If you want to see the precise point in Knox County where the economic tide of the last decade crested and began to ebb, take a ride out Parkside Drive through the retail sprawl of Turkey Creek.
Head west from Lovell Road, past the Super Walmart and Super Target and multiple outlets competing for your happy-hour margarita dollar (Salsarita's, Texas Roadhouse, Abuelo's), and turn left after the big Regal movieplex onto Turkey Cove Lane. There, just a few hundred yards behind Calhoun's, shielded by a row of trees, you'll find a housing subdivision called The Cove at Turkey Creek.
Or, at least, the spectral notion of a subdivision.
When The Cove at Turkey Creek was announced by its developers in the fall of 2006, an article in the Farragut Press promised "upscale housing," with "verandas and private courtyards" on 74 lots across 35 acres. Phil Cobble of Realty Executives, one of the listing agents for the properties, purchased an advertorial in the News Sentinel that bragged about "a new brand of urbanism" in the development, with sidewalks and streetlamps and a community clubhouse and swimming pool. Houses were expected to sell for around $850,000.
If you drive through it now, looping through its cul-de-sacs (Matthews Cove Lane, Fords Cove Lane), you'll see the sidewalks gleaming like new, and the streetlamps, and the clubhouse and the pool. What you won't see, for the most part, are houses or people. The lamps have no light bulbs. The pool is gated and covered with a tarp, a "No Diving" sign hung on a fence in almost poignantly unnecessary admonition. A half-dozen houses cluster together near the entrance to the subdivision, and another half-dozen or so are scattered randomly across the trimmed grassy expanse of the rest of the development. Only a few show any hint of habitation. Many have for-sale placards on their lawns. Mostly, there are just metal poles and sewer hookups to mark the empty lots. (A friend who lives nearby says her stepson doesn't like to ride his bike alone through The Cove. He calls it "the Creepy Neighborhood.")
When Phil Cobble filed for Chapter 7 bankruptcy last September, he told the News Sentinel that two of his projects—The Cove at Turkey Creek and The Battery at Berkeley Park in Farragut—had sold just one lot between them in the previous two years.
The Cove is emblematic of its era, obviously, a hangover from the credit binge of the last decade that briefly turned debt into America's hottest asset. You can find similarly stalled housing developments all over the country. But how emblematic is it of Knox County in particular? That's a complicated question.
A regional economy is a hard thing to get a handle on in the best of times, and clearly we are a long way from the best of times. Separating local weaknesses and strengths from the broader currents of the national and global markets takes some artful number-crunching and a certain amount of intuition. To ask, "How are we doing" is really to ask two different things: How are we doing right now, and how well are we positioned for the future?
In the short term, the answer is: Things are terrible. But somewhat less terrible than in a lot of places. And possibly maybe getting a little better (as the national job figures for March released last Friday faintly suggest). In the longer term, though, the local picture is not so grim. You know all of those things people always say about Knoxville? That it's comfortable and inexpensive, that it has a nice climate and decent cultural amenities, that it is basically a pleasant place to be? Those things turn out to matter in concrete ways.
"In the last 10 years or so, Knoxville has been one of the healthier metro areas of the state," says Matt Murray, associate director of the Center for Business and Economic Research at the University of Tennessee. "I think Knoxville has really transformed itself into a very attractive place to live."
Of course, that is easier to appreciate if you are employed and not among the 14 percent of the Knox County population living below the poverty line as of the most recent U.S. Census estimate (which was in 2008, suggesting that the percentage has almost certainly risen).
But for whatever consolation it provides, the Knoxville metro area's unemployment rate has stayed slightly but consistently below the national rate throughout the past decade, and often well below the overall rate in Tennessee. The poverty rate was about a percentage point higher locally in 2008 than the national average, but still a point below the state rate. And assorted cost-of-living calculations suggest that while median household income here lags the nation by about $6,000 ($45,922 locally in 2008 vs. $52,029 for the U.S.), affordable housing and services make up a good chunk of the difference.
There is, in other words, bad news and, maybe, good news.
