The growth will continue through this year and is expected to accelerate in 2014 and beyond, according to the forecast in the fall 2013 Tennessee Business and Economic Outlook released today.

The study, prepared by the UT Center for Business and Economic Research (CBER), predicts the course of the state and national economies by examining many economic and fiscal factors and trends.

The US unemployment rate is expected to average 7.6 percent this year, down from 7.8 percent in 2012. It is expected to fall to 7.1 percent in 2014 and to 6.5 percent in 2015.

“While growth is subdued due to reduced federal government spending and a global slowdown, the expansion has shown a much-welcomed resilience,” said Matt Murray, CBER associate director and the report’s author. “The outlook for 2014 is encouraging, but the economy continues to confront a number of domestic and international challenges.”

The heightened crisis in Syria and the federal budget deadlock have dampened expectations. Additionally, the housing market has begun to rebound, although higher interest rates have tempered the growth in the residential sector. But the national economy should be able to adapt to these pressures and still see a 2.6 percent growth in its gross domestic product and a 1.7 percent increase in nonfarm employment growth in 2014, according to the report.

Consumer spending has weakened because of the elimination of the payroll tax holiday and the sequestration of federal government has limited spending, but they have not derailed the country’s economic expansion.

“Nonresidential fixed investment, residential fixed investment, and exports will be the primary drivers of economic growth next year, while federal and state government spending will be the primary drags on growth,” Murray said.

The economic growth is good news but many problems remain, including a decline in the labor force participation rate. Millions of people are still unemployed and millions more are underemployed. Additionally, there are many discouraged workers who have left the labor market due to bleak employment prospects, according to the report.

Tennessee Economy

Tennessee’s economy has generally tracked the national economy, outpacing the nation in some measures and lagging behind in others, according to the report.

“Tennessee continues to see much stronger growth in manufacturing employment than the nation,” Murray said. “On the downside, the state’s unemployment rate is now well above its national counterpart.”

Manufacturing employment in Tennessee is expected to increase 2 percent this year, compared to 0.6 percent for the nation.

The state’s unemployment rate, however, will average 8.2 percent for 2013, compared to 7.6 percent for the nation. Tennessee’s unemployment rate was 8 percent last year and is expected to drop to 7.6 percent in 2014 and 7 percent in 2015.

Other findings:

• Personal income in Tennessee is expected to grow 2.6 percent this year, slightly lower than the nation’s 2.7 percent rate of growth. It is expected to improve to 4.4 percent in 2014.
• Professional and business services, leisure and hospitality services, and manufacturing sectors will see marginally slower growth next year compared to this year.
• Within the nondurable goods sector, food, beverage, and tobacco; plastics and rubber; and miscellaneous goods will see growth this year.
• Eating and drinking establishments and food stores will experience strong growth this year.
• Taxable sales growth for 2013 is expected to be 3.2 percent, well behind the 4.7 percent growth rate of 2012. It will see modest improvement in 2014 to a projected 3.5 percent.
• Automobile dealer sales were especially hot in 2012, up 10.1 percent, as consumers continued to satisfy their demands for vehicle upgrades. A cooling of sales will take place this year, with a rebound to 4.4 percent growth in 2014.

State Revenue Performance

Tennessee’s total revenue collections grew by 2.6 percent in fiscal year 2013, which is lower than the regional average of 3.9 percent and the national average of 4.2 percent.

In fiscal year 2014, state total collections are projected to reach $12.3 billion, up 3.2 percent from this year. That is a higher growth rate than the regional and national averages, according to the report.

The Southeast region significantly outperformed the rest of the nation in corporate income tax collections for all four quarters of 2012, with an average growth rate of 11.4 percent compared to 1.6 percent for all other states. Tennessee did well in the same period with an increase of 15.9 percent in corporate income tax collections, the report states.

Read the entire report on the CBER website (pdf).

—

CONTACTS:

Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)

Lola Alapo (865-974-3993, lalapo@utk.edu)

The event will begin at 1:30 p.m. in the center’s Toyota Auditorium. It is free and open to the public. For information about $2 parking at Volunteer Hall, visit the Baker Center’s website.

“Senator Lugar and Senator Baker have a long history of working together on matters of national importance, including global security and nuclear nonproliferation,” said Matt Murray, director of the Baker Center. “We’re looking forward to hearing Senator Lugar talk about his days in the Senate and the current work he’s doing to keep these important issues at the forefront of public thought.”

Lugar, a Republican, was Indiana’s longest-serving congressman. He was elected in 1977 and served until this year. He was unseated in the primary by Republican Richard Mourdock, Indiana’s state treasurer. Mourdock lost to Democrat Joe Donnelly in the general election.

Prior to the Senate, Lugar served as mayor of Indianapolis from 1968 to 1975.

While in the Senate, Lugar served as chair of the Senate Committee for Foreign Relations from 1985 to 1987 and from 2003 to 2007. He also was appointed to the Select Committee on Intelligence by Senator Howard Baker in 1977. Much of Lugar’s work in the Senate focused on global security. Specifically, one of his most notable pieces of legislation, the Nunn-Lugar Act, led to the dismantling of thousands of nuclear warheads, and improved security at hundreds of weapons sites across the former Soviet Union states. To date, the Nunn-Lugar program has deactivated more than 7,600 nuclear warheads that were once aimed at the United States.

Lugar now serves as president of the Lugar Center, a nonprofit organization focusing on nuclear nonproliferation, food security, foreign aid effectiveness, and other critical issues. He recently announced the creation of the Lugar Academy at the University of Indianapolis, including a Washington semester internship program for university students. Lugar also recently was named a professor of practice and distinguished scholar at the new School of Global and International Studies at Indiana University and a visiting distinguished professor at Georgetown University’s Global Public Policy Institute.

Lugar graduated first in his class at Denison University in Granville, Ohio. He attended Pembroke College at Oxford University as a Rhodes Scholar, studying politics, philosophy, and economics. Lugar volunteered for the US Navy in 1957, ultimately serving as an intelligence briefer for Admiral Arleigh Burke, chief of naval operations.

Lugar manages his family’s 604-acre corn, soybean, and tree farm. Before entering public life, he helped manage the family’s food machinery manufacturing business in Indianapolis with his brother Tom.

The Ashe Lecture series, funded by former ambassador and Knoxville Mayor Victor Ashe, hosts former mayors, ambassadors, and other public servants to discuss important issues.

—

MEDIA AVAILABILITY: Senator Lugar will be available for press from 2:30 to 3:00 p.m., immediately following his talk. Let us know if you plan to attend.

—

C O N T A C T :

Amy Blakely (865-974-5034, ablakey@utk.edu)

Former Senator Richard Lugar of Indiana will deliver the Ashe Lecture on August 27, and journalist and author Tom Brokaw will give the Baker Distinguished Lecture on November 13.

