Experts project Tennessee and the U.S. will see sustained economic growth after a strong growth in 2018, according to a report by the Boyd Center for Business and Economic Research.
This growth could potentially slow as the economy confronts a tightening labor market and rising interest rates. According to the report, patterns of slow growth are typical following years of sustained growth.
The Boyd Center for Business and Economic Research, housed within the Haslam College of Business, has provided Tennessee's governor an annual economic report since 1975 according to UT News.
Associate director of UT’s Boyd Center for Business and Economic Research Matt Murray served as project director for the 2019 Economic Report to the Governor of the State of Tennessee.
“The economy is in good shape and continues to expand, but job gains could slow as a result of a plateau, which has occurred throughout the country,” Murray said in a news release.
Tennessee's inflation-adjusted gross domestic product grew 2.7 percent in 2018 and the U.S. overall grew 2.9 percent.
A record low unemployment rate reflects the buoyant state labor market. Fading effects of federal tax cuts and increased spending in conjunction with rising interest rates and possible tariff wars could mean slower growth in years to come.
“This is by no means a recessionary outlook,” Murray said. “But the growth we are projected to see in 2019 is at a slower rate than what we saw in the years leading up to the state of recovery in which we currently operate.”
Non-farm jobs should grow by 1.4 percent, or 43,000 new jobs, in Tennessee's 2019, which is slightly less than the 1.8 percent pace of job growth seen in 2018. The state's inflation-adjusted gross domestic product is expect to rise 2.6 percent next year and Tennessee's expected economic growth is likely to mirror growth in the national economy.
“Historically low unemployment rates and an increase in both job growth and per capita personal income are all indicators that prove how well Tennessee’s economy performed in 2018,” Commissioner of the Tennessee Department of Economic and Community Development Bob Rolfe said in a news release. “We appreciate the work done by the Boyd Center as their report forecasts trends we can expect to see not only in Tennessee, but across the country for the upcoming year.
“We are eager to build upon the momentum built by Governor Bill Haslam as we continue to work with companies to create high quality, family wage jobs throughout the state,” Rolfe added.
The implications of federal tax reform and rising trade tensions for economic growth in Tennessee is laid out in a special chapter of the report. According to the report, the net effect of tax reform is likely a short-term boost to economic growth next year. Tariffs, however, are likely to lead to higher consumer and producer prices as well as job loss nationwide.
Export to Canada, Mexico and China totaled 16.2 billion in 2017, making international trade important in Tennessee. More than 150,000 Tennesseans work for foreign-owned companies and U.S. tariffs on aluminum and steel are costly for Tennessee's machinery, automobile and auto part manufacturers.
The report also projected that the Federal Reserve will raise interest rates in 2019; a contributing factor to higher interest rates is a slight acceleration in inflation in 2018. Along with increased interest rates, the U.S. trade deficit is expected to increase with a projected 4.1 percent increase in exports and more than a 6.4 percent increase in imports.
Job growth is projected to slow down in 2019, but the report expects the professional and business services sector and the transportation and utilities sector to see strong gains. The report predicts that the state's unemployment rate will increase to 3.6 percent in 2019 due to tight labor market drawing more people into the labor force for a job.
The full report can be found here.