New report forecasts an economic slowdown for Tennessee in 2024
KNOXVILLE, Tenn. (WKRN) — After a red-hot economy for the last couple of years, Tennessee’s economic engine is starting to cool. That’s one finding in the University of Tennessee’s new state economic report.
“We are projecting that economic growth in Tennessee is going to kind of decelerate a little bit over the next year or two,” said Larry Kessler, research associate professor, Boyd Center for Business and Economic Research.
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Kessler’s new report is calling for 1.8% job growth for Tennessee in 2024. That’s quite a slowdown from the 3.3% this year, and 4.2% last year.
Kessler said economic headwinds, such as high interest rates and the resumption of student loan payments, have cooled consumer spending, which makes up 70% of all economic activity.
“That’s really what was driving the economic expansion or the economic recovery following the pandemic was consumption spending, so it’ll be interesting to see what sort of happens to consumption spending and a household’s budget once we start seeing people having to make these payments again.”
But Tennessee’s economy is looking rosier than the nation. Where other states are forecasting a manufacturing contraction, in Tennessee, manufacturing is growing, and so is the number of people moving here with 82,000 new Tennesseans in 2022 – the largest in the data’s history.
“And that’s really important because population growth is just such a strong driver for economic growth in general. It leads to more consumption spending, more jobs and more people in the labor force, and just more economic activity in general.”
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The pandemic transformed the economy. The lockdowns initially brought a huge drop followed by a surge in economic activity. However stubborn inflation and increasing interest rates tortured the economy for years. In 2024, Kessler sees those variables – mainly started during the pandemic – starting to fade.
“I think 2024 might be a transition year where we have a little slightly below-trend growth as we revert back to the norm, which we might start to see in 2025.”
Kessler said affordable housing is one of Tennessee’s biggest challenges. This report is intended to guide policymakers heading into the new year.
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