The center will highlight its first decade of work with an exhibit and reception in the Baker Center Rotunda on September 4.

“This is an exciting time for the Baker Center,” Director Matt Murray said. “Senator Baker, who celebrates his eighty-eighth birthday on November 15, wanted to create a place where the campus and community could learn more about major issues facing our country.

“He also envisioned a place where students and faculty could nurture a ‘think tank’ atmosphere and become a source of expertise in the national discussion. We’ve made great strides toward that goal, and we’re excited as we plan the center’s future, focusing especially on energy and environmental issues, governance, and global security.”

Here’s the fall lineup. Events are free and open to the public unless other noted:

August 27—1:30 p.m., Baker Center Toyota Auditorium—Lugar will present Ashe Lecture.

August 29—3:30 to 5:00 p.m., Toyota Auditorium—Joshua Fu, UT associate professor of civil and environmental engineering, will talk about modeling in climate change as part of the Baker Forum on Energy and the Environment.

September 4—4:30 to 6:00 p.m. Tenth anniversary reception will be held in the Baker Center Rotunda.

September 17—5:30 p.m., Toyota Auditorium—Constitution Day panel discussion will feature several UT faculty members: Suzie Allard, associate professor of information sciences; Michael Berry, professor of electrical engineering and computer science and director of the Center for Intelligent Systems and Machine Learning; Brandon Prins, associate professor of political science; and Glenn Reynolds, law professor.

September 26—3:30 to 5:00 p.m., 416 Dougherty Engineering Building—Jim Shortie, a professor at Penn State University, will talk about agricultural and environmental economics as part of the Baker Forum on Energy and the Environment.

October 12—10:00 a.m. to 2:00 p.m. Toyota Auditorium—Working in collaboration with UT and city officials, students will develop suggestions for a parking policy for the future renovated Cumberland Strip. Check bakercenter.utk.edu for more information about how to participate.

October 24—6:00 to 7:30 p.m, Toyota Auditorium—Panelists from several universities will discuss emerging challenges to global security.

October 24—3:30 to 5:00 p.m., Toyota Auditorium—J.B. Ruhl, David Daniels Allen Distinguished Chair in Law at Vanderbilt University, will talk about environmental law as part of the Baker Forum on Energy and the Environment.

November 6—12:40 to 2:10 p.m., Toyota Auditorium—2013 Women’s Leadership Summit. The topic will be “Sustainable Quality of Life.” Co-sponsored by UT Center for Sustainable Business and Development.

November 13—1:30 p.m., University Center Auditorium—Tom Brokaw will give the Baker Distinguished Lecture. A Patrons Lunch will be held prior to the lecture. Cost is $250 per person and reservations are required. The free public lecture will be held at 1:30 p.m. in University Center Auditorium, 1502 Cumberland Avenue.

November 14—3:30 to 5:00 p.m., Toyota Auditorium—Bruce McCarl, a professor of agricultural economics at Texas A & M University, will talk about biofuels and climate change as part of the Baker Forum on Energy and the Environment.

Established in 2003, the Baker Center seeks to further the public’s knowledge of the US government and public policy and to encourage civil leadership and public service. The center sponsors programs to encourage informed discussion, with a special focus on engaging young people in policy issues and public service.

For more information about the Baker Center, visit bakercenter.utk.edu.

—

CONTACT:

Nissa Dahlin-Brown (865-974-8681, nissa@utk.edu)

Read or listen to the full story on the Marketplace website.

Several media outlets statewide highlighted the study, which was prepared by the Center for Business and Economic Research (CBER).

They include:

Chattanooga Times Free Press: Tennessee: Economy gaining, but jobless rate projected to remain above U.S. level through 2014

Knoxville News Sentinel: UT Report: Economy Poised for Strong Growth in 2014

WATE-Channel 6: UT Report: Economy shows signs of strength in 2014

WBIR-Channel 10: UT Study reveals state and national economies bouncing back

Despite sequestration of federal spending and a payroll tax increase that have slowed consumer spending, the economy is poised for strong growth in both 2014 and 2015, according to the spring 2013 Tennessee Business and Economic Outlook released today.

The study, prepared by UT’s Center for Business and Economic Research (CBER), predicts the trajectory of the state and national economies by examining many economic and fiscal factors and trends.

“The economy has finally found a firm footing,” said Matt Murray, CBER associate director and the report’s author. “This will be the third year of payroll employment growth and a falling unemployment rate following the Great Recession.”

The national unemployment rate dropped to 7.7 percent in first quarter of the year and is expected to average 7.6 percent this year, compared to 7.8 percent in 2012. It is predicted to fall to 7.2 percent in 2014.

Additionally, payroll employment for the nation is projected to be up 1.5 percent this year and 1.6 percent next year, according to the report.

“These modest employment gains will help support modest reductions in the unemployment rate,” Murray said.

Vehicle sales are inching closer to pre-recession levels, according to the report. They bottomed out at 10.4 million vehicle sales in 2009 but are rebounding. Sales are expected to total 15.3 million vehicles this year and 15.7 million next year. By 2016, sales will likely be restored to the levels that prevailed in 2006.

The residential housing market is showing major improvement in housing prices and in the sale of existing and new homes, according to the report. This comes after a long string of losses between 2006 and 2011.

The nation’s manufacturing sector is expected to continue to see job gains as well.

Tennessee Economy

Tennessee’s economy improved in recent quarters, notably in its unemployment rate. The state unemployment rate is projected to average 7.8 percent this year compared to 8.0 percent last year. It is expected to fall to 7.5 percent in 2014, according to the report.

The state outperformed the United States in many measures.

Last year, Tennessee’s personal income, nonfarm employment, and manufacturing employment all grew more strongly than the nation’s, while the state’s annual unemployment rate rested below the national unemployment rate, according to the report.

The first quarter of 2013 showed Tennessee performing better than most states. An index of economic momentum released by State Policy Reports placed Tennessee in the twelfth position across all states for first quarter economic performance. This index is a composite that includes personal income growth, employment growth, and population growth.

Tennessee’s manufacturing sector employment growth in the first quarter was more than twice as large as the growth recorded for the nation.

The state economy will see a modest slowdown in growth into the third quarter of the year. Growth will accelerate as the year comes to a close, setting the stage for sustained economic expansion through 2015.

Other findings:

• Tennessee nonfarm employment is expected to be up 1.7 percent in 2013 and 1.8 percent in 2014.
• Professional and business services enjoyed the strongest growth and will continue to lead employment gains outside the manufacturing sector, followed closely by leisure and hospitality services.
• Manufacturing will see employment growth continue into 2015. Jobs in the state’s industrial sector will be up 1.6 percent this year and next year. Employment losses will continue to take place in nondurable goods manufacturing.
• Personal income in the state is expected to advance at a 3.3 percent rate in 2013, with growth improving to 4.4 percent in 2014.

