Housing inventory drops, inflation and labor woes continue to impact local businesses
By Kailyn Lamb, Marketing Content Writer and Editor, PYA
The Knoxville Chamber’s March “Economic Conditions Outlook” report was released earlier this month. The labor shortage and inflation issues continue to have an impact on local businesses. Meanwhile, housing costs continue to increase as inventory runs short.
Businesses in the manufacturing sector said general business activity and outlooks were “the same.” In retail, businesses were slightly more optimistic with responses for both general activity and outlooks split between “improved” and “the same.” Businesses in the service sector, on the other hand, were split between “worse” and “the same.” Businesses in all three sectors continue to report issues with inflation, a tight labor pool, and low inventory as a result of problems in the supply chain.
In addition to the “ECO” report’s usual monthly questions, businesses were surveyed on hybrid business models. Of the businesses surveyed, 52 percent said they considered a hybrid model combining remote and in-person work. Within that group, 75 percent of the businesses implemented the model or already had hybrid work in place. A majority of the businesses also said the experience has been positive, leading to increased sales and productivity. Businesses that have not yet implemented a hybrid work model said they were trying to determine if employees were eligible to work remotely or are looking into negotiating with employees. Businesses that had not considered remote work said it was not preferred or did not work in some industries.
In the Knoxville Metropolitan Statistical Area (MSA), the February unemployment rate was 2.8 percent, slightly lower than the month before. In Knox County, the unemployment rate was 2.5 percent. There were 10,999 unique active job postings in February in the Knoxville MSA, and 7,499 postings in Knox County.
In an update on the local worker shortage, the “ECO” report said there continues to be high job demand with slower workforce growth. This will continue to put pressure on wages, benefits, and sign-up bonuses.
Other important trends identified were:
- The inflation rate in February has spiked when compared to last year. From February 2020 to February 2021, the national inflation rate was 1.7 percent. February 2021 to February 2022, on the other hand, saw a national inflation rate of 7.9 percent. This was also a slight increase when compared to January’s inflation rate.
- The inflation rate for the South Size Class B/C (populations of 2.5 million or less) was 8.4 percent from February 2021 to February 2022. This region includes Knoxville.
- For the first time in several months, home sales declined in both the Knoxville MSA and Knox County. In February, sales declined by 7.2 percent in the Knoxville area and by 13.5 percent in the county when compared to January. Home sales in the Knoxville area increased by 2 percent year-over-year but decreased by 13.1 percent in Knox County.
- The median home sale price in the Knoxville area was $305,000, an increase of 24 percent compared to last year. The numbers were similar in Knox County with the median sale price at $310,500, up 19.4 percent compared to last year. Forty-three percent of homes sold for over asking price.
- Housing inventory in both the Knoxville area and the county is down substantially when compared to last year. In the Knoxville MSA, inventory is down 41 percent, and in Knox County inventory is down 59 percent when compared to last year.
- The Knoxville MSA collected nearly $98 million in state sales tax in February, a decrease of 21.9 percent compared to January. In Knox County, $63.7 million was collected in state sales tax, down 23.2 percent from January.
- In Knox County, 229 new business licenses were issued in February 2022, up 1.8 percent compared to February 2021.
Read the full report here.