more economic slowdown but no recession

Despite the risk, researchers at the University of Tennessee, Knoxville, expect the economy to avoid recession but continue an economic slowdown in 2008.

That is among the findings and projections included in the annual Economic Report to the Governor of the State of Tennessee prepared by UT's Center for Business and Economic Research (CBER) and released today.

Figures posted at the end of 2007 and beginning of 2008 -- a weak national labor market in December, job losses in January, U.S. gross domestic product growth of only 0.6 percent in the fourth quarter of last year and reports of a weakening service sector -- are a cause for concern.

"Tennessee, too, has seen a weakening of economic conditions, but to date there are few, if any, signs that the economy is actually contracting," said Matt Murray, CBER associate director and project director who helped develop the forecast.

The report cautions an economic stimulus plan can be problematic. Congress recently passed a $168-billion plan that includes rebates for most taxpayers.

"Consumer relief would likely mean significant spending on imports, which would not help the domestic economy, while infrastructure investments might occur too late in the year to boost the economy. And, in general, any stimulus package will put upward pressure on inflation," the report said.

Economic growth in Tennessee has been affected by the lagging national economy, but the good news is that growth is taking place.

The report says state job growth and income growth were weak and the unemployment rate was higher in 2007. As with the national economy, the slumping housing market and residential construction industry are weighing down the growth.

The report includes sections looking at the U.S. economy in 2007 and for the future. For Tennessee, the report describes the current economic environment, the short-term outlook, the outlook for agriculture and the long-term outlook.

The report has a special section about recent changes in Tennessee's welfare policies. A final section reviews the findings of "School-to-Work: Do Tennessee's Higher Education Graduates Work in Tennessee?" Several installments of the study already have been released through CBER.