Read the entire report on the CBER website (pdf).

—

CONTACTS:

Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)

Lola Alapo (865-974-3993, lalapo@utk.edu)

The panel discussion will be from 6:00 to 7:30 p.m. in the Toyota Auditorium in the Howard H. Baker Jr. Center for Public Policy. It is free and open to the public.

The discussion will be moderated by Baker Scholars Eric Dixon, senior in philosophy, and Caleb Williford, senior in logistics.

Panelists will discuss the funding of state roads and bridges. Fuel tax revenue, which funds road maintenance, has been lower in the past few years because of more energy-efficient vehicles and alternative fuels. Paired with increased traffic and rising maintenance costs, building and repairing Tennessee roads have become more difficult.

The UT Transportation Research Center will open the panel with an overview of the situation before panelists discuss their solutions to the problem.

Panelists include:

• Kevin Bakewell, senior vice president of the AAA Auto Club Group
• Mark Burton, associate professor of economics and director of transportation economics at the UT Transportation Research Center
• Mike Edwards, president of the Knoxville Chamber of Commerce
• Dave Huneryager, president and CEO of the Tennessee Trucking Association
• Matt Murray, director of UT’s Baker Center and economist at the Center for Business and Economic Research
• John Schroer, commissioner for the Tennessee Department of Transportation
• Kent Starwalt, executive vice president of the Tennessee Road Builders Association

—

C O N T A C T :

Nissa Dahlin-Brown (865-974-8681, nissa@utk.edu)

Matt Murray, director of the Howard H. Baker Jr. Center for Public Policy, shares the big idea of the center’s Distinguished Lecture Series which will host US Secretary of Education Arne Duncan on April 3.

http://www.youtube.com/watch?v=jwYjSooukx0

The debate over the nation’s debt ceiling, the looming risk of sequestration of federal spending, and the payroll tax increase contribute to the slowdown in predicted gains, according to the forecast in the 2013 Economic Report to the Governor of the State of Tennessee, released today.

The study, prepared by the UT Center for Business and Economic Research (CBER), predicts the trajectory of the state and national economies by examining many economic and fiscal factors and trends.

“The U.S. economy is projected to continue to grow in the quarters ahead and the unemployment rate will continue its slow but steady decline,” said Matt Murray, CBER associate director and the report’s author. “For Tennessee, the economic outlook calls for modest growth in 2013 followed by substantially stronger growth in 2014.”

Several good signs for the nation’s still fragile economy are the rebound of the housing sector and tangible contributions from the construction and manufacturing sectors in job growth. Manufacturing jobs will be up for the third year in a row after thirteen years of contraction.

The expiration of the payroll tax cut is one of the most significant factors that puts downward pressure on consumer spending and overall economic growth for our state and the nation.

“To put it in perspective, for a Tennessee household earning $50,000 per year, this translates into a tax increase of $1,000,” said Murray. “It is expected that the payroll tax increase will have a significant negative effect on taxable sales for the year.”

For the US economy, inflation-adjusted gross domestic product is projected to grow only 1.7 percent in 2013, down from 2.3 percent growth in 2012. The unemployment rate will stay relatively flat this year, ending around 7.6 percent, just 0.2 percentage points down from its current level. Inflation is projected to remain benign and average under 2 percent over the next few years, despite interest rates being kept at historically low levels by the Federal Reserve.

Murray noted that while the last-minute cliff package averted large economic setbacks, continued positive growth is reliant on finding solutions to the nation’s fiscal woes.

“There is still much uncertainty clouding the outlook of the economy,” he noted. “The last-minute action helped avert tax hikes and drastic spending cuts, but it failed to address the core issue of how to bring the nation’s deficit and debt under control.”

Tennessee economy

Tennessee can expect slow growth this year, followed by stronger growth in 2014, according to the report.

This year and next, the state’s unemployment rate will drift down but remain above pre-recession levels. The state’s annual rate for 2013 is expected to be 7.9 percent. The rate will improve to 7.5 percent next year, according to the report.

Other findings:

• Nonfarm employment should advance 1 percent in 2013 and 1.7 percent in 2014.
• Employment growth in manufacturing will slow from the heated pace of 2012 but still see healthy growth of 1.2 percent; gains in durable goods manufacturing will more than offset losses in nondurable goods manufacturing.
• Natural resources, mining, and construction, along with professional and business
• services, will enjoy the strongest rates of growth in 2013. Information and financial activities are expected to perform poorly.
• Tennessee’s labor force will contract again in 2013, but only by a small amount. The number of employed people will improve slightly while the number of unemployed will fall by 2.2 percent. Substantial improvement is expected in 2014.
• The housing market is on the rise in Tennessee. Nashville-area Realtors reported a 20 percent increase in home sales this December compared to last.

State revenue performance

Tennessee performed better than the Southeastern region and the nation in fiscal year 2012 with total tax collections growing at 8 percent over 2011.

The state also had healthy sales tax collections, growing 6.7 percent, the second highest in the region behind West Virginia. However, third quarter 2012 data showed somewhat slower growth rates. Sales tax collections fell just below the nation and the region, growing at 2.4 percent.

As noted, taxable sales will likely take a severe hit due to the payroll tax.

The report also includes a special focus on e-commerce, which is important since the state relies heavily on the sales tax. Tennessee online business-to-business sales reached $3.5 trillion in 2010, and individual consumers’ online purchases totaled $170 billion that same year. Due to noncompliance in sales and use tax, CBER estimates Tennessee lost approximately $401 million in taxes in 2010 and predicts that these annual losses will continue to grow.

Read the entire report here (pdf).

—

CONTACT:

Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)

Whitney Heins (865-974-5460, wheins@utk.edu)

DebateWatch begins at 9:00 p.m. on Wednesday, October 3, in the Baker Center’s Toyota Auditorium, with a viewing of the first of the 2012 presidential debates, moderated by Jim Lehrer of PBS NewsHour.

After the debate concludes and the broadcast is turned off, those attending will connect with other college campuses statewide by videoconference. Schools confirmed to participate with UT are the University of Tennessee, Martin, and East Tennessee State University. The participation of other colleges is pending.

“By avoiding the influence of generally partisan post-debate commentary on broadcast networks, those at the DebateWatch are able to reflect on the debate in a civil, thoughtful environment,” said Matt Murray, director of the Baker Center.

Previous DebateWatch events at the Baker Center proved to be stimulating and enjoyable experiences.

“The opportunity to discuss the campaign talking points with students from other campuses was very valuable,” said Elizabeth Williams, 2012 graduate in the College Scholars Program, who attended the 2008 presidential election DebateWatch. “Not only is it an exciting environment in which to watch the debate, it reminds students of the importance of being an informed voter.”

