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

David A. Penn

English

Research Papers in Economics

he midstate economy struggled again during the
fourth quarter, with single-family home construction
and sales tax collections the only significant sources
of improvement.    
Total employment plunged during the quarter, with both
the midstate and Nashville MSA showing job losses of
more than 5% over the year.  
Nonfarm employment provides a more positive picture,
declining 3.6% over the year but posting a small increase
from the previous quarter (Table 2). Some specific sectors,
such as trade, professional and scientific services, and edu-
cational services, also show gains from the third quarter.
In manufacturing, durable goods lost jobs, but nondurable
goods increased employment slightly. In all, the rate of
decline has slowed, and some sectors are showing small
gains.
The unemployment rate, steady at 10.2% for the midstate
and 9.3% for the Nashville MSA, has shown little change
for the third consecutive quarter. This news is not as posi-
tive as it seems because the lower unemployment rate
reflects the reality that thousands of Tennesseans have
stopped searching for work, as evidenced by the substantial
decline in the labor force. To illustrate, total employment in
the midstate declined 64,000 over the year, but unemploy-
ment rose just 34,000; the difference, 30,000 workers, rep-
resent those who have dropped out of the labor force. The
flat unemployment rate masks the degree of labor market
stress. If all those who lost jobs during the past year had
remained in the labor force, the unemployment rate would
have increased to 12.3% for the midstate and 11.3% for the
Nashville MSA. In addition, many more thousands of Ten-
nesseans are working part-time instead of full-time or are
employed in jobs that underutilize their experience and
skills. These are the underemployed, as documented in a
recent BERC study on south central Tennessee.
Table 1. Economic Indicators for Middle Tennessee
continued inside
MIDSTATE 
Nashville Area
ECONOMIC INDICATORS Q409
Vol. 19.1 Spring 2010  
Business and Economic Research Center | Jennings A. Jones College of Business | Middle Tennessee State University
T
by David A. Penn
Series (seasonally adjusted)  Geographical  2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 % Change % Change
Area 09Q3-09Q4 08Q4-09Q4
Labor Force and Employment
Midstate Total Employment     Midstate** 1,111,741  1,086,504  1,072,468 1,059,477 1,046,869  -1.2% -5.8%
Midstate Labor Force   Midstate  1,195,796  1,196,314  1,191,011  1,181,229  1,165,355  -1.3% -2.5%
Midstate Unemployed        Midstate    84,055  109,809  121,543  121,752  118,486  -2.7% 41.0%
Midstate Unemployment Rate Midstate   7.0% 9.2% 10.2% 10.3% 10.2%
Nashville MSA Total Employment Nashville MSA*  743,878  729,599  719,017  708,139  704,015  -0.6% -5.4%
Nashville MSA Labor Force Nashville MSA*  794,236  794,783  792,377  782,792  776,326  -0.8% -2.3%
Nashville MSA Unemployed Nashville MSA*  50,357  65,184  73,360  74,653  72,311  -3.1% 43.6%
Nashville MSA Unemployment Rate Nashville MSA*  6.3%  8.2%  9.3%  9.5%  9.3% 
Nashville MSA Nonfarm Employment Nashville MSA*  748,700  740,800  733,400 723,300  721,600  -0.2% -3.6%
Initial Claims Unemployment Compensation  TN, weekly avg  11,386  14,067  12,761  11,098 9,526 -14.2% -16.3%
Housing Construction 
New Residential Permits    Nashville MSA  
Single-Family 913 839  963 1,080 1,150 6.5% 25.9%
Multi-Family 1,162  108  82  84 359 330.3% -69.1%
Total 2,075 948  1,044  1,163 1,509 29.8% -27.3%
Value of New Residential Units (million $)     Nashville MSA    
