Economic Conditions Outlook

September 2025

Welcome to the September 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:

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	Worker Shortage Update

Economic Survey Results by Industry

Based on the response to the Quarter 3 (July 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 and company outlooks had “improved.”)

The Quarter 3 current indicator responses show mostly increases in production, capacity utilization, volume of new orders, growth rate of orders, unfilled orders, volume of shipments, prices paid for raw materials, prices received for finished goods, wages and benefits, the number of employees, and capital expenditures. “No changes” are mostly reported for the average employee workweek. Delivery time is evenly split between “increase” and “no change.” Finished goods inventories is evenly split between “decrease” and “no change.” (In the last quarter, responses showed “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” were 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.)

The six-month outlook in Quarter 3 anticipates mostly “increases” in production, capacity utilization, volume of new orders, growth rate of orders, volume of shipments, prices paid for raw materials, prices received for finished goods, wages and benefits, the number of employees, and capital expenditures. “No changes” are mostly expected for unfilled orders, finished goods inventories, and average employee workweek. Delivery time is evenly 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, number of employees, and capital expenditures. “No changes” were expected in unfilled orders, delivery time, prices paid for raw materials, prices received for finished goods, wages and benefits, and average employee workweek.)

Knoxville area retailers indicated in the Quarter 3 (July 2025) survey that their evaluation of the level of general business activity and company outlooks are evenly split between “Improved” and “worsened.” (In the last quarter, retailers responded that their evaluation of the level of general business activity had “worsened” from the previous quarter and company outlooks had stayed “the same.”)

The Quarter 3 current indicator responses show “increases” in wages and benefits and input prices. “No changes” are reported in internet sales and inventories. All other indicators are evenly split between “increase” and “no change.” (In the last quarter, retail responses showed “increases” in net sales revenue, input prices, selling prices, capital expenditures, and inventories. The numbers of both full-time and part-time employees had “decreased.” “No changes” were reported for internet sales, average employee workweek, and wages and benefits.)

The six-month retail outlook in Quarter 3 projects “no changes” in internet sales, the numbers of full-time and part-time employees, and average employee workweek. Net sales revenue is evenly split between “increase” and “decrease.” Selling prices, capital expenditures, and inventories are evenly split between “increase” and “no change.” “Increases” are expected in wages and benefits and input prices. (The six-month outlook in the last quarter anticipated “increases” in net sales revenue, input prices, selling prices, and capital expenditures. “No changes” were expected in internet sales, the numbers of full-time and part-time employees, average employee workweek, and wages and benefits. Inventories were expected to “decrease.”)

Knoxville area service sector businesses report in the Quarter 3 (July 2025) survey that their evaluation of the level of general business activity and company outlooks are mostly “the same” from the last quarter. (The evaluation of the level of general business activity was mostly split between “worsened” and “the same” from the previous quarter, while company outlooks were “mixed” in the last quarter.)

The Quarter 3 current indicator responses show mostly “increases” in input prices and capital expenditures. The number of full-time employees, wages and benefits, and selling prices are evenly split between “increase” and “no change.” Revenue, the number of part-time employees, and average employee workweek are mostly reported as unchanged. (In the last quarter, responses showed 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 were split evenly between “increase” and “no change.” Capital expenditures were “mixed.”)

The six-month outlook in Quarter 3 projects mostly “increases” in revenue, wages and benefits, input prices, and capital expenditures. “No changes” are mostly expected in the numbers of full-time and part-time employees, and average employee workweek. Selling prices are evenly split between “increase” and “no change.” (The six-month outlook in the last quarter anticipated mostly “no changes” in selling prices, the number of part-time employees, and average employee workweek. “Increases” were mostly expected in wages and benefits, input prices, and capital expenditures. Revenue was evenly split between “increase” and “decrease.” The number of full-time employees was “mixed.”)

Labor Market Information

The Knoxville MSA’s unemployment rate in August was 3.2% (down from 4.0% in July and unchanged from August 2024.) Knox County’s unemployment rate in August was 3.1% (down from 3.9% in June and up from 3.0% in August 2024.) Tennessee’s unemployment rate was 3.6% in August (down from 4.4% in July and up from 3.5% last August.) The U.S. unemployment rate was 4.5% in August (down from 4.6% in July and up from 4.4% last August.)

The size of the total labor force slightly decreased from July to August at the local, state, and national levels. Knox County’s labor force decreased 0.1% from 262,184 in July to 261,868 in August. The Knoxville MSA’s labor force decreased 0.1% from 466,030 in July to 465,345 in August. Tennessee’s labor force decreased 0.2% from 3,514,374 in July to 3,506,861 in August. The national labor force decreased 0.4% from 171,646,000 in July to 171,035,000 in August.

