Local Economic Conditions

1
Local Economic Conditions

• David A. Penn, Director
• Business and Economic Research Center
• Jennings A. Jones College of Business
• Belmont University
• February 2, 2005

2
Tennessee by Comparison

• Industrial Structure
• Manufacturing sector is very important
• Health care important
• Government is much less important

3
Tennessee by Comparison
Manufacturing Employees earnings Tennessee
17.9 Southeast 12.8 U.S. 13.2
Tennessee ranks 8th in share of nonfarm earnings
from manufacturing.
4
Tennessee by Comparison
Health care and social assistance Employees
earnings Tennessee 11.5 Southeast
9.5 U.S. 9.5
5
Tennessee by Comparison
Government Employees earnings Tennessee
13.4 Southeast 18.6 U.S. 16.2
6
Manufacturing Importance for Counties
7
Overview

• Uncertainty
• Improved earlier last year
• Now increasing
• Major Factors
• Muddled consumer and business confidence
• Energy prices
• Lagging employment growth

8
Consumer and Business Confidence
Interest rate outlook
Iraq war
Terrorism
Confidence?
Earnings outlook
Aging of the population
Energy prices
Job outlook
Home equity
Investment spending
9
Gasoline Prices
Spending more for gasoline results in less
spending for other items.
10
Interest Rates
Fed policy is becoming less accommodating.
11
Consumer Confidence
Drifting higher since the recession, but not
steadily.
12
Manufacturing
PMI drifting lower, but still indicates expansion.
13
Indicators for the Local Economy

• Nonfarm employment
• Unemployment rate
• Taxable sales
• Housing and real estate

14
Indicators for the Local Economy

• Nonfarm employment
• Unemployment rate
• Taxable sales
• Housing and real estate

15
Nashville MSA Payroll Employment
Employment has improved beyond its pre-recession
peak.
16
Nonfarm employment
Modest job growth Nashville MSA up by 1.0 from
year ago.
Year to year percent change
17
Nonfarm employment
Modest job growth Tennessee employment growth
drifting lower.
Year to year percent change
18
Nonfarm employment
U.S. employment rising faster than locally.
Year to year percent change
19
Nonfarm employment
Nashville MSA compared with other MSAs of similar
size
20
Nashville MSA Ranking Compared with Peer MSAs
(4th QTR 200304)
21
Manufacturing Durables
Durables manufacturing growth is relatively
robust.
22
Manufacturing Non-Durables
Growth of non-durables manufacturing briefly
moved into positive territory.
23
Nashville Retailing
Hit hard during the recession, retailing
employment continues to weaken.
24
Educational and health services
Very strong coming out of the recession,
educational and health services growth remains
good.
25
Rutherford County

• Payroll employment grew 8.5 June 2003-04
• Ranked 1 among 315 largest counties in the U.S.
• Rose 7.3 March 2003-04 ranked 2 among largest
  counties
• Fourth highest December 2002-03 (4.6)
• Sixth highest growth June 2002-03

26
Indicators for the Local Economy

• Nonfarm employment
• Unemployment rate
• Taxable sales
• Housing and real estate

27
Unemployment rates
Lower in Tennessee than nationally.
November 2004 (2003) U.S. 5.4
(5.7) Tennessee 5.2 (6.0) Nashville
MSA 3.9 (4.3) Memphis MSA 6.4 (6.1)
28
Unemployment Rate by County 2004

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5


-

5
.
7

5
.
7


-

8
.
3

8
.
3


-

1
3

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Indicators for the Local Economy

• Nonfarm employment
• Unemployment rate
• Taxable sales
• Housing and real estate

30
Taxable Sales Growth
Sales slowed in the second and third quarters
following a strong first quarter. Figures for
November show improvement.
31
Taxable Sales by County (August 2004)
32
Taxable Sales by County (Percent change over
year ago)
33
Taxable Sales by Category (TN)
34
Categories of Taxable Sales
35







Growth of Taxable Sales, 2003-04 Second Quarter
P
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C
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t
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a
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0

0


-

1
0

1
0


-

1
8
.
5

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Indicators for the Local Economy

• Nonfarm employment
• Unemployment rate
• Taxable sales
• Housing and real estate

37
Permit-Authorized Residential Construction 2003-04
Activity in Davidson County picking up the pace.
38
Building Permits
Nashville MSA housing construction activity
volatile after gangbuster first quarter.
39
Rutherford County Housing Units

• Added more housing units in 2003 than six states.
• Rutherford County ranked in top 100 U.S. counties
  in housing unit growth for 2003 Census Bureau
• Implications for public services.

40
Realty Transfer Tax
Activity up 20 from 2003, except for September.
41
Realty Transfer TaxNovember 2003-04

• Tennessee 35.9
• Nashville MSA 23.8

42
Growth of Schools

• Student population increase 2002-2003

• 14,674 in Tennessee (1.5)

• 3,970 in the donut counties (3.9)

• 1,450 in Rutherford County (5.2)

Measured by net enrollment
43
School Expenditures and Revenues

• Spending per ADA rising 4.6 annually in donut
  counties 2000-03.
• Operating expenditures rising 7.3 annually for
  the donut counties.

• About 56 of revenue growth 2000-03 is from local
  sources.

44
How to Pay for New Schools?

• Options (something for everyone to hate)
• New revenues
• Slower growth
• Cut other spending
• Property tax hikes

45
U.S. and Nashville MSA employment growth
46
Expectations

• Recovery of the U.S. economy must continue.
• Need better performance from investment spending,
  net exports.
• Interest rates will continue to drift higher.
• Sustained growth in Europe, Canada, and Mexico
  would be helpful.

47
U.S. Markets

• Gently rising mortgage rates (up 0.5 in 2005)
• Housing starts down 7 in 2005, 8 in 2006
• Mortgage originations down 15 in 2005, 7 in
  2006
• Refinancings down 40 in 2005, 23 in 2006
• Source Mortgage Bankers Assoc.

48
Business and Economic Research Center Jennings
A. Jones College of Business

• Publications
• Data
• Contract Research
• Outreach

49
Publications

• Tennessees Business - Professor Horace Johns
• Election 2004 (forthcoming)
• People Who Keep State Government Running
• Tennessee Lottery

50
Publications

• Global Commerce - Professor Steven Livingston
• China Takes the Stage
• Free Trade Agreements
• Trade Wars

51
Publications

• Midstate Economic Indicators
• Issued quarterly
• Second quarter in print

52
Business and Economic Research Center
David Penn, Director dpenn_at_mtsu.edu 615-904-8571