This issue of Midstate Economic Indicators analyzes economic activity in the Nashville area for the first quarter of 2009.housing construction, local economic activity

David A. Penn

English

Research Papers in Economics

ne is tempted to put the first quarter economic
data aside and think about what a recovery will
be like. But since this is a quarterly report, we
really can’t escape at least a brief overview of the
dreadful economic news earlier this year.  
By just about any measure, the first quarter was proba-
bly one of the worst for the Nashville and midstate
areas in several decades. Dreadful is the word that
comes to mind, and often, for in the first quarter we
witnessed a very rapid decline in economic activity as
the severe recession plowed through just about every
corner of the Nashville and midstate economy. 
The first quarter brought economic indicators replete
with negativity. For example, unemployment grew 30
percent, initial claims for unemployment insurance
climbed 25 percent, and housing construction permits
plunged 47 percent, and all that just from the previous
quarter (Table 1)—dreadful indeed.  
The downturn has penetrated the far reaches of the
midstate economy. In fact, of all the major industries
Table 1. Economic Indicators for Middle Tennessee
continued inside
MIDSTATE 
Is the Worst Over?
ECONOMIC INDICATORS Q109
Vol. 18.3 Spring 2009  
Business and Economic Research Center | Jennings A. Jones College of Business | Middle Tennessee State University
O
by David A. Penn
Series (seasonally adjusted)  2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 % Change % Change
08Q4-09Q1 08Q1-09Q1
Labor Force and Employment
Midstate 
Total Employment     1,134,585  1,134,259  1,125,610  1,112,275  1,085,743  -2.4% -4.3%
Labor Force   1,198,477  1,205,105  1,202,166  1,195,272  1,195,516  0.0% -0.2%
Unemployed        63,892  70,846  76,556  82,996  109,773  32.3% 71.8%
Unemployment Rate 5.3% 5.9% 6.4% 6.9% 9.2%
Nashville MSA 
Total Employment 757,719  758,271  751,733  744,132  729,393  -2.0% -3.7%
Labor Force 795,161  800,132  798,067  793,819  794,325  0.1% -0.1%
Unemployed        37,442  41,861 46,334  49,686 64,933  30.7% 73.4%
Unemployment Rate 4.7% 5.2% 5.8% 6.3% 8.2%
Nonfarm employment 766,200  763,800  755,900  749,400  740,700 -1.2% -3.3%
Tennessee Unemployment Compensation, Weekly Average
Initial Claims  6,034 6,979  7,919  10,941 13,699  25.2% 127.0%
Continued Claims  42,861  47,545  53,334  68,358 97,569  42.7% 127.6%
Nashville MSA Housing Construction 
New Residential Permits   
Single-Family 1,555 1,552  1,328  895  817 -8.7% -47.4%
Multi-Family 285  219  359  990 165 -83.3% -42.0%
Total 1,840 1,772  1,687  1,885  983  -47.9% -46.6%
Value of New Residential Units (million $)    
Single-Family 282.4 287.9 245.7 165.2 155.6 -5.8% -44.9%
Multi-Family 27.2 18.1  19.5  74.0  14.3  -80.7% -47.5%
Total 309.6 305.9 265.2 239.2 169.9 -29.0% -45.1%
Davidson County Tourism
Total Air Passengers, Nashville International Airport   2,424,168  2,387,255  2,308,030  2,269,291  2,106,013  -7.2% -13.1%
Taxable Sales (estimates, million $)
Nashville MSA      7,448  7,379  7,167  6,802  6,613  -2.8% -11.2%
Midstate 10,081  10,021 9.750  9,299  9,104  -2.1% -9.7%
Notes: Seasonal adjustment with X11. *Nashville MSA includes 13 counties. **Midstate is a 41-county area. Sources: U.S. Department of Labor, 
Bureau of Labor Statistics; U.S. Bureau of the Census; Davidson County Clerkʼs office; Metropolitan Nashville Airport Authority; U.S. Bankruptcy Court, Middle Tennessee District.in the Nashville MSA, only two produced modest job
gains: educational and health services and manage-
ment of enterprises. All other industries lost jobs in the
