by Joe Sullivan

For all the fanfare associated with the Jobs Now! recruitment campaign, Knox County hasn’t attracted any major new employers this year. While there have been some notable corporate expansions, those have been outweighed by publicized closings of plants and call centers, outbound relocations, downsizings and the like. Consider:

Philips Consumer Electronics, which once had its U.S. headquarters here, has completely vamoosed, taking out the 200 employees that remained here with it. Cendant Corp, once the city’s largest call center, has shut down, terminating close to 300 workers. Ditto on a smaller scale for Dial America, with 162 jobs lost. PPC Industries’ porcelain product plant, which had 105 workers, is also a goner. Delta Apparel relocated its distribution center from the erstwhile Standard Knitting Mills site in the heart of Knoxville to a new facility in Clinton. And Baptist Hospital, which added more jobs than any other employer to the local economy in 2003 with the opening of its new West Knox facility, has been in an over-extended, downsizing mode this year.

So it would be easy to conclude that 2004 hasn’t been a good year for the local economy. However, that conclusion would be dead wrong. In fact, Knox County employment has grown a robust 2.5 percent over the past year, according to data compiled by the state Department of Labor and Workforce Development. The county’s total employment of 221,180 in October 2004 was up from 215,440 in October 2003.

This year’s growth comes on the heels of equally remarkable growth in 2003 (over 2002) that placed the Knoxville area 10th among the 200 largest metropolitan areas in the country, as covered in a recently released report by the Milken Institute. At 2.45 percent for the year, the Knoxville area’s job growth rate more than doubled that of any other metropolitan area in Tennessee.

In the absence of attracting any large new employers to Knox County, the question becomes what’s accounting for this growth? While expansions on the part of larger enterprises are certainly a factor, the biggest part of this answer would seem to be the growth and start-up of many smaller ones. Then there’s a burgeoning retail sector, epitomized by the phenomenal growth of Turkey Creek.

No data is readily available on the composition of Knox County’s job growth, let alone what’s driving it. For the six-county metropolitan area, the state’s statistics do break it out by sectors, and reveal the following:

The services sector accounts for all the growth, and then some. Indeed, services employment gains of 4,900 jobs over the past year mask declines in manufacturing and—more surprisingly—government jobs. By far the largest single component of the services increase has been retail trade, with 1,900 added jobs. Two other state-defined categories “Food Services and Drinking Places” and “Educational and Health Services” each account for slightly more than 1,000 added jobs.

Those statistics don’t begin to explain why Knoxville is faring so much better than the rest of the state, and economic assayers are almost at a loss to do so. About the best that Rhonda Rice, executive vice president of the Knoxville Area Chamber Partnership, can offer is, “The last time I was at Turkey Creek, more than half the license tags were from outside Knox County.” But she’s quick to add that she believes that’s only one of many factors.

Director of UT’s Center for Business and Economic Research, Matt Murray has little more to offer by way of an explanation. “I’m not sure anybody has an answer why those economies perform the way they do in the short run,” Murray says. But he goes on to venture that the recent growth may reflect “all of the quality of life, educational, transportation and other advantages that give the Knoxville area such high potential for long-term growth.”

One might suppose that the concentration of employment growth in retail, restaurants and the like connotes a profusion of low-end jobs to the exclusion of more desired, higher-paying professional and industrial job growth. But the most surprising single aspect of the recent Milken Institute report shows that Knoxville ranked 10th among all U.S. metropolitan areas in wage and salary growth in the most recent year covered. So go figure.

All of that is not to deprecate the Jobs Now! effort to recruit new industry, corporate headquarters, distribution centers, even call centers to the area. In the long run, success in the attraction and in the retention and expansion of high-end employers is no doubt vital to the area’s economic well being. So is the commercialization of research coming out of the labs at ORNL and UT that’s being stressed by everyone from Gov. Phil Bredesen to UT President John Petersen to County Mayor Mike Ragsdale. Ragsdale’s chief of staff, Mike Arms, has been spearheading the effort to raise $2.4 million for an incubator to be built on the UT campus to foster fledgling, research-based enterprises.

The Milken report stresses that “a metro must be able to start, grow and attract new firms continually to augment the diversity of its economic ecosystem and replace larger, older firms that may stagnate, exit or even disappear. Entrepreneurial capacity and behavior are prime drivers of economic growth and job creation.”

To judge by the results of the past two years, the Knoxville area may already have more entrepreneurial capacity than a lot of folks, including myself, have been giving us credit for.

December 9, 2004 • Vol. 14, No. 50 © 2004 Metro Pulse