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After nearly three years of decline, Chattanooga's economy moved from recession to recovery by the end of 2009, economists said Wednesday.

Metropolitan Chattanooga and Cleveland, Tenn., are among nearly half of the U.S. metro areas that economic consultants believe have bottomed out and are recovering from the Great Recession, according to Moody Economy.com.

In fact, Chattanooga is projected to outpace most of the nation for economic growth this year as Volkswagen, Alstom Power and related suppliers staff their new and expanding plants here.

"Overall, Chattanooga has experienced a much smaller decline in employment than at the national level, so with all of the development now going on in the area, it wasn't surprising to see (it) emerge from the recession," said Alex Miron, associate economist for Moody's Economy.

"For 2010, our outlook for Chattanooga is upbeat with respect to the rest of the nation," he said. "I expect the development of the Volkswagen plant and its supplier park to be a big driver of growth this year."

Moody's Economy.com forecasts that employment growth in metropolitan Chattanooga will occur 20 percent faster this year than the national average.

Despite the recovery in Southeast Tennessee, however, Moody's economists said other MidSouth metro areas -- including Atlanta, Nashville, Knoxville, Dalton, Ga., and Rome, Ga. -- still were mired in the recession as 2009 ended.

Xu Cheng, a Moody's economist who assesses Georgia, said the engines of Southern growth in the past -- Florida, Georgia and North Carolina -- all ended 2009 still in recession as those states try to recover from an overbuilt real estate market.

"Over half of the growth in jobs in Georgia comes from the Atlanta area, but Atlanta's commercial real estate market right now is really crumbling and that is also hurting the region's financial services industry," Mr. Cheng said.

The Northwest Georgia metro areas of Dalton and Rome also are being hurt by the prolonged slump in building and housing activity, which is affecting the region's carpet industry and construction businesses.

BY THE NUMBERS

* 1.2 percent -- Projected employment growth in 2010 in metro Chattanooga

* 1 percent -- Projected employment growth in 2010 for the U.S. as a whole

* 9.5 percent -- Projected unemployment peak in metro Chattanooga in the third quarter of 2010

* 9.2 percent -- December jobless rate in metro Chattanooga

* 9.7 percent -- December jobless rate in United States

Source: Moody's Economy.com, U.S. Bureau of Labor Statistics

METRO ECONOMIC STRENGTH

Recovering:

* Chattanooga

* Cleveland, Tenn.

* Memphis

* Johnson City, Tenn.

In recession:

* Atlanta

* Nashville

* Knoxville

* Dalton, Ga.

* Rome, Ga.

Source: Adversity Index from Moody's Economy.com and msnbc.com

Read about U.S. metro economies at http://adversity.msnbc.com

In Tennessee, Mr. Miron said, Nashville and Knoxville also have yet to show a rebound in jobs and industrial output.

But the manufacturing-based economies in Chattanooga and Cleveland showed an uptick in industrial output in the fourth quarter and appear to have stabilized the job losses of the previous three years.

"Employment in Chattanooga has basically been level since August, which we think is a positive indicator of stability," Mr. Miron said.

As the owner of Chattanooga's Manpower franchise, a temp agency, Mark Campbell is on the front lines of the battle for jobs and already sees the tide shifting in local employment.

"I think we probably bottomed out in November and we've started to see some hiring interest in light industrial and some clerical jobs," he said. "We're also doing quite bit of business from contractors at the VW construction site."

But unemployment remains a lagging economic indicator and could rise even as the economy begins to improve, Mr. Miron said. He projects that Chattanooga's unemployment rate will peak in the third quarter at around 9.5 percent.

In metro Cleveland, where the jobless rate -- 9.9 percent in December -- has remained above the Chattanooga rate through the recession, jobs are slow to come back, according to the owner of the Tennessee Temps staffing agency based in Cleveland.

"I keep hearing how it is getting better, but I really haven't seen much evidence of that yet," President Sandi Kramer said. "In my 19 years in the business, it's never been this tough."

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