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 296,087 passengers in September (down 0.2% from August’s passenger traffic of 296,778 and up 20.8% from September 2023.)

The total freight recorded in September at TYS was 5,475,033 pounds (down 16.3% from August and down 14.6% from last September.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in September was 2,392,340 (up 1.7% from the September 2023 daily passenger average of 2,351,205 and up 6.5% from the pre-COVID September 2019 average of 2,246,344.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA) , “Air travel demand growth is expected to maintain a positive trend, as indicated by ticket sales. The latest data suggest an increase of 7.4% YoY in ticket sales volumes for travel in October and November.” You can read more here.

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