Staff Photo by Dan Henry/Chattanooga Times Free Press The two buildings in Volkswagen's supplier park in the foreground are part of more than 1,100 acres VW is using for its automobile assembly plant at the Enterprise South industrial park. Most of the available industrial sites in the former Volunteer Army Ammunitions Plant have been bought or optioned.

NASHVILLE -- Chattanooga led other major Tennessee cities in job growth over the past year, thanks in large part to the Volkswagen auto assembly plant, according to a state economist.

The Chattanooga metropolitan area's employment growth rose nearly 1.5 percent during 2010, University of Tennessee economist Bill Fox said Monday.

Speaking to the state Funding Board, he noted that job growth in Clarksville's metro area in Montgomery County was nearly as high as Chattanooga's.

"I don't think anybody should be surprised in looking at this," said Fox, director of the Center for Business and Economic Research at UT. "What we're seeing is the effect of Volkswagen and the effect of Hemlock playing out very much in those parts of Tennessee."

Volkswagen's $1 billion plant will begin manufacturing the new model of Passat next month. The plant is employing more than 2,000 workers and has attracted hundreds more jobs from VW suppliers.

In Clarksville, Hemlock Semiconductor is building a $1.2 billion plant to manufacture polysilicon for semiconductors and solar panels.

Fox said the rest of Tennessee is "seeing relatively modest employment growth" coming out of the recession.

Speaking after the board meeting, Fox said that in recent years Nashville "was the fast-growing city." Chattanooga and the Kingsport areas in Northeast Tennessee found themselves caught in a "really big transition" as nonskilled manufacturing jobs in areas such as textiles fled overseas, Fox said.

Those jobs now are being replaced to some extent with higher-paying manufacturing jobs, the economist said.

"It's a good transition unless you were one of those who lose their jobs," he said.

In recent years, the Chattanooga metropolitan area has had increased job growth at existing plants such as Alstom Power.

Meanwhile, Wacker Chemical is building a $1.2 billion facility in Charleston, Tenn., in Bradley County that will employ about 500 people. Whirlpool, Olin Corp. and Coca-Cola also have announced Bradley County expansions.

Amazon says it will invest about $139 million in the two distribution centers in Hamilton and Bradley counties. The centers are expected to employ more than 1,400 full-time workers and 2,000 seasonal workers.

Jim White, executive director of the Legislature's Fiscal Review Committee, said a still-recovering Tennessee economy has gotten back about half the 212,000 jobs lost during the recession. He said it could take another two years before all the job losses are erased.

Meanwhile, Fox and other economists are forecasting higher growth in state revenues.

"I feel much more optimistic than I was in December," said state Comptroller Justin Wilson, a Funding Board member.

But he sounded a cautious note, saying that when it comes to revenues, "I think all our goals is not to overestimate or underestimate. It's just as damaging to underestimate as it is to overestimate."

Funding Board members are expected to release estimates Wednesday. They will determine how much money Gov. Bill Haslam, has to work with when dealing with anticipated budget cuts.

The board delayed acting in December at the request of Haslam and his finance commissioner, Mark Emkes, to have January figures, which reflected December activity that included holiday sales taxes.

"We still have to make cuts, but it was encouraging," Emkes said. "I think it always makes sense to work with as many actual numbers as possible, and I think that was why the delay was requested, because it was felt the economy is coming back and Christmas sales were going to be good. So this, I think, enables us to make better decisions."

Contact staff writer Andy Sher at asher@timesfreepress.com or 615-255-0550.