Below is the 13-month unemployment rates trending comparison for the four largest MSA’s in Tennessee –

Job Market

For the month of August, there were 9,043 unique active job postings in the Knoxville MSA (down 15.0% from July and down 11.5% from last August.) There were 5,775 unique active job postings in Knox County (down 10.6% from July and down 13.9% from this time last year.)

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

The Top 10 occupations (by number of job postings) in the Knoxville MSA in August 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 September report shows a net loss of 32,000 jobs in private-sector employment (down from the 54,000 net jobs gain in August). Industry sectors showing positive job growth in September include Education and Health Services (+33,000), Natural Resources and Mining (+4,000), and Information (+3,000). The industry sectors that showed negative job growth in September were Leisure and Hospitality (-19,000), Other Services (-16,000), Professional and Business Services (-13,000), Financial Activities (-9,000), Trade/Transportation/Utilities (-7,000), Construction (-5,000), and Manufacturing (-2,000).

By establishment size, large businesses (with 500+ employees) gained 33,000 jobs. “Other Small” businesses (with 20-49 employees) lost 21,000 jobs, “Very Small” businesses (with 1-19 employees) lost 19,000 jobs, mid-sized businesses (with 50-249 employees) lost 11,000 jobs, and mid-sized businesses (with 250-499 employees) lost 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 September, there were 12,920,600 people employed by U.S. small businesses with one to nine employees, down 48,400 from August. Jobs were down in all twelve industry sectors tracked by the Index including Leisure and Hospitality (-12,500), Professional and Business Services (-8,800), Education and Health Services (-6,400), Retail Trade (-5,800), Manufacturing (-3,800), Finance and Real Estate (-2,700), Construction (-2,500), Transportation and Warehousing (-2,500), Wholesale Trade (-1,700), Information (-1,100), Agriculture/Natural Resources/Mining (-500), and Utilities (-300).

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 7.2 million jobs to fill and only 5.1 million hires in August, leaving 2.1 million jobs unfilled.

In August, the largest increases in U.S. job openings were in accommodation and food services (+106,000), health care and social assistance (+81,000), retail trade (+55,000), transportation/warehousing/utilities (+53,000), private educational services (+14,000), and other services (+13,000).

The largest decreases in job openings were in construction (-115,000), professional and business services (-39,000), manufacturing (-29,000), financial activities (-14,000), arts/entertainment/recreation (-9,000), information (-8,000), and wholesale trade (-3,000).

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.

Highlights From UT Boyd Center’s Summer 2025 Tennessee Business Leaders Survey

The University of Tennessee’s Boyd Center for Business and Economic Research recently released the results of their Summer 2025 (August) Tennessee Business Leaders Survey. Compared to last year, the state’s business leaders say current business and economic conditions are “a little worse” to “considerably worse” at 44% (43.8% East TN) and their expectations over the next 12 months are “a little worse” to “considerably worse” at 43.4% (48% East TN).

However, the majority of state business leaders see a less than 25% chance of a national recession at 52% (57.5% East TN). Respondents indicated that tariffs are starting to affect their businesses “a little” at 49.3% (38.4% East TN), but most businesses have not passed on the tariff costs on to their customers at 55.8% (47.9% East TN).

State business leaders are much more optimistic about Tennessee’s economic outlook as expectations for the state’s economy over the next 12 months are “a little better” to “considerably better” at 63.3% (67.1% East TN). In fact, a clear majority of respondents say that the state of Tennessee is headed in the right direction at 69.4% (72.6% East TN).

The top three priorities that business leaders want the state to focus on are infrastructure development at 60.9% (64.4% East TN), enhanced workforce development at 53.2% (50.7% East TN), and energy infrastructure at 45.5% (53.4% East TN). Respondents said that there is not an ample supply of local workers appropriately trained for their employment needs at 59.5% (52.1% East TN).

The top three challenges for businesses to attract or retain workers are the cost of housing at 56.1% (58.9% East TN), the cost of childcare services at 33.1% (34.2% East TN), and availability of housing at 27.7% (34.2% East TN). You can access the full interactive report here.

Consumer Price Index (CPI – Inflation Rates)

The national inflation rate from August 2024 to August 2025 is 2.9%. This is up from 2.7% in the July 2024 to July 2025 period. Last year, the national inflation rate was 2.5% from August 2023 to August 2024.

The August CPI report marks the thirty-eighth 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 13.8%, auto repair services are up 8.5%, electricity costs are up 6.2%, used car prices are up 6.0%, auto insurance is up 4.7%, eating out prices are up 3.9%, housing prices are up 3.6%, airline fares are up 3.3%, groceries are up 2.7%, new vehicle prices are up 0.7%, and apparel is up 0.2%.

