The state is expecting the economy to improve next year, but the pandemic is making the outlook complicated. There are many promising signs in Tennessee, but officials say they want to be cautious.

One thing that’s taken a turn for the worse recently is the unemployment rate, which actually rose in October for the first time in three months. But, University of Tennessee economist Bill Fox explains the uptick isn’t a reason to panic.

“That’s heavily attributable to the fact that there was a big increase in the labor force,” Fox says. “So the employment picture has continued to improve through October.”

Courtesy Secretary of State's Office and the University of Tennessee

As overall employment decreased in Tennessee, the chart above shows the number of initial business filings increased sharply.

Another good sign: the number of new business filings. Those are up more than 40% compared to the same time last year. But it’s unclear how many of them were created because people couldn’t find work elsewhere. And they could disappear when more traditional jobs come back.

The state has been bringing in more revenue than it expected, largely thanks to sales tax from online retail. But economists aren’t sure how long Tennesseans will keep spending at current levels. Fox says people have been spending on a lot of things that you only buy once, like home renovations and exercise equipment.

This progress could still be shaken if the pandemic gets worse. And even if it doesn’t, experts say it could take a couple of years for the economy to fully recover.