The Toyota Auditorium holds 180 people, so those planning to attend the 2012 presidential election DebateWatch should arrive early.

The Howard H. Baker Jr. Center is a nonpartisan institute devoted to education and research concerning public policy and civic engagement. For more information about the Baker Center, visit bakercenter.utk.edu.

For more information about DebateWatch events, visit debates.org.

—

C O N T A C T :

Nissa Dahlin-Brown (865-974-8681, nissa@utk.edu)

Hopes for accelerated growth this year in the state and national economies “have been dashed,” due to the sluggish creation of jobs, according to a report by University of Tennessee, Knoxville.

But it’s not all bad news. The unemployment rate is steadily decreasing, jobs have been growing, the housing market continues to address its long-standing pressures, and the financial health of states has improved—all key indicators of economic recovery, according to the spring 2012 Tennessee Business and Economic Outlook, a mid-year update released today by UT’s Center for Business and Economic Research (CBER).

“Despite slower-than-desired growth, the economy is on much firmer footing today than it was a year ago,” said Matt Murray, associate director of CBER and the report’s author.

The economy is also enjoying “a bit of a respite” from oil price pressures that significantly affected 2011, he said. The economy is expected to continue to grow along the same track throughout this year and into 2013. There likely will be subpar growth, but sustained expansion into 2014.

The main short-term risks confronting the US. economy are the possibility of a political and economic meltdown in the European Union and sharply lower rates of growth in emerging market economies, including China.

Tennessee Economy

Tennessee has a marginally healthier economy than the nation despite facing the same challenges, although there are some exceptions, according to the report.

• Tennessee’s nonfarm employment is expected to increase by 1.7 percent, compared to 1.5 percent growth for the nation.
• The state’s unemployment rate is expected to average 7.8 percent this year and 7.4 percent in 2013. By contrast, the nation’s unemployment rate is expected to average 8.1 percent this year and 7.8 percent in 2013.
• The state’s personal income is expected to grow 4.2 percent this year, while US personal income will be up 3.8 percent.

Not all state indicators were as bright. Manufacturing employment growth in Tennessee lagged behind national growth in 2011 and the first quarter of 2012.

The strongest employment outlook for 2012 is in natural resources, mining and construction, durable goods manufacturing, and professional and business services.

“Most measures of state growth will show further improvement in 2013, assuming the nation’s path of economic growth is not derailed,” Murray said.

In other areas, taxable sales have rebounded significantly, increasing to 7.9 percent this year, compared to 5.9 percent in 2011.

Automobile dealers, miscellaneous durable goods, eating and drinking establishments, and hotels and motels will show strong growth this year and in 2013.

State Revenue Performance

Nationally, state tax revenues have been slowly increasing in 2011 and this year although local revenues have been held back due to ongoing housing market crisis and the lag in property tax revenues.

Despite strong growth in revenue in the short-term, Tennessee and the nation “are not out of the woods,” Murray said.

The economy has yet to fully recover and states are facing more budget shortfalls.

“With revenue collections that aid in education resources still struggling to climb back up to prerecession peak levels and programs being cut, providing services to students and others will continue to be a challenge,” Murray said.

Read the full report online (pdf).

–

CONTACTS:

Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)

Lola Alapo (865-974-3993, lalapo@utk.edu)

“We are pleased to establish the Ashe Lecture Series at the Baker Center,” said Matt Murray, director of the Baker Center. “In accordance with the Baker Center’s mission and strategic focus on quality programs, the Ashe Lecture Series will be a welcome addition to the center’s emphasis on public discourse and civic engagement.”

This lecture series was created to honor Sen. Baker by hosting ambassadors and mayors to speak on policy matters including foreign relations, diplomacy, world affairs, and local government.

“Senator Baker’s emphasis on effective governance and leadership is a model for all,” said Ashe. “I’m hopeful the Ashe Lecture Series will encourage others to get involved as the Baker Center continues to focus on its mission of student engagement, public programming and policy research.”

For more information about the lecture series or to make a contribution, contact Michelle Castro at 865-974-3816 or mcastro@utfi.org. For more information about the Baker Center, visit the website.

—

C O N T A C T :

Nissa Dahlin-Brown (865-974-8681, nissa@utk.edu)

That is the message of “Assessment of Incentives and Employment Impacts of Solar Industry Deployment,” a report commissioned by the Solar Energy Industry Association (SEIA).

The Howard H. Baker Jr. Center for Public Policy at the University of Tennessee, Knoxville, administered funding for the research and the report. The Baker Center is a nonpartisan institute devoted to education and scholarship concerning public policy and civic engagement.

The report was written by a five-person team that included Susan M. Schexnayder, a senior research associate with UT’s Department of Forestry, Wildlife, and Fisheries; Alexandra Brewer, a UT graduate student in political science and graduate research assistant at the Baker Center; David P. Vogt of Decision Commerce Group LLC and retired from Oak Ridge National Laboratory; Tom N. Yoder, of Ohio, a partner at Decision Commerce Group LLC and an independent research professional; and Edward J. Lapsa, an independent consultant from Knoxville.

“This report looks at solar in relation to other energy sources and finds that solar is on the path to becoming a mainstream source of energy for our nation,” said Matt Murray, director of the Baker Center. “In addition, the report pulls together data showing the solar industry’s great potential for the US economy—not only in the diversification of our energy supply, but also through job creation and global business opportunities.”

Murray said being involved with the production of this report is in line with the Baker Center’s focus on energy and environmental policy. The Baker Center is also administering the $700,000 SunShot Solar Initiative, a project looking at the regulatory challenges and non-technological barriers to solar adoption.

Report highlights

The report outlines a variety of benefits of solar energy, which include:

• Its ability to reduce energy costs by providing much of the nation’s electricity needs during peak usage times;
• Its potential to produce hundreds of thousands of jobs; and
• Its tremendous export potential for solar manufacturing and materials.

Solar energy is readily available—especially during peak usage times—and, therefore, could provide a cheap energy alternative, the report states.

“As economic growth becomes ever more dependent on abundant and sustainable energy supplies, policymakers are working to enrich the portfolio of electricity-producing fuel sources with options like wind and solar power,” the report says. “Rooftop solar power alone would provide 20 percent of our electricity needs.”

Annual installed solar capacity has seen steady increases, especially in the past six years. It nearly doubled between 2009 and 2010 and was expected to double again between 2010 and 2011.

Long-term annual cumulative growth projections range from about 5 percent to 25 percent.

As the use of solar energy increases, the industry will grow as an economic force.

“The growing solar industry will be a boost to employment in the U.S., especially since the solar industry has historically produced more jobs per megawatt-hour than any other energy industry. Depending on the assumed growth rate, we estimate between 193,000 and 2.3 million total jobs.”

