Tennessee, which led the nation in economic growth in 2021, was displaced last year by Idaho as the state with the fastest-growing economy, according to estimates by the U.S. Bureau of Economic Analysis through the first three quarters of last year.
But the government agency said the Volunteer State ranked second among all U.S. states in gross domestic product growth in 2022, rising nearly 2 1/2 times as much as the rest of the country. In an analysis of the Bureau of Economic Analysis data, the nonprofit study group CivMetrics estimates Tennessee's economy grew by 4.5% last year to a record $368.6 million of output.
"Tennessee is part of a pocket of states in the Southeast where the population is growing and the labor market is strong," Ted Ballantine, director of CivMetrics, said in a telephone interview Tuesday. "These states are growing more, in part, because of strong immigration of younger people with college degrees and a strong job market where there are more job openings than can even be filled by the working population. Those things act as a cushion against broader headwinds like inflation and higher interest rates that everyone is facing."
Tennessee's population growth last year outpaced the nation as a whole, and in the fiscal year ended Sept. 30, the Tennessee Valley attracted the second-highest investment ever with more than $10.2 billion of new business growth announced last year.
After trailing the national average in economic growth in the previous three years, Tennessee led the nation in GDP growth in 2021, growing 8.6% to outpace the national average growth rate of 5.7%.
"There's been a slower rate of growth across all states, but Tennessee remains a very bright spot among all states," Don Bruce, director of the Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville, said in a telephone interview Tuesday. "During and beyond the pandemic, a lot of folks have moved here, and many businesses have also decided to relocate here as well."
Tennessee landed its biggest investment ever in late 2021 when Ford Motor Co. and LG Chem announced plans for a $5.6 billion electric vehicle and battery production complex in Stanton, just outside Memphis. To supply the new Ford facility and other plants, LG Chem announced last year it plans to build a $3.2 billion battery plant in Clarksville, Tennessee, that will add 860 jobs when in full production by 2025. The Clarksville announcement came 14 months after GM and LG Chem announced plans for a joint venture known as Ultium Cells to build a $2.3 billion battery plant in Spring Hill, Tennessee, that is projected to add 1,300 jobs.
Bruce said Tennessee continues to benefit from its location within a day's drive of 60% of the U.S. population and its favorable energy prices, state and local taxes, and costs of doing business.
"With more remote workers able to live anywhere, we're seeing an increase in migration to Tennessee from other higher-cost-of-living states," Bruce said.
In its annual economic forecast, UT's Boyd Center predicts Tennessee will avoid a recession this year and grow another 0.7% for all of 2023. Nationwide, the U.S. economy is projected to decline by 0.2% for all of 2023.
Fastest growing economies in 2022
In 2022, the states with the biggest gains in gross domestic product growth were:
1. Idaho, up 5.7%.
2. Tennessee, up 4.5%.
3. Texas, up 4%.
4. Florida, up 3.5%.
5. Oregon, up 3.3%.
6. Colorado, up 3.2%.
7. North Carolina, up 3.2%.
8. New York, up 2.8%.
9. New Jersey, up 3.8%.
10. Utah, up 2.7%.
Source: CivMetrics report based on U.S. Bureau of Economic Analysis figures through the first nine months of 2022.