Tennessee business leaders more optimistic about state's economic outlook than nation's, survey shows

Contributed Photo / Business leaders are more optimistic about Tennessee’s economic outlook this year than they are about the U.S. economy in general.

Business leaders in Tennessee are far more optimistic about the economic outlook this year in their own state than for the country as a whole, according to a University of Tennessee study released Monday.

Among more than 160 employers surveyed across the Volunteer State in January, 72% said they expect the state's economic conditions to improve over the next year, or nearly three times the number that expects the U.S. economy as a whole to get better.

Don Bruce, the director of the Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville, which conducted the semiannual business survey, said the business sentiments mirror the outlook his staff projects for Tennessee and the U.S. economy in 2023.

"The continued growth in jobs in Tennessee, the record number of business startups and the investments being made by new and expanding businesses in the state all point to a Tennessee economy that is vastly better than the national economy," Bruce said in a telephone interview Monday.

In its annual economic forecast to the governor earlier this year, the Boyd Center predicted that Tennessee will avoid a recession this year and grow another 0.7% for all of 2023. Nationwide, UT economists predict the U.S. economy is projected to decline by 0.2% for all of 2023.

Tennessee's population growth last year outpaced the nation as a whole, and in the fiscal year ended Sept. 30, the Tennessee Valley Authority attracted its second-highest investment ever with more than $10.2 billion of new business growth announced last year.

"Our state has done a good job of weathering these past few years and keeping Tennessee open for business," Bruce said in a report released Monday. "People are moving to Tennessee and joining the labor force as well, which gives us a leg up and further instills confidence in Tennessee's economy."

  photo  Boyd Center for Business and Economic Research at the University of Tennessee in Knoxville / This graph shows how Tennessee employers responded to a January survey about how they expect the Tennessee and U.S. economies to change in 2023.

The new survey of Tennessee business leaders found most are more optimistic about the economic outlook now than they were a year ago and more than 80% of the respondents said they thought Tennessee was headed in the right direction.

Most expect interest rates to stop rising this year as inflationary pressures moderate.

Supply chain problems have eased, but business leaders remain most concerned about lingering labor shortages, Bruce said. Nearly 40% of the respondents listed human resources as their biggest challenge, and nearly 42% of the respondents thought Tennessee should do more to improve the training and education of workers.

Nearly one-fourth of the business respondents thought government safety net programs should be reduced to encourage more people to work, while nearly 15% of respondents said the state should do more to promote the in-migration of workers and the enhancement of child care options to expand the workforce.

On Monday, Tennessee's career centers were advertising 359,374 open jobs across the state, or more than three times as many jobs as the number of unemployed Tennesseans counted in the most recent employment report from the state.

"There are still a lot of jobs that need to be filled, even though more Tennesseans are working now than before the pandemic," Bruce said. "Employers are having trouble hiring from that dwindling pool of available and unemployed people."

The business sentiments were voiced in surveys in January ahead of the recent turmoil in the banking industry and before the Federal Reserve made its most recent interest rate increase. But the Boyd Center surveyed another 50 business and government leaders at a dinner in Nashville in February, and the sentiments mirrored the January survey, Bruce said.

"When I asked these business leaders about Tennessee's economy in relation to the U.S., nearly every hand in that room shot up. They all think our state is doing great," Bruce said. "However, there are still countless employers out there looking for workers to fill positions. The demand is there, but the supply hasn't kept up."

Two-thirds of the survey respondents said they don't have an adequate supply of workers trained to work in their industries. Four in 10 business leaders added that potential employees lack technical skills or are unrealistic about compensation.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.