Likewise, the export potential for US solar manufacturing and material is also expanding with the rapid increase in solar use in Europe.

Role of federal incentives

Research shows that many American industries travel a somewhat bumpy path as they enter the mainstream of commerce.

Historically, it’s taken about thirty years for energy resources—oil, natural gas, hydropower, coal, etc.—to go from innovation to early adoption to rapid growth, and, finally, to majority adoption, the report notes.

“Each traditional energy sources has been developed with what might even conservatively be considered ‘significant’ government engagement, from market control measures for oil, to making pipelines available for natural gas, to building flood control dams that provide the fuel for hydropower, to states surveying their coal resources,” the report says.

In the days before the oil embargo, federal energy policy was either industrial policy or economic development policy meant to maintain competition, provide for national security, and promote economic development through tax incentives.

After the oil embargo, the federal energy policy got more focused, maintaining competition by deregulation; assuring worker safety, public health, and environmental quality; and providing for energy security by adding renewable energy options to the national portfolio.

The federal government currently provides incentives to every major energy production market, although reports of how much money the government spends on each vary greatly.

Federal incentives may aid in an energy resource’s production and refining, transmission, and distribution, transformation, or consumption. Effective incentives help remove specific barriers, level costs for private markets, and offer stability that help new technologies “cross the chasm” into mainstream use. Ideally, the incentives can decrease as the industry matures.

Fossil fuels, biofuels, and nuclear power have had significant federal engagement in the production, refining, and transportation steps.

Solar energy—because it’s widely available and doesn’t need to be transported—won’t need much federal investment in these areas.

Read the full report on the Baker Center website (pdf).

—

C O N T A C T :

Amy Blakely (865-974-5034, ablakely@utk.edu)

The University of Tennessee, Knoxville, is part of a national effort to find out.

UT’s Howard H. Baker Jr. Center for Public is participating in the US Department of Energy’s Rooftop Solar Challenge, an effort to encourage wider use of solar energy by streamlining the permitting processes, cutting red tape, and lowering the costs for rooftop solar systems.

The Baker Center, along with other UT departments and the Tennessee Solar Institute, is administering a $700,000 DOE grant that the group will use to identify best practices in financing, permitting, and zoning. The goal is to encourage the adoption of an online system to allow residents of four jurisdictions—Knoxville, Franklin, Nashville, and Memphis/Shelby County—to get residential solar permits through an over-the-counter, same-day review process.

“This research is timely and fits nicely within the Baker Center’s focus on energy and environmental policy,” Baker Center Director Matt Murray said. “We are pleased to play a role in this important environmental initiative.”

UT is one of twenty-two teams nation-wide to receive Rooftop Solar Challenge funding. The teams bring together city, county, and state officials, regulatory entities, private industry, universities, local utilities, and other regional stakeholders to clear a path for rapid expansion of solar energy and serve as models for other communities across the country.

Like the UT team, each team is trying to increase access to financing, standardize permit processes, improve grid-connection standards, and update planning and zoning codes. Non-hardware costs such as permitting, installation, design, and maintenance currently account for up to 40 percent of the total cost of installed rooftop photovoltaic systems in the United States. Lowering these costs is an important part of growing the solar energy industry so that it can provide clean, renewable energy for American families and businesses, improve US energy security, and create new jobs for American workers.

The UT team will work with the four municipalities and their electrical distributors, the Tennessee Valley Authority, and other stakeholders. They will try to create uniform documents, develop a prototype mobile application for installers, and assist in the developing more standardized code. The team also will research best practices from around the country on third-party financing, community solar, zoning, subdivision ordinances, and historic preservation in regards to solar rooftop installations.

“The UT team understands the importance of reducing the administrative barriers that stand in the way of solar-energy adoption in Tennessee,” said project principal investigator Bruce Tonn, who is a professor in the Department of Political Science and a fellow of the Energy and Environment Program at the Baker Center. “Funding and innovation leadership through the Rooftop Solar Challenge will help our state transition to clean solar energy.”

The Rooftop Solar Challenge is part of the DOE SunShot Initiative, an effort to make solar cost-competitive with other energy forms by the end of the decade. Reducing the installed cost of solar energy systems by about 75 percent will help drive widespread and large-scale adoption of solar power.

“Through the Rooftop Solar Challenge, the energy department is helping to unleash America’s solar energy potential in Tennessee and communities across the country,” US Energy Secretary Steven Chu said. “These awards will reduce the costs homeowners and businesses pay to install solar energy systems, while at the same time saving time and money for local governments faced with tight budgets.”

For information about the SunShot Initiative, visit energy.gov/SunShot.

For information on individual Rooftop Solar Challenge awards, visit www.eere.energy.gov/solar/sunshot/rooftop_challenge.html.

—

C O N T A C T :

Anne Guidos, (865-974-0931, aguidos@tennessee.edu)

That’s the cautiously optimistic prediction in the 2012 Economic Report to the Governor, released today by the Center for Business and Economic Research at the University of Tennessee, Knoxville. The report can be accessed at http://cber.bus.utk.edu/tefslist.htm.

“We expect the expansion to continue, albeit at a modest pace,” said Matt Murray, associate director of CBER and lead author of the annual report. “The economic outlook for Tennessee calls for conditions to improve further in 2012 and 2013, assuming nothing derails the path of growth for the nation.”

Murray cited Tennessee’s gains in personal income, taxable sales, and job creation as key indicators of economic improvement.

Problems that caused hiccups in the nation’s economic recovery during 2011 included continuing problems in the housing sector and “political gridlock in tackling the nation’s fiscal problems which contributed to falling consumer and business confidence over the year,” he added.

Nevertheless, employment gains and a revival of the manufacturing sector have helped stabilize the national economy and set it on course for further improvement.

The biggest risks for the US economy are the Eurozone sovereign debt crisis, the Middle East because of Iran’s threats to shipping, and the risk of rising gas prices, Murray said.

In addition to forecasting US and Tennessee economies, the report tackles issues about transitioning from college to career in Tennessee and looks at state data culled from the 2010 Census, Tennessee’s rebounding automotive industry, and the deal Amazon has forged with the state.

Tennessee economy

Among the good news predicted for the state in the next year or two: rising personal income and taxable sales, a continued decline in the unemployment rate, and growth in nonfarm employment and manufacturing, specifically in durable goods.

The report notes some of the 2011 gains that signal this future economic improvement:

• Tennesseans’ personal income was up 4.8 percent in 2011—after growth of only 4.2 percent in 2010 and a 2.9 percent backslide in 2009.
• Despite quarterly fluctuations, there was a 1 percent pace of job creation for the year. It was the first year since 2008 that the state and national economies were able to engineer nonfarm job gains.
• After peaking at 10.8 percent in the third quarter of 2009, the state’s unemployment rate inched downward, ending 2011 at 9.3 percent.
• Thanks to personal income growth and an improved employment rate, taxable sales were up, which boosted local and state sales tax revenues.

