UT survey finds continued optimism about state economy, but concerns grow over costs, workforce and national conditions
KNOXVILLE, Tenn. (Smokies.LIVE Information Center) — More than half of Tennessee business leaders say they have absorbed higher fuel costs rather than passing the full increase on to customers, according to a new survey from the Boyd Center for Business and Economic Research at the University of Tennessee, Knoxville.
The summer 2026 Tennessee Business Leaders Survey, conducted in August, found that more than 47% of employers had raised prices to offset higher gas and diesel costs. About 10% said they had passed a large portion of those increased costs on to customers.
“Oil market instability continues to strain our state’s businesses and their bottom lines,” said Don Bruce, director of the Boyd Center. “These August results show that business leaders are trying to cushion the blow to consumers, but absorbing those costs will become harder.”
Despite those pressures, Tennessee business leaders remain relatively optimistic about the state’s economy.
Four in five respondents put the chance of a recession during the next year below 50%, a figure consistent with the center’s winter survey conducted in February.
However, views of the national economy have become more pessimistic.
Nearly 45% of business leaders said the national economy was somewhat or considerably worse than a year ago, up from 37.6% in February. The share expecting the national economy to worsen during the next year increased from 32.7% in February to 42.1%.
Workforce concerns remain
Workforce availability also remains a concern for Tennessee employers.
About 56.8% of employers surveyed said there was an insufficient supply of appropriately trained workers in the state’s labor force.
Work ethic was the most frequently cited missing attribute among job applicants, identified by about 61% of respondents. In West Tennessee, 85% of employers listed work ethic as a concern.
Other frequently cited gaps included initiative at 44.4%, realistic compensation expectations at 43.8% and technical skills at 40.1%.
The share of business leaders reporting difficulty attracting and retaining employees also increased, rising from 36.8% in February to 43.5%.
Housing and child care were among the factors employers identified as contributing to those challenges. Nearly three in five respondents cited the cost of housing, while 37.9% pointed to child care costs and 30.4% cited housing availability.
The issue appeared less pronounced in Middle Tennessee, where about one-quarter of respondents reported employee attraction and retention as a problem.
AI use grows without major hiring impact
The survey also found that Tennessee businesses are increasingly using artificial intelligence without significant changes to employment levels.
Nearly 72% of employers said AI had not affected their employment levels, an increase of nearly 10 percentage points from the winter survey.
About 10% said they were hiring fewer employees because of AI, while 16.3% said they were not using AI at all. That figure was down from about 25% in February.
The survey provides a snapshot of how Tennessee business leaders are navigating higher operating costs, workforce challenges and changing technology while maintaining a generally positive outlook for the state’s economy.
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