Monday, March 09, 2009


More Signs of Trouble for the East Tennessee Economy

There have been several major events related to the local economy here in Knoxville - Goody's and IPIX going belly-up being at the top of the charts. Blount County has also been hit hard, with Alcoa experiencing lay-offs, the boat manufacturing plants and Denso cutting back hours, and a recent report (along with confirmation to me from anonymous sources familiar with the situation) that Clayton Homes may be in serious trouble.

And while massive lay-offs at The University of Tennessee may create more problems, Knox and Blount Counties are fortunate to have multiple large employers in their municipal boundaries. Other places close to home are not so lucky.

The Tri-Cities are a prime example. Each has its own major economic driver. Johnson City has East Tennessee State University. Bristol has Bristol Motor Speedway. Kingsport has Eastman Chemical. Over a decade ago, I wrote a piece speaking to the vulnerability of each of the Tri-Cities due to this phenomenon. At the time, King Pharmaceuticals and several other mid-sized employers were operating in the area, but the problem has become more acute due to cut-backs or bankruptcy of those mid-sized employers over the past 15 years.

I have always felt that each of the Tri-Cities was intimately connected to the fortunes of its major economic driver. If the business institution failed, then the city risked collapse.

In today's news comes another sign that my theory is about to be put to the test.

"Kingsport most likely to bear brunt of more Eastman layoffs; 5 percent pay cuts on the way"

Eastman, known around Kingsport for lavishing huge bonuses on its executives and spending insane amounts of money on executive facility upgrades and remodeling, is once again cutting employees and salary. This caught several people by surprise, given that the word as of last month was about the size of annual bonuses, which are usually only issued during times of company strength.

East Tennessee has done a good job of attracting businesses. However, the economy is going to test the versatility of the economy here.

MORE: Warren Buffet says that things are going to get worse on the unemployment and inflation front before they get better. Buffet, while a flaming liberal, is the best financial mind of his time. When he is worried (and isn't sure what is to happen with Clayton Homes), one has to worry.

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