However, not all of the tax revenue news was positive.

For local governments, property tax revenues make up about two-thirds of total tax collections, and property tax revenues haven’t rebounded in the same way as sales, income and corporate tax revenues.

“Due to stagnant or falling housing prices, as well as weaknesses in other property categories, local collections across the states were down 1.0 percent in the second quarter of 2011, the third consecutive quarter of decline,” the report says.

Tennessee’s automotive industry

After taking a battering in the Great Recession, the state’s automotive industry is revving up again with new investments from Volkswagen, Nissan, and General Motors.

“The revival of the automotive industry in Tennessee also benefits the state in terms of opportunities for automotive suppliers that manufacture the myriad components that go into each vehicle,” the report says. “The state now has four assembly plants but

nearly 1,000 major automotive suppliers.”

The report notes that for the second consecutive year, Tennessee led the nation in automotive manufacturing strength, according to rankings listed in Business Facilities, a national economic development publication.

Among the notable new investments in 2011:

• Volkswagen’s two-million-square-foot Chattanooga plant opened in May and is expected, in time, to employ about 2,000 people.
• GM announced it will reopen the Spring Hill facility—which was put on standby in 2009 as part of its bankruptcy plan—and convert it to an ultra-flexible plant that would serve as an overflow source of production for vehicles already built in other factories. The effort, expected to build 40,000 vehicles a year, will create about 700 jobs. Plus, GM said it plans to invest another $183 million in Spring Hill for the manufacture of midsize vehicles.
• Nissan chose Decherd, west of Chattanooga, as the site to produce electric motors for the Nissan Leaf EV. Earlier this month, Nissan said it had a deal with Mercedes Benz to begin producing engines at the Dercherd plant in 2014.

—

C O N T A C T :

Matt Murray (865-974-6084 or 865-974-0931, mmurray1@utk.edu)

Amy Blakely (865-974-5034, ablakely@utk.edu)

Murray, the Ball Corporation Professor of Business, will take the place of Carl Pierce, who has directed the center since June 2009. Pierce, who is the W. Allen Separk Distinguished Professor of Law, will now focus on compiling Senator Baker’s papers and will eventually divide his time between the Baker Center and teaching in UT’s College of Law.

“We’re grateful to Carl for leading the center as we’ve studied its role on the campus and outlined a course that will keep it focused on critical issues, link it more directly to the campus’s academic community, and ensure it remains financially viable into the future. He’s helped us make changes that will lay the groundwork for transitioning the Baker Center into a more focused unit,” Chancellor Jimmy G. Cheek said.

“Matt is taking the reins at the Baker Center at a time when we’re trying to align it more closely with the university mission to teach, conduct research, and provide service to our community and the world. Matt’s strong research background coupled with the relationships he has not only on campus, but also in the local, state, and national realm, will help us position the Baker Center as the go-to source of public policy information, especially in the areas of global security, energy, and the environment,” Cheek said.

Murray’s appointment as Baker Center director is for three years; he will continue to work with CBER during that time.

Senator Baker said he is enthusiastic about what’s been happening at the center and what its future holds.

“I think Carl did a tremendous job helping us rethink the role of the Baker Center and begin its transition. I now look forward to working with him on a variety of projects with the hope that these efforts may benefit future generations of public servants,” he said. “Meanwhile, I welcome Matt as the new director of the Baker Center. I’m confident his leadership will help it evolve as a thought-leader, both on campus and also with state and national leaders.”

—

C O N T A C T :

Amy Blakely (865-974-5034, ablakely@utk.edu)

Many aspects of the economy, however, are showing some gains in the short-term, which is good news particularly in the areas of employment, personal income, sales tax, and state tax revenue, according to a University of Tennessee, Knoxville, report released today.

However, the housing market will continue to struggle, according to the fall 2011 Tennessee Business and Economic Outlook. The economy could also face a number of downside risks in the months ahead, including the looming financial crisis in Europe.

The study, prepared by the UT Center for Business and Economic Research, predicts the trajectory of the state and national economies by examining several economic and fiscal factors.

“Economic growth has slowed but has not stalled,” wrote Matt Murray, CBER associate director and author of the study. “A slight pickup in growth is anticipated in the third and fourth quarters, but annualized growth will come in at a disappointing rate for the year as a whole. The outlook for 2012 is only slightly better.”

Tennessee’s short-term economic outlook has been downgraded because of slower growth prospects nationally and internationally.

Here are some major themes in the fall report:

 Employment

Tennessee’s unemployment rate will surpass the national rate in the short-term.

It will average 9.8 percent in the third quarter and 9.7 percent in the fourth. The 2012 projection is 9.4 percent. It’s not expected to dip below 9 percent until 2013.

The nation’s unemployment rate was officially 9.1 percent in August, which was an improvement over the 9.6 percent rate in 2010.

The national unemployment rate will also remain above 9 percent this year and next year.

Tennessee’s nonfarm employment is expected to be up 0.8 percent this year and 1.0 percent in 2012, down slightly from expectations in the spring.

Manufacturing will enjoy short-term employment gains particularly in the durable goods sector. This is largely due to steady improvement in the transportation equipment industry, including new jobs created by Volkswagen. However, manufacturing will not regain all of the jobs lost during the course of the recent recession.

Nondurable goods will decline 0.2 percent this year. The textiles and printing industries will see “especially large losses,” Murray wrote. Plastics and rubber, on the other hand, will enjoy healthy growth benefiting in part from the pickup in transportation equipment production.

Most sectors of the economy outside of manufacturing are expected to see job gains in the quarters ahead. Exceptions for 2011 include retail trade, information, and government, including federal, state, and local employment.

In 2012, retail trade and the government areas will likely continue to lose jobs while other sectors expand.

Nationally, “employment is not only below pre-recession levels but below the level of employment that prevailed in 2000,” Murray wrote.

U.S. payroll employment is expected to grow 0.9 percent this year and 1 percent in 2012. However, employment will not return to 2008 levels even by the end of 2013.

 Tax collections

Tennessee’s sales tax revenues for the July 2010 through March 2011 time period fared better than the southeastern average.

Total tax revenues grew 6.3 percent compared to 2010, and sales tax revenues grew by 4.6 percent. While both numbers were above the southeastern average, they were below the national average.

The second quarter of 2011 compared to the same period in 2010 showed positive growth for Tennessee. The total growth was 3.3 percent over 2010, and sales tax growth was up 5 percent. Tennessee’s sales tax grew more than the southeastern average in the second quarter of 2011 over 2010.

This is the second consecutive August with positive sales tax revenue growth which moves collections to just $9.5 million below August 2007.

