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Tri-Cities gains 7,800 jobs in 4th quarter; ETSU economist doubts growth rate is sustainable

SHARON CASKEY HAYES • Feb 14, 2007 at 9:45 AM

The Tri-Cities gained more than 7,800 jobs in the fourth quarter 2006, representing the seventh consecutive quarter of job growth in the region.

The latest labor market report issued Wednesday by East Tennessee State University shows that 7,823 jobs were added to the region's employment base in the fourth quarter vs. the same period of 2005, while the unemployment rate in the Tri-Cities fell 9.17 percent to 4.18 percent.

Johnson City added the most jobs - 2,618 - while its unemployment rate fell 10.1 percent to 3.97 percent in the quarter.

In Kingsport, 1,361 jobs were created in the fourth quarter, and the unemployment rate declined 8.05 percent to 4.09 percent.

And Bristol gained 607 jobs while its unemployment rate dipped 12.10 percent to 4.09 percent.

ETSU economist Steb Hipple said the region's job market posted the best performance in five years.

"This is easily the strongest labor market performance we have seen in several years," Hipple said. "In 2005 and 2006, the Tri-Cities area more than recovered the jobs that had been lost in the 2001 recession."

However, Hipple said he doesn't think this level of job creation is sustainable, and businesses are already having difficulty finding qualified workers.

"The unemployment rate is just wound up so tight - it's as tight as a drum in Johnson City at under 4 percent. And every place you go around here you see ‘Now Hiring' signs," Hipple said.

The region posted job gains in education and health services, other services, retail trade, government, information services, and wholesale trade in the fourth quarter.

But job losses were reported in construction, leisure and hospitality, durable and nondurable manufacturing, professional and business services, finance, and transport and utilities.

Hipple said the construction sector led job losses in the quarter, with a decline of more than 1,000 jobs in the Tri-Cities.

And manufacturing continues to bleed jobs in the region. Just this week, playing card manufacturer Cartamundi announced it would close its Kingsport plant this spring, impacting nearly 100 people.

"The continuing shift of jobs away from goods production and into services production reintroduces the old question about the quality of the new jobs being created in the region," Hipple said. "So here's the question: What kind of jobs are we actually creating? This can be a very precarious situation."

At the national level, job creation has been around 2 percent for the past two years, and Hipple questioned whether this rate of growth is sustainable since it exceeds 1 percent, which is historically the natural rate of growth for the labor market.

"The strong growth in employment and output in the fourth quarter is a danger signal of potential overheating of the national economy," Hipple said.

He said the Federal Reserve System could raise interest rates to help control inflationary pressures caused by overly robust job growth.

"Business conditions in early 2007 will determine which way interest rates will go," he said.

The labor market report is based on the 2005 benchmark of the Current Population Survey of the U.S. Department of Labor. The report is available online at http://faculty.etsu.edu/hipples.

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