Tennessee Unemployment Dips to 3.5%, Beats U.S. Average in Early 2026

NASHVILLE, Tenn. — Tennessee's economy showed resilience into 2026, with the state's seasonally adjusted unemployment rate falling to 3.5% in January, down one-tenth of a percentage point from December 2025. That figure beat the U.S. rate of 4.3% and marked stability after a year where rates hovered between 3.5% and 3.7% throughout 2025. Total nonfarm employment grew by 7,200 jobs over the month, with the biggest gains in private education and health services, professional and business services, and financial activities.

By February, the rate edged up slightly to 3.6%, still eight-tenths below the national 4.4%. Over the past year, employers added 5,900 nonfarm jobs through January, led by health care and social assistance, state government, and arts, entertainment, and recreation. However, February saw a net loss of 9,200 jobs, primarily in private education and health services, trade, transportation, and utilities, and leisure and hospitality.

Local variation underscored Tennessee's patchwork prosperity. In January, 84 of 95 counties reported rates below 5%, with Williamson County at a low 2.7%, followed by Cheatham and Wilson at 2.8% each. Knox County clocked in at 2.9%, while rural Perry County topped the list at 11.3%. Officials from the Tennessee Department of Labor and Workforce Development hailed the trends as evidence of the state's edge over national benchmarks.