Q2 2012 Knoxville, Tennessee Commercial Real Estate Economy

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Q2 2012 Knoxville, Tennessee Commercial Real Estate Economy

The Knoxville economy had regained all the payroll jobs it lost in the Great Recession by July 2012, but employment has yet to catch up with population growth. According to Current Employment Survey (CES) data from the U.S. Bureau of Labor Statistics (BLS), total non-farm payroll employment in metro Knoxville increased by 9,700 (3.0%) from July 2011 to July 2012, and exceeded the July 2007 level by 1,700. The pace of growth is strong for an area anchored by stable institutions, the state run University of Tennessee and Smoky Mountain National Park. Government employment increased by 800 (1.7%) over the most recent July-to-July period, and Leisure and Hospitality rose by 900 (2.6%). Household-based data from the BLS on the number of employed residents of the Metropolitan Statistical Area (MSA), including the self-employed, show an increase of 7,640 (2.2%) year-over-year in July. The unemployment rate remains elevated due to population growth. The labor force rose by 6,260 (1.7%) over the most recent July-to-July period.

When asked about the future, according to KnoxNews.com, businesses talk about politics rather than business fundamentals and decisions. But the real problem, according to this source, is consumer demand not political uncertainty. Health care is expected to continue growing regardless of the outcome of the federal election, creating a demand for medical office space, according to real estate market watchers quoted by KnoxNews.com. According to CES data, the private Education and Health Services sector added 2,900 jobs (6.2%) in the year to July, the largest absolute employment gain of any sector. Tennessee, according to KnoxNews.com, benefits from among the lowest state and local tax burdens in the U.S. “Tennessee’s taxes are more business-friendly than all bordering states, which can be an edge in business recruitment.” The Manufacturing sector, which tends to be footloose in search of lower wages, lower employee benefits, and lower taxes, added 2,100 jobs (6.8%) in the year to July.

The local economy is expanding. Construction and related sectors added 1,300 jobs (7.5%) year-over-year as of July, growth that might reflect gains in natural gas drilling as much as construction. Retail Trade edged up 300 jobs (0.7%), while Wholesale Trade, and Transportation and Utilities were unchanged or nearly so. Among the office-based sectors, Professional and Business Services added 1,500 jobs (3.1%), while Financial Activities lost 100 (0.6%). In addition to tourists and students, metro Knoxville has experienced relatively modest demand growth from residents. Household average income, well below the U.S. average, edged up just 0.7% in the year to second quarter according to Moody’s Economy.com, while population growth, at 1.0% (about 6,900) per year or less, is slightly below the U.S. average, and expected to remain so.