Tennessee was among the economies that were the hardest hit by COVID-19 in 2020. With its daily case rate peaking last December to become the worst in the country per 100,000 people at the time, Tennessean businesses were forced to close, and many people lost their jobs. But as people adapt and vaccines begin to be rolled out, experts at the Boyd Center for Economic Research are cautiously optimistic that although the state’s economy may take years to return to its pre-pandemic normal, it may be able to bounce back and improve this year.
COVID-19’s effect on the labor market
The spike in cases in March drastically changed consumer behavior in Tennessee in less than a month’s time. Less household spending on leisure activities has led to company closures and mass lay-offs, especially in industries that required in-person interactions such as the restaurant and hotel industry. ThinkTennessee’s research showed that two in five Tennesseans have lost their income since the pandemic first hit, leading to the state’s unemployment rates reaching a record high of 15.5% just a month after the start of the pandemic. Among the most affected were low-income families, Hispanic and Black communities, and women. However, the state was able to rebound to a 7.5% average rate towards the end of 2020 due to factors like government aid and the opening of new businesses. Ultimately, widespread vaccine distribution, which may be possible by the middle of this year, may lead to a more optimistic outlook for employment across the state.
Entrepreneurship and government aid
The shift in consumer spending provided opportunities for various businesses in the e-commerce space. Many turned to online entrepreneurship as a response to unemployment, catering to household needs that arose due to stay-at-home orders and physical distancing measures implemented by the state. In fact, in mid-2020, applications for new businesses in the US surged to a 13-year-high.
This phenomenon can be attributed to federal government aid and efforts such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided households and some small businesses much-needed resources to stay afloat. More than 500,000 unemployment insurance claims were filed in Tennessee in March to May 2020 alone, and many have used the benefits from this policy to begin their own small businesses and build from the ground up. Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development, remarked that they remain hopeful that the entrepreneurial spirit in Tennessee will continue to generate economic growth across the state.
Outlook for state sectors
The pandemic affected various industries in different ways throughout 2020, and this will be the case as Tennessee’s continues to recover. Although accommodation, food services, and healthcare are historically strong sectors in the state, as pointed out in ZenBusiness’ guide to Tennessee, these sectors may take more time to recover depending on the trajectory of the virus. With some 155,000 jobs in the state in healthcare prior to the pandemic, this particular sector will continue to feel the long-term damage of the COVID-19 recession. On the other hand, sectors like the advanced energy industry are predicted to lead to more jobs, as well as Tennessee’s real estate sector, with Nashville home sales 6% higher in 2020 than the previous year, even as sales across the country flattened due to the pandemic.
The recovery of The Volunteer State, needless to say, has not been and will not be smooth, with the spikes in COVID-19 cases continuing to affect sectors unevenly across the state. But through government aid, the emergence of adaptive industries leading to more jobs, and the expected arrival of vaccines by mid-2021 amidst what is considered one of the darkest points in the history of the country, Tennessee is beginning to see the light at the end of the tunnel.
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