THE BAD NEWS
As in most parts of the United States right now, the bad news starts with jobs. In January, the most recent month for which local numbers have been broken out, the unemployment rate in the Knoxville metro area was 9.3 percent. (The metropolitan statistical area includes Anderson, Blount, Knox, Loudon and Union counties.) That was better than both the national and state rates, of 9.7 percent and 11.4 percent, respectively. But it was tied with last June's number for the highest rate of the past 20 years. For all of the 1990s, the local unemployment rate never rose above 5.6 percent, and for the past decade it didn't break 5 percent until it began to rise in June 2008.
What 9.3 percent translates to, according to the U.S. Bureau of Labor Statistics, is an estimated 33,000 people looking for work, out of a local labor force of about 354,000.
It also translates to a lot of people who need help of one kind or another. At Second Harvest of East Tennessee, grants administrator Patty Ford says demand across the 18 counties served by the food assistance agency is up by 30 percent over the past 18 months. Meanwhile, donations to food banks nationwide are down about 28 percent over the same period.
"Our agencies are telling us they're seeing people come in for food that used to come in to volunteer," Ford says.
There's a similar story at United Way of Greater Knoxville, which distributes funds to 111 programs in 44 agencies. "The United Way of Greater Knoxville is 88 years old, and we've had some ups and downs that we've faced in those many decades," says Ben Landers, the agency's president. "But the last two years, 2008 and 2009, have been extremely hard."
Landers, who has worked with United Way affiliates across the country for the past 32 years, says he has never experienced anything like the fall-off in support and increase in demand of the current downturn. Because United Way relies heavily on paycheck contributions through workplace campaigns, the dismal employment picture has taken a direct toll. "These past two years, there are clearly fewer people in the Knox County workplace," Landers says.
United Way of Greater Knoxville reached a funding level of $12.8 million in 2007, before beginning a plunge that took it down to $11.8 million last year. The agency just finished disbursing its 2009 money late last month, and Landers says the results were ugly: Funding for the groups that rely on United Way support was down 14 to 15 percent across the board.
"Everybody affiliated with the United Way of Greater Knoxville—including the United Way of Greater Knoxville, the budget that I manage—everybody is down," Landers says. "To our knowledge, that's historic." In 2007, Landers' agency had 26 employees. It now has 14.
(Sidebar: The Pawn Shop Economy)
Federal labor statistics suggest the downturn has cut across most sectors, but some have been hit harder than others. The private construction industry, for example, accounted for an estimated 10,380 jobs in Knox County in September of last year (the last month for which numbers are available), down from a peak of 12,907 in September of 2007, and the lowest number for any September since at least 2000. Even more dramatic is the drop-off in manufacturing, where a steady but slow decline in employment turned into a free-fall over the past two years. In September 2001, there were an estimated 19,095 manufacturing jobs in Knox County. By September 2006, that had slid to 16,612. By last September, it was an estimated 11,265, well below the number of Knox Countians employed by local government (15,838) or state government (13,402).
"We've seen manufacturing jobs fall now for well over 10 years, without any increase," Murray says. "This current recession is going to be a shift downward in manufacturing that will never be recovered."
And in a state as dependent on sales taxes as Tennessee, the drop in consumer spending that goes along with higher unemployment and general anxiety turns into a direct hit on state and local government. In February 2010, Knox County collected $44.1 million in state and local sales taxes, down by more than $11 million from February 2007 and the lowest total for that month in seven years. County Mayor Mike Ragsdale won't release his proposed budget until later this month, but he has asked department heads to make proposals for budget cuts of both 4 and 8 percent.
In the city of Knoxville, senior policy director Bill Lyons says nothing that draconian is expected, but he says the trajectory looks like "declining or at best stabilizing revenues, and increasing expenses." Among other things, federal stimulus money that has gone toward community development and programs like the Solar Cities initiative will start to tail off.
The toll has also shown up on the retail landscape. At Town & Country Commons, the Cedar Bluff shopping center that spans North Peters Road between Kingston Pike and I-40, the collapse of two chains has left large sections of asphalt without an anchor. The former Circuit City store, with its distinctive, giant-plug-shaped entrance and its 34,942 square feet of empty space, seems to have had collateral damage on its neighbors: Between it and the Panera Bread store farther down the plaza, four out of five storefronts are vacant. Across the way, a former Goody's store offers another 30,000 square feet for anybody who needs it.
