CLEVELAND, Tennessee -- The U.S. economy appears headed into a recession, but the economic downturn is likely to be shorter than most recessions and be less severe in Tennessee, University of Tennessee Economist Ed Taylor said Tuesday.
In a speech to the Tennessee Chamber of Commerce and Industry during a Manufacturing Road Show, Taylor said higher interest rates adopted by the Federal Reserve Board to try to limit inflation will likely push the nation's gross domestic product down by 0.5% next year and boost the current 3.5% jobless rate up to as high as 6% next year.
But Taylor said the downturn "will be relatively mild" and shorter than the typical recession which usually lasts 8 to 10 months. The UT economist also said Tennessee's diverse and growing economy going into the recession should cushion the impact of the national recession in the Volunteer State.
"Tennessee's outlook is slightly more favorable than the U.S. as a whole so we don't expect as big of an increase and as much as a decline," Taylor said during a presentation Wednesday morning to several dozen manufacturing leaders gathered at the PIE Center here.
Taylor said economic demand will soften in the coming months while borrowing costs will continue to rise. But businesses may also get some reprieve in their struggles with supply chain problems and labor shortages.
For now, manufacturers said finding workers to staff operations remains a challenge. During Wednesday's forum, managers from Olin Corp., McKee Foods and Duracell all indicated they continue to seek to hire workers. Bradley Jackson, president of the Tennessee Chamber of Commerce and Industry, said workforce challenges remain the biggest concern among Tennessee manufacturers.
With an aging workforce and fewer new workers coming into the labor market, unemployment in September fell in metropolitan Chattanooga to 2.8% -- matching the historic lows reached in late 2021 and again in April this year. The 2.8% unemployment rate is the lowest in at least four decades.
Taylor said manufacturing accounts for 15.9% of the state's economic output and employed 362,600 workers in September across Tennessee.
Jackson said a recession may cost some jobs in Tennessee, but he said the diversity of the state's economy and major new investments by Ford Motor Co., battery manufacturers and others should ensure that the Volunteer State fares better than most of the nation.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340. Follow him on Twitter @DFlessner1.