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Local Economic Conditions

Local Economic Conditions. David A. Penn, Director Business and Economic Research Center Jennings A. Jones College of Business Belmont University February 2, 2005. Tennessee by Comparison . Industrial Structure Manufacturing sector is very important Health care important

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Local Economic Conditions

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  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. Nonfarmemployment Modest job growth: Nashville MSA up by 1.0% from year ago. Year to year percent change

  17. Nonfarmemployment Modest job growth: Tennessee employment growth drifting lower. Year to year percent change

  18. Nonfarmemployment U.S. employment rising faster than locally. Year to year percent change

  19. Nonfarmemployment Nashville MSA compared with other MSAs of similar size

  20. Nashville MSA Ranking Compared with Peer MSAs (4th QTR 2003:04)

  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 U n e m p l o y m e n t R a t e b y C o u n t y 2 . 5 % - 5 . 7 % 5 . 7 % - 8 . 3 % 8 . 3 % - 1 3 %

  29. Indicators for the Local Economy • Nonfarm employment • Unemployment rate • Taxable sales • Housing and real estate

  30. Sales slowed in the second and third quarters following a strong first quarter. Figures for November show improvement. Taxable Sales Growth

  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 e r c e n t C h a n g e i n S a l e s L e s s t h a n 0 % 0 % - 1 0 % 1 0 % - 1 8 . 5 %

  36. 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 • Tennessee’s 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

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