Michael Wiener, a national retail consultant based in Lake Success, N.Y., says he doesn't see any recovery of consumer spending yet. His company, Excess Space Retail Services, seeks out tenants for vacant storefronts; his listings currently include 115,000 square feet at the former Dillard's building at Knoxville Center mall. "Things are still pretty bad, and I think there are more vacancies to come," Wiener says.
In the short term, he says, many landlords will find themselves considering the kinds of tenants they would have ruled out a few years ago: mass discounters, stores with the word "Dollar" in their names, the only part of the retail sector that's showing any real growth. "Landlords have to be realistic," he says. "They want to have their properties tenanted."
That apparently holds true even in Turkey Creek, which to the casual observer seems to be weathering the downturn with most of its brand names intact. But right in the heart of its anchor plaza, there's a big banner advertising 35,000 square feet for rent. Wiener says stores that big aren't hard to rent in good times—they can be subdivided into as many storefronts as needed. But for the moment, the space is home to something called Book Gallery, one of those bargain outlets with piles of paperbacks and coffee-table tomes stacked along row after row of folding tables. The only sign of the former tenant is on the wall by the door, near where the shopping carts used to be. A logo advertises Linens 'N Things, a name that entered bankruptcy and liquidation in 2008 and now exists only as a website, lnt.com.
THE GOOD NEWS?
The headline in USA Today on March 8 was the kind to give a little bounce to the step of any civic booster or real estate agent (or, perhaps, a mayor seeking higher office): "Knoxville's housing market picking up." As part of a series of looks at local economies, the national newspaper noted that, "In January, Knox County home sales were 12.2 percent higher than in January 2009." It quoted Barry Hensley, past president of the Knoxville Area Association of Realtors, saying, "It's odd, because it will get red hot and then slow down a little, and then get a red hot again."
In a phone call a few weeks later, Hensley offers a small disclaimer: He never said red hot. And the current downturn is unlike any other he's seen in his career, making predictions about recovery even trickier than usual. Still, compared to a lot of parts of the country, he says, things aren't that bad. Prices have come down from their peak a few years ago, but not precipitously—partly because Knoxville was somewhat insulated from the bubble to begin with. "We just never experienced that type of a market here," says Hensley, principal broker with Southland GMAC Real Estate.
And to the extent there was speculation and fall-off, he says, it was at the top end, places like The Cove at Turkey Creek. "If you get above $350,000, I think there is a lot of inventory in that upper bracket," Hensley says. "But when you get down into the $200,000 range, I don't see a lot of inventory there."
(Sidebar: The Downtown Exception)
But for housing to really recover, jobs will have to recover first. On that count, Murray sees one area in particular as the most likely engine for growth: health care. With an aging population, and a continued influx of retirees either returning to East Tennessee from elsewhere or moving here for the first time to take advantage of inexpensive land and low taxes, growing demand for health services seems inevitable.
The experience of the past decade bears that out. Even during the recession, "Education and Health Services" is one of the few categories tracked by the U.S. Bureau of Labor Statistics that continued to grow in Knox County. The sector accounted for 25,283 county jobs in January 2001, and climbed to 33,981 by last September—a gain of 8,700 new positions that by itself nearly offset the 9,000 manufacturing jobs lost in the same period.
There are downsides to the population's gray shift, of course. According to Murray, "If you look at the data, we have a smaller proportion of our population in the workforce than you would find for the nation as a whole." That reduces the amount of overall business activity, with all its attendant income and tax generation.
The local dependence on public and quasi-public employment has its pluses and minuses, too. Government work is the second-largest employment sector in Knox County, accounting for 15.8 percent of nonfarm jobs as of December. Murray notes that institutions like the school system, the Tennessee Valley Authority and the University of Tennessee are facing budget crunches that will hamper job growth. But at the same time, those institutions provide greater stability than many parts of the private sector; they are less prone to mass lay-offs and outsourcing, and overall government employment was actually up slightly over the decade through last September.
Taken together, Murray says all of those elements should help cushion the area against whatever shocks may be left to come. In some ways, Knox County's economy is as conservative as its politics—at least in the old-fashioned, take-things-slowly sense of the word.
"We're going to see incremental change in this county, whether it be bad or good, rather than dramatic change," Murray says. "And I think people are pretty comfortable with that."