State governments are finally seeing some relief from the recession. Recovery, in terms of tax revenue growth, is “quite strong,” Murray wrote.

Year-over-year growth in the second quarter of 2011 compared to 2010 was the strongest states have seen since 2005. It was 11.4 percent. The first and second quarters of 2011 show continued state tax revenue growth throughout the nation. Though revenues have been positive for six consecutive quarters, collection levels are still below pre-recession figures, including Tennessee.

Local governments are not as lucky.

Due to weak property tax revenues, which account for more than a quarter of local tax collections, state and local collections have seen losses for two consecutive quarters nationwide. Compared to the same quarter in the previous year, property taxes fell by 1.7 percent in the first quarter of 2011 and 3 percent in the fourth quarter of 2010, reflecting the declines in property values during the past two years.

“Unfortunately, the worst is not likely over for local governments,” Murray wrote.

 Personal income

Tennesseans will have a bit more money this year.

Personal income is expected to grow 4.6 percent in 2011, thanks in part to the temporary two percentage point reduction in the Social Security payroll tax.

Rent, interest, and dividend income should see strong growth of 5 percent.

A 4.3 percent income growth rate is expected in 2012, one more illustration of slow economic expansion.

Nationally, nominal personal income is expected to increase 5.3 percent in 2011, but it will not be evenly distributed across all socio-demographic groups.

 Housing market

Home values in Tennessee and the nation are expected to keep falling through 2011. Existing home sales will remain low and national home prices will drop 5.2 percent for the year, the report states.

“Foreclosures are expected to be up in 2011 after a respite in 2010,” Murray wrote. “The depressed state of the housing market will limit job creation in the construction, building material, and home furnishing sectors, while putting downward pressure on the sales and property tax bases of states and localities.”

 Investment

Murray called nonresidential fixed investment “an important bright spot” for the national economy.

Following 4.4 percent growth in 2010, investment spending is expected to rise 7.8 percent this year and 4.3 percent next year. Equipment and software investment will show broad-based gains. Investment in structures, however, will see only 3.2 percent growth in 2011 and a 3.5 percent setback in 2012.

“This weak performance for structures is nonetheless marked improvement over the double-digit declines in 2009 and 2010,” Murray said.

To see the report in its entirety, visit http://cber.bus.utk.edu/tefs/fall11.pdf.

The report was financed by the state Department of Finance and Administration, the state Department of Economic and Community Development, the state Department of Revenue, the state Department of Labor and Workforce Development and the Appalachian Regional Commission.

–

C O N T A C T S:

Matt Murray (865-974-6084, mmurray1@utk.edu)

Lola Alapo (865-974-3993, lola.alapo@tennessee.edu)

This forecast was released today in the spring update to the 2010 Economic Report to the Governor, an annual report prepared by the University of Tennessee, Knoxville’s Center for Business and Economic Research (CBER).

While evidence collected by the study illustrates the recession hit rock bottom in the middle of 2009, Tennessee will not see economic activity return to pre-recession levels until 2012 or 2013. Nevertheless, the state is finally on a sustainable path to recovery, according to Matt Murray, CBER associate director and director of the study.

The report notes two areas of concern for the national economy. First, the debt situation in Greece and other European countries poses a risk to our national economy. As uncertainty and speculation persists, financial markets will continue to be volatile and vulnerable.

Second, like Tennessee, state economies have suffered massive budget gaps and have had stimulus funds to cover up to 40 percent of projected shortfalls. This federal assistance will expire in 2011, compelling states to make drastic changes in the form of tax increases and spending cuts in order to balance budgets.

Here are some of the major themes in this year’s report:

Employment

Tennessee’s employment took a major hit during the recession and it will take several years for it to rebound to 2007 levels.

Nonfarm employment slipped .8 percent in 2008 and then plummeted 5.6 percent the next year. Between the first quarter of 2007 and the first quarter of 2010, the state manufacturing sector shed 88,000 jobs. And in 2009 alone, manufacturing jobs dropped 14.2 percent.

Education and health services and government were the only sectors of the state economy to see job growth in 2007, 2008 and 2009.

“The employment situation across the state has been nothing less than grim,” Murray wrote. “It will take a considerable period of time to erase the job losses that mounted over the course of the recession. Even in 2012, employment levels will lag the figures that prevailed in 2007.”

Nonfarm employment is expected to fall slightly this year before engineering a strong 1.8 percent rate of growth in 2011. The state manufacturing sector will experience a 2.5 percent setback this year before a 3 percent gain in 2011. The retail trade, professional and business services, education and health services, leisure and hospitality services, and government sectors all will see growth in 2010.

Tennessee’s unemployment rate will remain high for several years to come — 10.2 percent in 2010 and 9.4 percent in 2011. Many of those who lost their jobs during the recession will find it difficult to market their skills when hiring picks up. Additionally, discouraged workers who had a tough time finding employment during the recession will resume their search, thus being counted by the state as officially unemployed again. These two factors will help sustain a high statewide unemployment rate.

Housing market

Tennessee’s housing market also illustrates the damage done by the recession and the long path back to recovery.

For example, residential building permits in the Knoxville-metro region were sliced from 6,963 in 2005 to 2,102 to 2009. Making matters worse, the weak employment and earnings environment has caused mortgage delinquencies and foreclosures to surge and that is expected to continue.

“As of this date, neither foreclosures nor delinquency rates have peaked,” Murray wrote. “These problems will persist as the unemployed and underemployed find it increasingly difficult to make their monthly payments.”

Personal income

Among the morsels of good news in the report, Tennesseans will make more money this year and even more next year.

Nominal personal income — the sum of wage and salary disbursements, proprietors’ income, personal dividend income, personal interest income, and transfer payments to persons– in Tennessee will increase 2.8 percent in 2010 and 4 percent in 2011.

“Wage and salary income will show healthy gains next year as employment returns to the black. It appears that the bottom is now behind us and an improved outlook is now emerging,” Murray wrote.

State tax revenues

Although the growth in state revenues may be turning in the right direction, Tennessee will not reach previous peaks in sales and use tax growth rates for some time to come.

“This recession was the first where Tennessee actually saw tax revenues, which include the influence of inflation, fall over two consecutive fiscal years,” Murray wrote. “The Great Recession continues to impact federal and state budgets with spending pressures outweighing revenue collections.”

According to CBER, total tax collections in Tennessee increased by $27.2 million, or a 2.2 percent nominal expansion, for the first time in two years, from April 2009 to April 2010, with sales and use tax collections increasing 5.6 percent.

But we still have a long way to go. From April 2007 to April 2010 tax revenues fell 11.2 percent, creating a large gap. At present, revenues remain 8.8 percent below the April 2007 pre-recession level.

