Nashville's economic diversity offers better shield from recession

By Wendy Lee • THE TENNESSEAN • June 30, 2009 Nashville's economy is faring better than many other major cities', based on a review of recent jobs data, wages and home prices by The Brookings Institution. Some experts see the Brookings' study released earlier this month as evidence that Music City will bounce back from recession faster than some other areas thanks to its diverse economy. "Nashville has industries that are probably more vulnerable to the recession and probably some that made it less vulnerable," said Howard Wial, a fellow at The Brookings Institution, a Washington, D.C.-based public policy group. "The balance of those put it pretty much in the middle." Overall, Greater Nashville beat at least 40 other metro areas in most categories of the study, which took into account local job markets, real estate sales, gross metropolitan product and wages during the first quarter of this year compared with a year earlier. The Nashville area fared best on housing prices, which haven't been battered nearly as badly as some other harder-hit regions or states, particularly Florida, California and a swath in the Northeast. Nashville finished 25th of 100 cities on home price stability, the Brookings report concluded. Cities that ranked lowest in the study included Detroit, an automobile industry hub that's been devastated by the bankruptcies of General Motors and Chrysler; as well as Los Angeles and Stockton, Calif., which soared with rising home prices earlier this decade only to collapse when the mortgage industry imploded last year. 'Stability factor' better Wial said because Nashville ranks in the middle of the pack overall, it's probably true it will get out of the recession sooner. One of the benefits for Nashville is that it never had a big housing boom, and therefore never suffered a big housing bust, Wial said. "I think our stability factor to begin with was better," said Mike Nichols, president of the Greater Nashville Association of Realtors and managing broker for Zeitlin & Co., Realtors' InTown office. Nichols said it appears the local housing market is stabilizing. Still, home sales remain significantly behind 2008 levels, according to the most recent data from the Realtors group. In May, there were 1,783 residential closings, down nearly 29 percent from the same month a year earlier, the association said. The median price of a single-family home here was $169,900, officials said, down 10.6 percent from May 2008. One lingering challenge is the local job market. The state's unemployment rate for May was 10.7 percent, worse than the national jobless rate of 9.4 percent for the same period. Bill Ingram, a Lipscomb University professor of economics and finance, said it's hard to say when the job market will get better. Ingram said he expects to see more signs of consumer spending improving by fall. "The Christmas season this year will be a whole lot better than it was last year," Ingram said. "There will be less fear."