Tennessee's economic growth will slow next year, but state economists are not forecasting a recession in the Volunteer State in 2023.
In their annual economic outlook released Thursday, economists at the Boyd Center for Business and Economic Research at the University of Tennessee predict the national economy will turn negative next year with the gross domestic product declining in the first half of 2023. But buoyed by its growing electric vehicle industry and a continued influx of new residents, Tennessee is expected to continue to grow in 2023, albeit at a much slower pace with higher interest rates and more economic uncertainty.
"The current national forecast is projecting a mild economic recession with U.S. real GDP (gross domestic product) falling in the fourth quarter of 2022 and continuing to contract through the first half of 2023," Lawrence M. Kessler, a research associate professor at the University of Tennessee and project director for the Boyd Center for Business and Economic Research, said in a 150-page forecast. "In contrast to the more pessimistic national outlook, economic growth in Tennessee will likely remain positive in the near term due to the state's strong in-migration in recent years which has led to an uptick in economic activity."
Kessler predicts the U.S. economy will decline by 2% in the first quarter of 2023 and by 0.4% in the spring quarter before rebounding and growing again in the second half of the year.
In Tennessee, the UT economist expects economic growth to slow from a robust 9.2% last year to 2.4% this year and 0.7% in 2023. But Tennessee's economy is projected to continue to grow through all four quarters of the year.
Over the past five years, car and battery manufacturers have announced plans for nearly $13 billion of electric vehicle-related projects that are projected to add over 11,000 new jobs. Tennessee is currently home to major EV producers at Volkswagen in Chattanooga, General Motors in Spring Hill and Nissan in Smyrna. Ford has teamed up with SK Innovation near Memphis to build a $5.6 billion EV and battery plant -- the biggest ever in Tennessee.
Tennessee also continues to draw relocating workers and seniors. A study by the website moveBuddha.com found that Chattanooga had 3.06 new residents moving into the area for every resident leaving in 2022.
Kessler said the financial health of Tennessee's state government also "remains healthy due to strong tax revenue collections coupled with direct state aid through the American Rescue Plan, which has put the state economy on stronger footing."
Unemployment in Tennessee is projected to increase next year from the historic lows reached in 2022, Kessler said. After shedding 3.8% of the state's jobs during the pandemic in 2020, Tennessee has regained all of those lost jobs and last month state payrolls were nearly 109,000 above pre-pandemic levels.
The Tennessee Department of Labor and Workforce Development reported Thursday that Tennessee's jobless rate in November remained at 3.5%, which was two-tenths of a percentage point below the national unemployment rate for last month.
Statewide, Tennessee employers added 6,400 new jobs to their payrolls in November and 119,400 more jobs over the past 12 months.
In neighboring Georgia, unemployment last month edged higher but remained below both the Tennessee and U.S. jobless rates. In the Peach State, the jobless rate was 3% last month, up a tenth of a percent from October's 2.9% jobless rate.
Georgia employers added 1,100 jobs last month and 182,200 jobs over the past year to boost employment in Georgia to an all-time high.
Jobless in November
— 3% in Georgia, up from 2.9% in October
— 3.5% in Tennessee, unchanged from October
— 3.7% in the U.S. as a whole, unchanged from Ocotober
Sources: Tennessee Department of Labor and Workforce Development, Georgia Department of Labor and the U.S. Bureau of Labor Statistics