From a year ago, gasoline prices are down 6.6%.

The Federal Reserve decided to lower the target range of the federal funds rate by a quarter percentage point to 4 to 4 ¼ percent at its Federal Open Market Committee (FOMC) policy-setting meeting on September 17. The Fed stated that “recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.” The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the long run. 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 August 2024 to August 2025 period. This is up from 2.5% in the July 2024 to July 2025 period. Last year, the rate was 2.1% from August 2023 to August 2024.

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

Housing Market

Home sales in East Tennessee increased 2.1% from July to August at a seasonally adjusted annual rate (SAAR) of 19,868, an increase of 7.4% over August 2024.

August home sales in Knox County also increased 7.6% month over month and 10.2% over 2024 at a seasonally adjusted annual rate (SAAR) of 7,855.

The median home sales price across the East Tennessee region was $376,200 in August, up 3% from a year ago. Knox County’s median home sale price dropped to $390,000, a seasonally expected decrease from July and very slight increase of just 1% over 2024.

Half of the homes sold across the East Tennessee region went under contract in 28 days or less, up from 20 days last year.

Active inventory in the East Tennessee region was up 31.4% 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, dropped slightly to 4 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 August 2025 was $745.481 billion (up 0.2% from July and up 1.2% from last August.)

The retail sectors that showed sales growth from last August were Food Services and Drinking Places (+5.2%), Clothing Stores (+3.5%), Non-store Retailers (+2.8%), Health and Personal Care Stores (+2.7%), Food and Beverage Stores (+1.9%), Furniture and Home Furnishings Stores (+0.8%), General Merchandise Stores (+0.7%), and Motor Vehicles and Parts Sales (+0.6%).

Retail sectors that showed a decline in sales from last August were Building Materials (-6.5%), Miscellaneous Stores (-5.6%), Electronics and Appliance Stores (-2.0%), and Gasoline Stations (-1.3%). The Sporting Goods/Books/Hobby/Music Stores category was unchanged.

Tennessee State and Local Sales Tax Collections

The Knoxville MSA region collected $137.559 million in state sales taxes in August (up 1.2% from July and up 4.2% from last August) and Knox County collected $85.904 million in August (statistically unchanged from July and up 2.3% from last August.) The state of Tennessee collected $1.286 billion in state sales taxes in August (up 1.2% from July and up 5.2% from last August.)

The Knoxville MSA collected $51.130 million in local sales taxes in August (up 2.9% from July and up 7.7% from last August) and Knox County collected $30.260 million in August (up 2.5% from July and up 5.9% from last August.)

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 4, 2025 – Oklo, an advanced nuclear technology company, announced plans to invest $1.68 billion and create 800 new jobs in Oak Ridge. The company will develop the nation’s first privately funded advanced nuclear fuel recycling facility on a 247-acre site at the Oak Ridge Heritage Center that will recycle used nuclear fuel and provide a durable, domestic fuel supply for advanced reactors. Oklo is the fifth company to locate in Tennessee using the state’s $50 million Nuclear Energy Fund. You can read more here.

September 22, 2025 – IWI US, Inc., a Pennsylvania firearms manufacturer, announced plans to relocate its headquarters and all major operations to Andersonville in Anderson County. The company will invest $15.7 million and create 72 new jobs. IWI US specializes in manufacturing firearms for the commercial, law enforcement, and government markets. You can read more here.

Knox County Business Licenses

New business licenses issued in August 2025 by Knox County are down 2.1% from July and are up 10.9% from August 2024.

A total of 275 new business licenses were issued in August 2025 compared to 281 in July and 248 in August 2024. The top industry sectors for which business licenses were issued in August 2025 were services, retail, non-classified, 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 317,399 passengers in August (down 11.0% from July’s passenger traffic of 356,533 and up 6.9% from August 2024.) The total freight recorded in August at TYS was 5,097,726 pounds (down 4.3% from July and down 22.1% from last August.)

According to the Transportation Security Administration, the average daily number of passengers passing through the nation’s TSA checkpoints in August was 2,590,470 (up 1.0% from the August 2024 daily passenger average of 2,564,788 and up 9.8% from the pre-COVID August 2019 average of 2,359,247.) You can view the daily TSA checkpoint travel numbers here.

According to the International Air Transport Association (IATA), “Industry-wide domestic traffic expanded by 1.5% YoY in August, consistent with the gains in July. The U.S. was the only major domestic market that contracted, down 0.2% YoY after July’s brief rebound of 0.5% – revised from 1.5% in July’s report. U.S. domestic PLF (Passenger-Load-Factor) fell 1.1 percentage points, marking the eighth consecutive month of YoY declines in 2025.” You can read more here.

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