This article was originally published on timesfreepress.com.
As truck shipments and future orders began to slow last summer across a number of industries, Max Fuller thought the U.S. economy was about to hit the brakes after more than six years of growth.
"What we saw in our business signaled a recession in early to mid-2017," recalled Fuller, CEO of U.S. Xpress Enterprises, one of the nation's biggest trucking companies. "That all changed after the election of Donald Trump, who is a real game changer. If he does what he says he is going to do to relax regulations, cut taxes and boost infrastructure spending, there's going to be a lot of stimulus, and I think you're going to see the GDP (gross domestic product) jump, and we should move into an early stage acceleration."
Fuller's optimism echoes what many business leaders expect for the new year, especially in the Chattanooga region, where job growth has already been outpacing the national average. Despite rising interest rates and recent cutbacks or closures by some of Chattanooga's biggest employers, most Chattanoogans expect the economy to improve in 2017 even after local home sales, airport boardings and employment levels rose to new highs last year.
Chattanoogans may have voted for a change in the White House and voiced concerns about the direction of the country as a whole in the presidential election in November, but most think Chattanooga is headed in the right direction and expect the local economy to be better in the new year.
Among 360 voters sampled across Hamilton County on election day, more than two thirds of the respondents said they think Chattanooga is headed in the right direction, compared with only one in six who think Chattanooga is going in the wrong direction. A majority of Chattanoogans expect the local economy to improve in 2017, and nearly half of local voters said they expect their own personal financial situation to get better this year. Less than 9 percent of survey respondents said they expect their financial condition will worsen this year.
"When you look at all of the development going on in Chattanooga and the expansion by Volkswagen and its suppliers, it's clear that Chattanooga is moving forward and continuing to get better," said Steve Chappell, a Chattanooga voter who grew up on Signal Mountain and has watched its redevelopment over the past three decades.
"Cleveland is growing even faster."
VW, economy drives more jobs
Metropolitan Cleveland boasted one of the fastest rates of job growth of any U.S. metro area last year, growing at a 7.4 percent pace, more than four times the U.S. average, in the 12 months ending in November.
Gary Farlow, president of the Cleveland/Bradley County Chamber of Commerce, said Cleveland is continuing to get more business prospects, and the planned completion of the Exit 20 expansion linking Interstate 75 to the new 330-acre Spring Branch Industrial Park by March will open up additional sites for new industry.
"This is the best year we've ever had for business leads this year so, barring something extraordinary, we expect even more growth next year," Farlow said.
Overall, Tennessee also continued to add jobs at more than twice the U.S. rate last year, according to household surveys by the U.S. Department of Labor.
"We saw extraordinary growth in employment across Tennessee in the past year, much faster than the U.S. as a whole and surprisingly strong for this late in an economic growth cycle," said Dr. Bill Fox, director of the Center for Business and Economic Research at the University of Tennessee. "When you see these levels of job growth this far into the expansion, you know that the labor market is starting to get tight and that could create some problems for employers trying to fill lower-paying or some skilled jobs with labor shortages."
Metropolitan Chattanooga grew at a slower 1.3 percent pace of job additions in the 12 months ending in November 2016. But Chattanooga is continuing to benefit from job additions at the Volkswagen assembly plant, which has begun production of its second vehicle — the Atlas sports utility vehicle. VW is adding about 1,000 jobs for the new vehicle and even more spinoff jobs are expected from VW suppliers, including the addition of Yanfeng Automotive interiors last year and the ongoing expansion of Gestamp.
Closings, changes create challenges
The region is facing some headwinds from the closing of several of what were once some the region's biggest employers.
GE is shutting down production at its Alstom turbine power plant, which under its corporate predecessor once employed more than 5,000 employees. Similarly, Invista is limiting operations at the former DuPont plant, which also once had more than 5,000 workers.
Area factories from Goodman Manufacturing in Dayton, Tenn., to Duracell in Cleveland, Tenn., also are planning to close this year and next, idling several hundred more workers. The region's biggest employer, the Tennessee Valley Authority, also continued to trim its staff last year, cutting its corporate-wide staff to about 10,000 workers, down from a peak of 51,709 in 1981.
The carpet industry in Dalton, Ga., also has yet to fully recovery from the Great Recession. Despite the housing rebound, more home buyers are shifting to hard surface floors rather than carpet and production techniques are becoming more automated, requiring fewer workers.
In the most recent 12-month period, metro Dalton reported a net loss of 100 jobs.