first quarter (Table 2). Over-the-year job losses have
been particularly large in the goods-producing indus-
tries including manufacturing (-11.1 percent) and natu-
ral resources, mining, and construction (-11.3 percent).
Manufacturing job losses are most severe in durable
goods production, particularly transportation equip-
ment (autos, trucks, and auto parts).
Consumers cut spending in a big way, as shown by
very large declines in taxable sales over the year
(Table 1). Households are spending less for several
reasons: (1) they are saving more of their incomes as a
precaution against deteriorating economic conditions,
(2) they are unable to maintain previous levels of
spending because credit is not nearly as available as in
the past, and (3) they simply have less income to
spend when one or more family members become
unemployed.
Thankfully, the first quarter is history. While the labor
market is likely to bring bad news for months to come,
we see signs of improvement for two important indica-
tors. First, single-family home construction appears to
have leveled off during the first quarter. As shown in
Figure 1, single-family home construction hit bottom
in November at 252 permits, climbing marginally to
287 permits in March. Although the smoothed trend
for permits is still declining, the rate of decline has
slowed considerably. Given the current pattern, the
2007 2008 2009
Figure 1. Single-Family Home Permits Issued
Monthly, Nashville MSA   Worst Over?
continued from front 
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Seasonally adjusted  Trend
Sector  2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 % Change % Change
08Q4-09Q1 08Q1-09Q1
Total Nonfarm    766.1   763.8   755.9  749.4 740.7  -1.2% -3.3% 
Total Private  664.3  660.6   653.8   646.8   638.7  -1.3% -3.9%
Goods Producing 117.6   115.4  112.7 108.9 104.5 -4.1% -11.2%
Service Providing 648.6 648.4 643.2 640.4 636.2 -0.7% -1.9%
Private Service Providing 546.7 545.0 541.2 537.8 534.2 -0.7% 2.3%
Natural Resources, Mining, & Construction 41.4 39.9 39.1 38.3 36.7 -4.3% -11.3%
Manufacturing   76.4 75.4 73.6 70.6 67.9 -3.8% -11.1%
Durable Goods        51.8 51.1 49.4 46.8 44.8 -4.3% -13.5%
Nondurable Goods 24.6 24.3 24.1 23.8 23.1 -2.9% -6.1%
Trade, Transportation, and Utilities 155.6 154.4 153.6 151.5 149.8 -1.1% -3.8%
Wholesale Trade 37.4 37.1 37.1 36.8 36.7 -0.4% -1.8%
Retail Trade 88.4 87.3 86.9 85.5 84.2 -1.6% -4.8%
Transportation and Utilities 30.0 29.9 29.6 29.1 28.9 -0.7% -3.4%
Information 21.1 21.2 21.2 21.2 20.9 -1.6% -1.2%
Financial Activities 46.4 46.1 46.1 45.9 45.6 -0.7% -1.6%
Finance and Insurance 35.8   35.6   35.5   35.3   35.2  -0.3% -1.7%
Real Estate and Rental and Leasing 10.6   10.5   10.6   10.6   10.5  -1.4% -1.6%
Professional and Business Services 101.8   101.9   99.3   97.3   96.5  -0.9% -5.2%
Professional, Scientific, and Technical Services 38.0   38.5   38.2   37.8   37.2 -1.5% -2.0%
Management of Companies and Enterprises 9.9  9.8   9.7   9.7  9.8  1.3% -0.6%
Administrative & Support & Waste Management & Remediation Services 54.0 53.4 51.4 50.0 49.4 -1.3% -8.5%
Educational and Health Services   110.2 110.9 111.1 111.9 112.6 0.7% 2.2%
Educational Services 18.6 18.6 18.6 18.9 19.1 1.1% 2.4%
Health Care and Social Assistance 91.5 92.3 92.5 93.0 93.5 0.5% 2.2%
Leisure and Hospitality 80.5 80.1 79.7 79.8 79.2 -0.8% -1.6%
Arts, Entertainment, and Recreation    9.8   9.9   9.6   9.6   9.4 -1.5% -4.1%
Accommodation and Food Services 70.7   70.1   70.1   70.3   69.8  -0.7% -1.3%
Accommodation  12.1   12.2  11.9   12.0   11.8  -1.1% -2.2%
Food Services and Drinking Places    58.6   57.9   58.1   58.4   57.9  -0.8% -1.1%
Other Services 31.0   30.7   30.4   30.0   29.5  -1.6% -4.8%
