Jury Still Out on Fiscal "Bump in the Road"

Daily News Journal (9/12/04)

By Erin Edgemon / Staff Writer
 
Middle Tennessee's booming economy has slowed down over the second quarter of the year, and the jury is still out on whether it's temporary, said a local economic expert.

"I guess what we hit is called a bump in the road," said David Penn, director of the Business and Economic Research Center at MTSU. "Chances are this is a temporary lull."

The center won't know if the second quarter (April-June) lull is temporary or something more significant for a couple of months, he said.

Penn said there are a number of things, however, that may be causing the slump.

"The most visible is the very high gasoline prices during the period. If we are spending more on gasoline, it means that we are spending less on something else."

Mortgage refinancing also has leveled off in the second quarter, meaning consumers don't have as much discretionary income, Penn said.

"Mortgage rates are still historically low," he said. "But when the number starts to tick up a little bit, then the number of refinances start to drop off."
The lull could also mean the impact from the large federal tax cuts has started to end, he said.

Taxable sales and initial claims for unemployment insurance are flat, Penn said.

Home construction in Middle Tennessee slowed during the second quarter, but numbers are still up from 2003, according to the fall 2004 issue of Midstate Economic Indicators, a publication of the Business and Economic Research Center in the Jennings A. Jones College of Business at MTSU.

According to the Census Bureau, building permits for single-family homes fell to 4,382 during the second quarter from 4,415 in the first quarter (January-March) of the year.

Permits, however, are up 20 percent from 2003, stated the economic publication, and values for single-family permits were up 29 percent from last year.

Middle Tennessee's unemployment rate fell to 4.4 percent, with total employment gaining 1.0 percent in the second quarter of 2004, stated the publication. Claims for unemployment insurance increased 0.3 percent to 28,400 from last year.

Only 61 percent of Midstate businesses showed an increase in employment, compared to 80 percent last quarter, Penn said.

"Manufacturing is still chugging along, adding jobs even through the lull, which I thought was encouraging," he said. "On the other hand, the information sector and professional services were down from a year ago."

DNJ