U.S. and Tennessee Economic Outlook: 2017 October 2017 Matthew N. Murray, PhD

Quarterly GDP Growth—Typical Volatility Around a Stable Trend (chained 2009 dollars) 8/9/17; GDPR; % chg Annual Rate; FRED GDPC1 includes BEA revisions beginning 2011q1 forward FRED series: GDPC1 Seasonally Adjusted Annual Rate Frequency: Quarterly Units: Percent Change from Preceding Period DO NOT USE 3-QTR SMOOTHING FOR GDP!!!!!!! Real Chained 2009 dollars Growth is calculated using SAAR. (((B/A)^4)-1)*100 – 3 quarter moving average FRED GDPC1 (SAAR Compounded annual rate) October 2017

Interest Rates and Inflation Rates Low, but Inching Upward Fed’s recent move pushes FFs rate to 0.75 - 1.00 range 8/9/2017 RMFF (level) & CPI (yr-over-year % change) October 2017

U.S. Employment Cost Index: Pressure Mounts as Labor Market Tightens Source: IHS Markit™, U.S. Economic Outlook, September 2017 (copyright).

Brent Crude Price Edges Up—But Where is the New Ceiling? Source: IHS Markit™, U.S. Economic Outlook, September 2017 (copyright).

Industrial Production Slows as Economy Approaches Full Employment Source: IHS Markit™, U.S. Economic Outlook, September 2017 (copyright).

U.S. Productivity Slowdown Expected to Continue Source: IHS Markit™, U.S. Economic Outlook, September 2017 (copyright).

Light Vehicles Sales Return to Pre-Recession Peak: No Room for Acceleration 8/9/2017; IHS series SUVLV // FRED series ALTSALES October 2017

Housing Sales Remain Low for an Expansion and Constrained by Supply 8/9/2017; HUESOLD, HUSPS levels; AUG17 IHS short-term forecast bank EXHOSLUSA495S HOUST Fred Global Insight Baseline for current year October 2017

Housing Starts to Plateau Well Below Pre-Recession Levels VC model for TN housing permits Source: U.S. Department of Housing and Urban Development, State of the Cities Data Systems (SOCDS) database; UT-Boyd Center; and IHS Markit™, U.S. Economic Outlook, September 2017 (copyright).

Housing Sales Trending up in Tennessee But Dips Along the Way 8/9/2017 Source: Tennessee Department of Revenue, Monthly Revenue Collections, June 2005 to June 2017. October 2017

Nonfarm Job Growth Slows: Current Cycle (Full Employment) and Long Term (Demographics) 1/1/2017 U.S: USJAN17 IHS forecast TN: ERG2017 forecast (workfile as of Jan 21 from LK) Source: Bureau of Labor Statistics; IHS, Inc.; and Boyd CBER. October 2017

Population: Urban-Rural Divide is Growing 8/18/2017; S:\CONTRACT\CUNNINGHAM\PPT CHARTS\CNTY MSA LABOR FORCE.xlsx Source: U.S. Census Bureau, Annual Population Estimates and 2010 Decennial Census. October 2017

Dramatic Differences in Post-Recession Private Employment Growth Across Tennessee (2007 to 2016) U.S.: 5.7% -44.1% to -20.0% -19.9% to -10.0% -9.9% to 0.0% 0.1% to 9.9% 10.0% to 19.9% 20.0% or higher Note: Employment covered by the state unemployment insurance program. 08/14/2017 Source: Bureau of Labor Statistics. 52 winner 43 losers October 2017

Full Recovery from the Great Recession in Most Sectors (June 2017 Employment as a Share of December 2007 Employment) 08/9/2017; current to recession peak Source: Bureau of Labor Statistics. October 2017

Unemployment Rates Bottom Out 1/17/2017: USJAN17 IHS & ERG17 (through 2019q1) August 2017 Rates TN: 3.3% US: 4.4% Source: Bureau of Labor Statistics; IHS. Inc.; Boyd CBER. October 2017

Labor Force Participation Rates Point to Near-Term Turnaround 8/11/2017 Source: Bureau of Labor Statistics. October 2017

Don’t Blame the Great Recession: Labor Force Participation Rate Peaked in 2000 8/9/2017 BLS LNS11300000Q; LNS11300001Q; LNS11300002Q Source: Bureau of Labor Statistics. October 2017

Unemployment Rates Show Significant Variation Across the State Tennessee: 4.2%* United States: 4.5% Less than 4.2% 4.2% to 5.1% 5.2% to 6.1% Greater than 6.1% *June non-seasonally adjusted rates. Source: Bureau of Labor Statistics BLS downloaded 8/14/2017 || seas adj rate JUN17: TN 3.6%, US 4.4% October 2017

Tennesseans Have Poor Health Status Which Affects Labor Force Outcomes Disability rates are up for both the U.S. & TN, but TN’s rates are rising more rapidly 2015 https://nccd.cdc.gov/BRFSSPrevalence/rdPage.aspx?rdReport=DPH_BRFSS.ExploreByTopic&islClass=CLASS03&islTopic=Topic10&islYear=2014&go=GO Source: Centers for Disease Control and Prevention, Behavior Risk Factor Surveillance System. October 2017

Schedule II Opioid Prescriptions Per Capita, 2015 State average = 1.3 About 80 doses per person Source: Tennessee Department of Health October 2017

Opioid Prescriptions Per Capita and Labor Force Participation Rates October 2017

Educational Attainment of Persons Aged 25 Years & Older: High School & Higher Tennessee: 85.5% United States: 86.7% Less than 75.0% 75.0% to 79.9% 80.0% to 85.5% Greater than 85.5% Source: U.S. Census Bureau, American Community Survey (5-Year Estimates 2011-2015). ACS October 2017

Trailing Levels of Educational Attainment Contribute to Trailing Levels of Income and Lower Participation Rates Percentage of Population Aged 25 Yrs & Older Percentage of Population Aged 25 Yrs & Older American Factfinder ACS Table S1501 (various years, all 5-year averages); 08/09/2017 Source: U.S. Census Bureau, American Community Survey (5-Year Estimates, various years). October 2017

Per Capita Income is Lower than the U. S Per Capita Income is Lower than the U.S. Average in All But Two Tennessee Counties Tennessee: $42,094 U.S.: $48,112 Less than $35,000 $35,000 to $42,094 $42,094 to $48,112 Greater than $48,112 08/09/2017; current dollars 2015 2015 Per Capita Personal Income. Source: Bureau of Economic Analysis. October 2017

Boyd Center for Business & Economic Research Haslam College of Business 716 Stokely Management Center 916 Volunteer Boulevard Knoxville, Tennessee 37996-0570 865.974.5441 http://cber.haslam.utk.edu Howard H. Baker Jr. Center for Public Policy 1640 Cumberland Avenue Knoxville, Tennessee 37996-3340 865.974.0931 http://bakercenter.utk.edu October 2017