Leaders hopeful for 2017
But Carl Campbell, executive director of the Dalton/Whitfield Joint Development Authority, said more business prospects are looking at Dalton, and he expects Northwest Georgia to continue to show economic gains again in 2017.
"It was uncharacteristically slow last summer, but it has really picked up lately and we've been very busy, so I'm very excited about the year ahead," he said.
Unlike Dalton, Ga., where more than two thirds of all carpet in the United States is produced, Chattanooga has a more diversified economy and therefore hasn't traditionally had the highs or lows of single industry towns like Dalton.
"We're blessed in Chattanooga to have a pretty diverse economy, but these kind of cutbacks and closings show the need to continue to work to grow and recruit new business to provide jobs for the future," said Charles Wood, vice president of economic development at the Chattanooga Area Chamber of Commerce. "We're seeing some hopeful signs for the new year."
A year end survey of 133 major employers across the country by Express Employment Professionals showed 79 percent expect their business performance and hiring to grow in 2017. Only 5 percent said they expect a decline in business, while 21 percent forecast "exponential growth" for 2017.
"Whether the reason for the optimism is based on the election outcome, hope for the new year, or a combination of the two, business growth in 2017 will be a key factor in the number of opportunities for workers in the U.S.," said Bob Funk, CEO of Express, and a former chairman of the Federal Reserve Bank of Kansas City.
Impact of rising interest rates
Rising interest rates will make borrowing more expensive for cars and homes, but most economists still expect both the housing and automotive industries to remain strong. Higher interest rates will actually help the $50 billion-plus investment portfolio of Chattanooga's biggest publicly traded company, Unum Group, and should help profit margins of local banks and other lenders.
Gus Issa, owner of G.T. Issa Construction, one of the region's biggest home building businesses, said mortgage rates remain at historically low levels despite recent increases, and he doesn't expect moves by the Federal Reserve Bank to push up short-term rates to discourage many home buyers.
"I've been a home builder my whole life and right now is a good time to be in Chattanooga," Issa says. "For the next three to four years, I see nothing but more growth for us in Chattanooga from both new residents moving to our area and two-income families moving into higher-price homes."
Last year, sales through the Multiple Listing Service of the Greater Chattanooga Association sold a record number of houses. Through the first 11 months of the year, home sales were up 10 percent to 8,850 homes, surpassing the previously record of 8,717 home sales for all of 2015.
Demographics is destiny
Abby Shemesh, founder and CEO of Amerinote Xchange, a direct mortgage note buyer specializing in mortgage and business note acquisition and mortgage loan portfolios, said the real estate market should benefit this year from both younger and older home buyers.
"Increased interest in home buying can be attributed to more jobs for millennials, rising wages, and more millennials reaching the age when they're thinking about marriage and children," Shemesh said. "As more baby boomers reach retirement age, we also will see more movement toward retirement hot spots."
Tennessee is trying to attract more relocating retirees through its Retire Tennessee program, and developers like John "Thunder" Thornton are already luring seniors from across the country to his Jasper Highlands mountaintop development near Kimball Tennessee.
"We have some of the most beautiful scenic sites anywhere in America at very attractive prices," said Thornton, who has already sold properties to relocating residents from 33 states.
Entrepreneurial growth
Wood said Chattanooga also is building a more entrepreneurial economy as mobile entrepreneurs are attracted to the city by EPB's fastest-in-the-country internet service and outdoor enthusiasts come for the chance to go whitewater rafting, rock climbing, caving or mountain biking only a short distance from downtown Chattanooga.
Chattanooga is trying to capitalize on those strengths in its Innovation District created two years ago downtown and nurtured by the state's biggest business incubator at the Chattanooga Business Development Center, business accelerators at The Company Lab and Lamp Post Group and new venture capital funds such as the Dynamo Fund, Jump Fund and Chattanooga Renaissance Fund.
"We've got a lot of homegrown companies like Skuid, Reliance Partners and others who are really starting to jump and that portends well for our future," Wood said.
Miller Welborn, chairman of SmartBank and a mentor for the Dynamo Fund in Chattanooga, said the self-proclaimed "Gig city" is poised for further growth in its emerging entrepreneurial economy.
"We've had a couple of good years in Chattanooga, but I think we're really on the verge of exploding growth among startup and emerging businesses with the accelerator programs we have and the willingness of successful business people in Chattanooga to reinvest in other ventures," Welborn says. "That reinvestment should spur more jobs and growth so I really think we're only at the starting line, not the finish line."