Economic growth in Tennessee will continue yet begin to lose momentum in 2019, according to a new report by the University of Tennessee’s Boyd Center for Business and Economic Research.
“I’m reasonably optimistic right now,” economist Matthew Murray said.
The report is signaling a potential slow down in the near future, pointing to changes in labor markets and rising interest rates.
The Tennessee economy grew by 2.7 percent in 2018 but is expected to slow to 1.9 percent growth in the next two years. Economist Matthew Murray, associate director and project director for the Boyd Center for Business and Economic Research, said this shift should have little impact on the wallet.
“Consumers are going to face marginally higher interest rate costs, mortgage rates are going to be marginally higher, importantly the federal government and their increased deficit is going to have to be financed with higher interest rates but by and large these effects are going to be muted,” Murray said.
Unemployment is also expected to stay relatively low according to data analysis, yet will gradually rise above 4 percent by 2020. Murray said less skilled workers will be most affected by this.
“There are shrinking opportunities for poorly skilled workers, so if you’re a high school dropout, the employment prospects are going to be pretty bleak,” Murray said.
Murray said vocational training and greater access to broadband in rural areas could be part of the solution, but overall, labor markets are becoming tighter, like the auto market where job opportunity has already started to decline.
“The rate of growth is going to slow,” Murray said. “We’re not going to see five, six, seven, eight percent growth in employment in the transportation equipment sector when we have national auto sales that are starting to slip down.”
Murray predicts next year’s economic gains in Tennessee to look much like this year’s, pending any unforeseen shock in the economy or dramatic policy shifts in the incoming Gov. Bill Lee administration.
“What Bill Lee does, he talked about vocational education, he’s talked about vouchers, he’s talked about fiscal prudence, but we really haven’t seen anything significant right now to provide us an indication on where the administration is going,” Murray said.
Economists predict around 43,000 new jobs will come to Tennessee in 2019 and the state’s gross domestic product to increase 2.6 percent over the next year.