Government 101.9 103.0   102.3   102.6   101.9  -0.7% 0.1%
Table 2. Quarterly Nonfarm Employment, Nashville MSA (seasonally adjusted, thousands)Series (seasonally adjusted)  2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 % Change % Change
08Q4-09Q1 08Q1-09Q1
Chattanooga MSA
Nonfarm Employment (thousands) 248.0 246.4 245.1 243.9 242.8 -0.4% -2.1%
Unemployment Rate 4.8 5.3 6.0 6.6 8.2
Taxable Sales (million $) 1,671.0  1,689.5  1,643.8  1,619.5 1,543.6  -4.7% -7.6%
Permit-Authorized Housing Construction      
Total 372 348 294 202 215 6.6% -42.2%
Single-Family 300 309 247 186 188 1.2% -37.3%
Clarksville MSA 
Nonfarm Employment (thousands) 84.8 83.9 83.2 82.5 81.4 -1.3% -4.0%
Unemployment Rate 5.8 6.6 7.3 7.7 9.4
Taxable Sales (million $) 566.8 578.9 556.4 571.1 591.9 3.6% 4.4% 
Permit-Authorized Housing Construction      
Total 477 224 391 278 397 42.8% -16.9%
Single-Family 236 199 285 222 298 34.2% 26.2%
Table 3. Economic Indicators for Chattanooga MSA and Clarksville MSA
longer-term trend should hit bottom during the second
quarter.  
Given the very large amount of inventory and contin-
ued downward pressure on housing prices, we do not
expect a strong recovery for housing construction.
Single-family construction will slide sideways for the
next year or so, at best producing a modest increase. 
Total housing construction (single-family plus multi-
family) is a different story altogether. A large inven-
tory plus losses on development loans will add to
already large declines in multifamily permits.  
Second, initial claims for unemployment insurance for
Tennessee may have peaked. Initial claims count the
number of first-time applications for unemployment
insurance filed during a given week—thought to be a
useful indicator of the future unemployment rate. In
recent months, a rising level of initial claims has been
strongly related to the accelerating increases in the
unemployment rate. For example, initial claims rose
28 percent during the previous quarter, reasonably
close to the 25 percent rise in the number of unem-
ployed in the Nashville MSA.  
Initial claims have leveled off during the past several
weeks, but this does not mean that the unemployment
rate will soon begin to decline—far from it, as initial
claims remain at a very high level. It does mean, how-
ever, that some of the upward pressure on unemploy-
ment has diminished; the high level of initial claims
will continue to push the unemployment rate higher
but not nearly as quickly as in the first quarter.
Table 3 presents details for the Chattanooga and
Clarksville metropolitan areas. Both metro areas expe-
rienced large increases in the unemployment rate, but
nonfarm job loss was less in Chattanooga than in
Clarksville. Also, taxable sales are performing better
in Clarksville. Both metro areas experienced gains in
housing construction permits from the previous quar-
ter, with Clarksville showing a large over-the-year
gain in single-family home construction. 
Note: Taxable sales and permit-authorized housing construction are quarterly sums of activity.
Business and Economic Research Center
Jennings A. Jones College of Business
Middle Tennessee State University 
Director: David A. Penn
Associate Director: Murat Arik
Dean: E. James Burton
Editor/Designer: Sally Govan
kkulp@mtsu.edu
615-898-2610
www.mtsu.edu/~berc
MTSU, a Tennessee Board
of Regents University, is
an equal opportunity, non-
racially identifiable,
educational institution that
does not discriminate
against individuals with
disabilities. 
AA258-0408

Is the Worst Over?

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Is the Worst Over?

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