Single-Family 168.4 164.2 183.5 190.7 217.0 13.8% 28.9%
Multi-Family 79.6 9.9  5.8  5.1 16.4 218.6% -79.4%
Total 248.0 174.1 189.3 195.8 233.4 19.2% -5.9%
Tourism
Total Air Passengers, Nashville Intʼl Airport   Davidson Co.    2,267,628  2,123,311  2,214,699  2,288,235 2,298,838 0.5% 1.4%
Taxable Sales (estimates, million $)
Nashville MSA      Nashville MSA   6,785 6,628 6,388  6,346 6,593 3.9% -2.8%
Midstate Midstate  9,285  9,120  8,834 8,852 9,070 2.5% -2.3%
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.Nashville Area
continued from front
Reducing the unemployment rate to the level that existed
before the recession will require many months of sustained
employment growth; this will undoubtedly be the most
challenging task for the nascent economic recovery. In
order to bring down the unemployment rate to the status
quo ante, two things must occur. First, the economy must
generate enough new jobs to recover those lost during the
past two years. Second, the economy must generate
enough jobs to absorb new entrants to the labor force,
including inmigrants from other counties and states, new
high school graduates, and new college graduates. Thus,
we need employment growth to bring down the unemploy-
ment rate—and more employment growth to keep it there.  
One of the few positive outcomes of the fourth quarter is
the continued growth of single-family home construction
(Table 1, Figure 1). Permits issued for construction hit bot-
tom in the first quarter and have increased in subsequent
quarters. Activity in the fourth quarter is 25.9% higher over
the year but remains much lower than pre-recession levels.  
Construction of multi-family units, including apartments
and town houses, has not fared as well. Multi-family con-
struction is 27.3% lower over the year but experienced a
very large spurt of activity during the fourth quarter.
Multi-family housing is experiencing credit availability
problems more severe than for single-family housing.  
Although improvement is welcome, sustained housing
growth is facing a number of issues going forward. First,
the Federal Reserve has signaled that it will begin to
unwind its position in the mortgage market. Over the past
year, the Fed has purchased large amounts of mortgage-
backed securities in order to provide a base level of
demand for mortgages, putting downward pressure on
mortgage rates. As the Fed eases up its purchases and
begins selling its stock of mortgage securities, this will
create upward pressure on mortgage rates. Second, the
Federal Housing Administration has announced it will
tighten its lending requirements in order to forestall antici-
pated future loan losses. This will mean that some classes
of borrowers may no longer qualify for an FHA-backed
loan. And third, the first-time home buyer tax credit is
scheduled to expire at the end of April 2010. The net effect
of these three upcoming events remains to be seen.
The second important indicator to show improvement is
sales tax collections—up from the previous quarter in both
the midstate and Nashville MSA although lower over the
year (Table 1). Even with these gains, sales tax collections
are 5% lower than estimated for the state government
budget through seven months of the present fiscal year.  
The Chattanooga and Clarksville metropolitan areas show
similar improvement for single-family home construction
and sales tax collections (Table 3): from the previous quar-
ter, single-family home construction rose more than 10% in
both MSAs, and sales tax collections are somewhat higher.  
Sector  2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 % Change % Change
