Slower domestic demand and the absence of serious supply interruptions have allowed gasoline prices to fall some in recent weeks, but pump prices are likely to rise again as 2007 arrives.

"Consumers are enjoying some relief at the filling station, but higher prices are on the horizon" -Matt Murray
Associate Director CBER

"Consumers are enjoying some relief at the filling station, but higher prices are on the horizon," said Matt Murray, CBER associate director and project director, who helped develop the projections.

Mortgage rates have already risen and, as a result, "the nation’s housing market also has weakened appreciably in recent months," Murray said.

Both the national and state economies will see somewhat lower overall growth largely in response to rising interest rates and high energy costs, the report states.

• Expected state unemployment rates:
• 5.5% 2006
• 5.6% 2007
• Manufacturing Jobs Lost in 2006-07:
• 8,000

But even with slower job growth and rising unemployment rates, the national and state economies will not retreat into recession, Murray said.

• Personal Income Growth 5.3% in 2006; 5.4% in 2007
• Growth in non-farm jobs 1.3% in 2006
• Overall job growth:
• 1.2% in 2007
• New Jobs: 35,000, 2006
• 34,100, 2007

The economy should benefit from healthy business investment in computer technology and new facilities, too. Depreciation of the dollar in international markets also will help. A fall in the dollar makes American-made products less costly to consumers in other countries.

"The decline in the dollar has helped prop up jobs for the nation’s manufacturing sector and help forestall more serious setbacks here in Tennessee," Murray said.