KNOXVILLE — University of Tennessee economists see no reason to expect an improvement soon in the state or national economies, they said in an annual forecast released today.
The 2009 report to Gov. Phil Bredesen from UT’s Center for Business and Economic Research said the facts are disconcerting and predictions are equally worrisome.
“Tennessee’s fate depends on the path taken by the global and national economies in the months ahead,” the report said. “Unfortunately, there is no sign of a bottom to the current cycle.”
Tennessee’s jobless rate is now higher than the national average — 7.9 percent in December compared with 7.2 percent nationally — growth in state personal income in 2008 was 3.7 percent, just 70 percent of growth seen in the previous year, and Tennessee’s taxable sales are down 1.6 percent.
National moves to loosen monetary policy, bail out banks and provide an economic stimulus could help later this year or in 2010.
But at this point, the report said, the chance that things will get worse this year is just as likely as the chance they will get better.
“If more financial institutions go under, the financial crisis could become more severe as the remaining banks try to fortify their balance sheets by holding reserves rather than lending,” the report said. “This would reduce both consumption and investment further than already anticipated, which would lead to larger job losses and higher unemployment.”
On the other hand, “if financial markets react positively to government policy and credit markets unfreeze, then the economy could begin to show early signs of stabilization.”
UT economist Matt Murray, who led the reporting team, said the best hedge against rising unemployment is a well-educated population. Tennessee counties with better-educated populations tended to have lower rates of joblessness, higher rates of job creation and higher levels of per capita income than poorly educated counties.
Still, Tennessee spending on education remains lower than the nation’s, which means “the state will continue to trail the nation by many measures of economic well-being in the years ahead,” Murray wrote.