09Q3-09Q4 08Q4-09Q4
Total Nonfarm    756.6  733.0  731.5  725.0  729.0  0.6% -3.6%
Total  Private  652.0 629.4 629.9 625.4 624.3  -0.2% -4.3%
Goods Producing 109.3 103.1 101.1 99.6 96.2 -3.4% -12.0%
Service Providing 647.3 629.9 630.5 625.4 632.8 1.2% -2.2%
Private Service Providing 542.7 526.3 528.8 525.8 528.1 0.4% -2.7%
Natural Resources, Mining, and Construction    38.3 35.6 35.3 35.1 33.0 -6.0% -13.9% 
Manufacturing   71.0 67.4 65.8 64.5 63.2  -2.1% -11.0%
Durable Goods        47.0  44.5  43.2 42.2 40.7 -3.6% -13.5%
Nondurable Goods 24.0 23.0 22.6 22.3 22.5 0.7% -6.1%
Trade, Transportation, and Utilities 154.3 148.5 148.1 147.5 149.5 1.3% -3.2%
Wholesale Trade 37.0 36.5 36.2 36.3 36.5 0.4% -1.4%
Retail Trade 87.7 83.4 83.7 83.1 84.8 2.1% -3.3%
Transportation and Utilities 29.6 28.5 28.2 28.1 28.2 0.2% -4.8%
Information 21.2 20.8 20.6 20.3 20.3 0.0% -4.6%
Financial Activities 46.0 45.3 45.5 45.3 45.2 -0.4% -1.7%
Finance and Insurance 35.4 35.0 35.1 35.0 35.1 0.2% -0.9%
Real Estate and Rental and Leasing 10.6 10.3 10.4 10.3 10.1 -2.3% -4.4%
Professional and Business Services 99.7 93.8 93.7 92.9 93.2 0.4% -6.5%
Professional, Scientific, and Technical Services 37.8 37.2 36.9 36.5 36.9 1.1% -2.4%
Management of Companies and Enterprises 9.8 9.7 9.9 9.9 9.9 -0.3% 1.4%
Admin., Support, Waste Management, Remediation Services 52.1 46.9 46.9 46.4 46.4 0.0% -11.0%
Educational and Health Services   111.9 111.9 112.1 111.4 112.5 1.0% 0.5%
Educational Services 19.0 18.8 18.6 18.3 18.9 3.1% -0.5%
Health Care and Social Assistance 92.9 93.0 93.6 93.0 93.6 0.6% 0.8%
Leisure and Hospitality 79.6 76.6 79.2 79.2 77.9 -1.7% -2.2%
Arts, Entertainment, and Recreation    9.2 8.4 10.0 10.3 9.1 -11.9% -1.1%
Accommodation and Food Services 70.4 68.2 69.2 68.9 68.8 -0.2% -2.4%
Accommodation 12.0 11.5 11.7 11.7 11.6 -0.3% -3.3%
Food Services and Drinking Places    58.4 56.7 57.5 57.2 57.1 -0.2% -2.2%
Other Services 29.9 29.4 29.6 29.2 29.6 1.3% -1.0%
Government 104.6 103.6 101.6 99.6 104.7 5.2% 0.1%
Table 2. Nashville MSA Quarterly Nonfarm Employment (thousands, seasonally adjusted)Series (seasonally adjusted)  2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 % Change % Change
09Q3-09Q4 08Q4-09Q4
Chattanooga MSA
Nonfarm Employment (thousand) 239.8 233.1 227.2 224.1 224.4 0.1% -6.4%
Unemployment Rate 6.7 8.2 9.2 9.4 9.3
Taxable Sales (million $) 1,614.7  1,548.8  1,516.0  1,508.1  1,576.1  4.5% -2.4%
Permit-Authorized Housing Construction      
Total 204.0 217.0 230.0 264 258.0 -2.2% 26.6%
Single-Family 193.0 193.0 207.0 243 275.0 13.0% 42.4%
Clarksville MSA 
Nonfarm Employment (thousand) 82.4 81.2 81.6 80.8 80.9 0.2% -1.8%
Unemployment Rate 7.8 9.3 10.2 10.6 11.1
Taxable Sales (million $) 570.7 589.2 580.3 585.6 592.1 1.1% 3.8%
Permit-Authorized Housing Construction      
Total 267.0 397.0 289.0 368.0 370.0 0.6% 38.7%
Single-Family 214.0 299.0 245.0 332.0 366.0 10.4% 71.0%
Note: Taxable sales and permit-authorized housing construction are quarterly sums of activity.
1,200
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800
600
400
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2007 2008 2009
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Figure 1. Nashville MSA Building Permits Issued for Single-Family Homes (monthly)
Table 3. Economic Indicators for Chattanooga MSA and Clarksville MSA
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
berc@mtsu.edu
615-898-2610
www.mtsu.edu/~berc
Seasonally adjusted 
Trend

Nashville Area

http://frank.mtsu.edu/~berc/msei/spr10/meispr10.pdf

Nashville Area

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