“Tennessee tax revenues, as with collections, will not reach their pre-recession collection peak until at least the 2012-13 fiscal year. In the meantime more fiscal pressures will emerge when federal fiscal stimulus funds are exhausted at the end of the 2010-11 federal fiscal year,” Murray said.

Taxable sales and sales tax collections will improve as more Tennesseans go back to work and as earnings rise.

Read the full report online.

—

C O N T A C T:

Whitney Holmes (865-974-5460, wholmes7@utk.edu)

Free and open to the public, the event will begin at 6:30 p.m. in the Toyota Auditorium at the Howard H. Baker Jr. Center for Public Policy, located at 1640 Cumberland Ave.

Panelists will include Joe Carcello, Ernst & Young Professor in the Department of Accounting and Information Management and director of research for the Corporate Governance Center; Joan Heminway, distinguished professor of law; and Matt Murray, economics professor and associate director of the Center of Business and Economic Research. The session will be moderated by Paul Fain, who is a certified financial planner, a columnist for the Knoxville News Sentinel and president of Asset Planning.

Each panelist will offer his or her perspective of the economic crisis, looking at regulatory issues, the markets, bank regulations and other concerns.

Heminway said she will focus on the role of securities regulation in the recession and financial crisis by answering questions, like “Did the U.S. Securities and Exchange Commission (SEC) miss the boat on the financial instruments that had a large role in the crisis?” and “Is the SEC all but extinct (in its current from)?”

Carcello said he will look at some of the causes of the financial crisis, including cheap money (credit available at low interest rates), misaligned incentives and inadequate regulation.

The Baker Center, which opened at UT in 2003, develops programs and promotes research to further the public’s knowledge of our system of governance, and to highlight the critical importance of public service, a hallmark of Sen. Baker’s career.

For more about the Baker Center, see http://www.bakercenter.utk.edu.

—

C O N T A C T :

Amy Blakely (865-974-5034, amy.blakely@tennessee.edu)

Simply put, that’s the forecast in the 2010 Economic Report to the Governor, an annual report prepared by the Center for Business and Economic Research (CBER) at the University of Tennessee, Knoxville.

“The recession that began in December 2007 has now had more than two years to wreak havoc on the state economy,” wrote Matt Murray, CBER associate director and director of the study. “It will take well over two years for the economy to fully rebound.”

The report notes that the federal stimulus package has helped stabilize the economy: Federal government spending has increased and this will add 1.3 percentage points to growth in the gross domestic product in 2010. The stimulus package has allowed states to stave off aggressive actions, including debilitating budget cuts, raised taxes and depletion of rainy day funds.

The question is how much the economy will falter when stimulus funds run out at the end of the 2010-11 federal fiscal year.

“Concerns are mounting daily on how the states will be able to respond when fiscal stimulus funds are exhausted,” the report says.

Here are some of the major themes in this year’s report:

Employment

“The state unemployment rate will likely average 10.4 percent (in 2010) and remain stuck above 10 percent through 2011,” the report says. “This will translate into more than 300,000 unemployed people in Tennessee in 2010 and 2011 and put sustained pressure on the state’s unemployment insurance trust fund.”

The only sectors expected to see job growth in the coming year are wholesale trade, professional and business services, education and health services, and government.

As for the long-term outlook, the report states that the state unemployment rate is expected to “remain stubbornly high for several years to come, not falling below 7 percent until 2016.”

Tennessee is now into its fourth consecutive quarter with a statewide unemployment rate in excess of 10 percent.

“The number of unemployed people has nearly doubled since the start of the recession,” the report says.

Personal income

“Personal income growth in Tennessee lagged the nation between 1999 and 2009,” the report said. “The long-run forecast indicates that same pattern will emerge in the years out to 2019.”

Nevertheless, some improvement is forecasted.

“A slower rate of job loss, along with the expectation of rising average wage, should produce 2.5 percent growth in wage and salary income in 2010,” the report says. In addition, labor income, proprietors’ income and rent, and interest and dividend income also are expected to grow in the coming year.

As a result, nominal personal income — the sum of wage and salary disbursements, proprietors’ income, personal dividend income, personal interest income, and transfer payments to persons — should grow 2.1 percent in 2010 and 3.5 percent in 2011.

By comparison, nominal personal income rose only 0.2 percent in 2009. Individually, wage and salary income, proprietors’ income and rent, and interest and dividend income all fell.

Sales tax revenue

Taxable sales should show improvement in the coming year, too — partly because the economy will improve and also because sales are at such a severely depressed level now.

“For the year as a whole, taxable sales should advance 2.1 percent in 2010,” the report says.

Before the recession, sales tax revenue peaked in the 2007-08 fiscal year, and revenues aren’t expected to rise beyond that pre-recession peak until the 2012-13 fiscal year.

“In the meantime, the state will find that federal stimulus funds in support of the budget will have been exhausted,” the report says.

Agriculture

Weather conditions are ripe for improvement in the agriculture sector. Now, it’s just a matter of market.

The state’s agriculture sector — which accounts for 11.4 percent of Tennessee’s economy — saw some improvement in the past year.

“Good moisture levels in 2009 resulted in increased soybean, corn, hay and cotton production,” the report said. “Tobacco production and winter wheat production both fell. While 2009 crop prices did not hit the highs seen in 2008, they were sufficient to ensure profitability in the crop sector.”

Livestock producers didn’t fare as well, mostly because higher crop prices meant higher feed costs.

Because of significant rain during the fall, spring planting looks good.

“The big issue for crop farmers in 2010 will be price, as the market is currently on the downward side of a price spike that peaked in 2008,” the report said.

Livestock farmers have reduced the number of animals they keep, but “it remains to be seen if the reduction is large enough to restore profitability to the sector.”

Automobile industry

“Despite some growing pains, Tennessee has successfully moved from a small player in the transportation equipment sector to a major player in the national arena,” the report notes in a special section that examines the future of the U.S. automobile industry and the impact it is likely to have on Tennessee.

The report notes that Tennessee was successful in expanding its role in the transportation equipment sector in the 1980s when it recruited Nissan and Saturn assembly facilities. At its peak in 2000, there were 68,500 jobs in transportation equipment production in Tennessee.

Tennessee has taken a hard hit in this business sector during the economic downturn with Peterbilt and former Saturn production facilities closing.

“But there are bright spots as well for the state’s transportation equipment sector,” the report says, noting that Nissan will be building its zero emissions Leaf car in Rutherford County, and Volkswagen will soon begin production in Hamilton County.

However, the report suggests the state will have to work to maintain that status:

“Tennessee will need to offer a highly skilled workforce and complements to the design, production and assembly processes (like research and development capacity) to maintain and support this important industry cluster.”

Read the full report on CBER’s Web site.

—

C O N T A C T :

Amy Blakely (865-974-5034, amy.blakely@tennessee.edu)