"Auto Production, Sales Bolster Economy"
Key Factors Mitigate Effects of U.S. Recession

Daily News Journal (9/22/02)

By Jennifer Farish / Staff Reporter of The Daily News Journal


Automobile production and sales in Middle Tennessee have helped mitigate the effects of the national recession, said a local economy expert.

But the strength in that area is one of the few positives seen in economic indicators from the second quarter, said David Penn, director of the Business and Economic Research Center at MTSU.

The strength of the automobile industry nationally has been of particular importance to the local manufacturing economy.

“Nationally, manufacturing jobs have been down since the beginning of the recession,” Penn said. “But locally there has been minor impact on manufacturing overall, partially because of the strong market for automobiles.”

The number of hours worked per week in manufacturing dropped during the second quarter. Hours worked can be an important indicator of future hiring plans, since employees are likely to lengthen the work week before they increase hiring, Penn wrote in the recent “Mid-State Economic Indicators” published by the BERC.

Payroll employment in the Nashville MSA increased 900 net jobs from the first quarter, while job growth in manufacturing was flat but favorable compared to job losses in the U.S. manufacturing sector.

Penn added the economic outlook for other states is more pessimistic because their economies are based on declining industries.

“The particular circumstance of this recession helped us to dodge a bullet,” Penn said.

Because aircraft manufacturers and telecommunication equipment manufacturers have been among the hardest hit by the recession, there are areas of the country feeling the recession’s effects much more than Middle Tennessee.

“The states and areas that had concentrations in these areas (aircraft and telecommunications) have been hit hard,” Penn said.

The outlook for the next two quarters is mixed, Penn said, explaining a low consumer confidence index and national cooling of the housing construction industry is causing concern.

Consumer confidence has sharply declined over the last quarter, as evidenced by the 56-point drop in the August Middle Tennessee Consumer Confidence Index. The survey, conducted by the Office of Consumer Research at MTSU, showed local consumer confidence falling to 269.4 from 325.8 in April.

“Now the economy is much more uncertain than in spring,” Penn said. “In the spring, people thought the economy would recover by Christmas. Now it is more uncertain. I don’t think we can be sure we will be in great shape by Christmas.”

In the second quarter, transportation, communication and utilities posted robust job gains, while retail trade and government services posted modest gains and services employment fell by 800 jobs, Penn said.
In the Mid-State area, total bankruptcy filings fell by 5.3 percent in the second quarter to 3,653. The trend in filings is down after peaking at 3,946 in the fourth quarter of 2001.

There were mixed indicators for housing construction and tourism in the Mid-State area. The number of residential permits for new housing construction fell slightly in the second quarter even as the total value of permits rose, Penn said.