By ERIN EDGEMON, March 23, 2008

Is Rutherford County in a recession?

Well, it depends on whom you ask.

Most local experts admit that Rutherford County’s economy has slowed some but not to the speed of the rest of the country.

David Penn, executive director of the Business and Economic Research Center at MTSU, is reluctant to say Rutherford County is in a recession.

“I am not ready to say we are in a recession,” he said. “We need to see more losses for another couple of months, more severe losses to really convince me.”

By and large, Rutherford County is still experiencing growth in all segments of the economy but just not at the record-setting pace of a couple of years ago.

This isn’t necessarily a bad thing.

Rutherford County can’t keep up with that amount of growth, Penn said, referring to the cost of constructing new schools and roads.

There’s evidence that less money is being spent in the county largely due to a cut in home sales. Gas prices, hovering around $3.10 a gallon, also are pinching residents’ wallets.

“You can tell ever since (news reports) have started talking about a recession going on that our weeknights have dropped,” said Mike Zelenak, owner of Maple Street Grill. “Instead of people eating out one or two times during the week, they are saving it to go out on the weekend.”

Maple Street Grill also is being hit by higher prices from its suppliers due to rising diesel prices.

“It is going to hurt the independent businesses the most,” Zelenak said of the economic slowdown. “We are going to have to get together as a group to support each other. I think that is going to be what gets everyone through.”

Leslie Matthews, owner of Leslie’s Shoppe, said traffic at The Avenue Murfreesboro hasn’t been as busy in recent weeks.

She said sales at her clothing boutique have improved since moving from downtown Murfreesboro to the massive lifestyle center in November but sales could be better.

Nissan’s Smyrna assembly plant is cutting its five-day workweek down to four days beginning April 7 as a result of an oversupply of inventory due to a slowdown in U.S. car sales. Employees, however, will work nine-hour days.

The plant will cease production totally March 28 and March 31.

A majority of economists polled by The Wall Street Journal in recent weeks agreed that the U.S. has slid into recession.

A recession is a significant decline in general economic activity over an extended period of time.

The reason? Retail sales nationally dropping 0.6 percent in February, shrinking payrolls and 63,000 national job losses last month.

Rutherford County is seeing its own declining numbers.

Sales tax collections in the country aren’t as high as projected, said Lisa Nolen, Rutherford County finance director.

Rutherford County budgeted for a 9 percent increase in sales tax revenue from July 2007 to February 2008, largely due to the opening of The Avenue Murfreesboro in October, but so far, revenues are only up 3.5 percent from the same period last year.

If collections don’t pick up, it could put a pinch in the county school system’s budget that will have to be made up somewhere else, Nolen said.

In previous years, the county has seen double-digit sale tax revenue increases.

The Nashville-Davidson-Murfreesboro metropolitan statistical area saw a 0.5 percent increase in employment in December 2007 from the previous year. The average weekly earnings in manufacturing dropped 1.43 percent in December 2007 from the previous year.

Tennessee’s February unemployment rate released March 20 went up 0.4 percent from January to 5.3 percent. County numbers have yet to be released.

Holly Sears, vice president of economic development of Rutherford County Chamber of Commerce, said Rutherford County is not seeing the job losses the rest of the country is experiencing.

“I anticipate we will continue to see net job growth in our community during the 2008 year, perhaps not the job growth we have seen the last five years which were phenomenal years, but growth,” she said.

Rutherford County has seen a dramatic drop in home sales and residential construction starts over the previous years, which has contributed to the drop in sales tax revenues, loss of jobs and likely some confidence in the local economy.

Home construction dropped nearly 30 percent in 2007 from what it was two years ago, according to U.S. Census data.

“New home construction has slowed significantly since the 2004-05 period when things were so unusually hot,” said Jim Averwater, owner of Averwater Construction and president of the Rutherford County Homebuilders Association.

But it hasn’t damaged the economy, he said.

“In Rutherford County, our economy seems to be better,” Averwater, a 20-year homebuilder, said. “Other parts of the country had a run up of prices, our didn’t. As a result, we are not having the economic problems they are having.”

Averwater said home prices are holding steady or rising slowly.

According to the Middle Tennessee Association of Realtors, the average price of a home sold in 2007 rose 6.4 percent from the previous year.

Home sales, according to the association, dropped 17 percent in 2007 over the previous year. Sales in February 2008 were down 33.5 percent over the same month last year.

Averwater said Rutherford County currently has a 10-month supply of homes on the market.

“We would really like to have a four or five-month supply,” he said.

This drastic drop in home construction has caused several builders to close or scale back their operations, causing a lack of work for many tradesman and lower-level management, he said.

Lee Moss, chief executive officer of MidSouth Bank, said it is the oversupply of homes on the market rather than a tightening of lending to prospective homebuyers that is causing the drop in home sales.

With more homes on the market, it is harder for existing homeowners to sell and buy a new home, he said.

Moss said now is still a good time for a consumer with solid or good credit to purchase a new home especially with interest rates remaining low at around 5.5 percent.

“We have seen virtually no price decline in Rutherford County,” Moss said. “The price of property has held steady. Buyers are reluctant to go out and buy because they feel we are in a recession.”

Moss said credit standards have tightened but to what is considered normal standards.

“If you don’t have good credit, then you are going to have trouble buying a house right now,” Penn said.

What is keeping Rutherford County’s economy stable?

“We have a more diverse economy than most places,” Penn said. “We are not feeling much of a decline due to the housing bust. We did not see the extreme boom as places like Florida, Arizona and Nevada. We didn’t have as far to drop.”

Rutherford County is continuing to see high commercial growth with several large-scale office, hotel and hospital projects under development along Medical Center Parkway.

“We are still seeing commercial, industrial and office projects look at the community, however, everyone is being cautious and financing is much more difficult to achieve at this time,” Sears said.

How long will this economic slowing last?

“I think Rutherford County is going to experience a recessionary time, but it will not be as deep or as long as most of the rest of the country,” Moss said.

But, Penn said the economy will likely get a little worse before it gets better.

“I think we are going to see six more months of worse news or declining activity,” he said. “We are going to see job growth decline or become negative for a month or two.”

Penn said residents shouldn’t react to the news reports they see about the declining economy but evaluate their own financial situation instead.

“Right now, we are seeing the convergence of higher food prices, the growing lack of confidence in the financial sector and an oversupply of automobiles, “ Penn said. “This causes consumers to have caution.”

Erin Edgemon can be reached at 869-0812 and at eedgemon@murfreesboropost.com.