KNOXVILLE, Tenn. (AP) _ Government and community leaders said Thursday that the thousands of layoffs announced by the Tennessee Valley Authority will be devastating in limited areas without destroying the region's economic foundations.

And many said TVA's stated goal of keeping its power rates low will be a boon in years to come.

''There seems to be a trade-off here that TVA is trying to address,'' said Matthew Murray, an assistant economics professor at the University of Tennessee. ''The short-run impact will be negative for the Knoxville area and the TVA region in general. But TVA apparently has decided the long-run benefits outweigh the short-run costs of the dislocations and terminations.''

The TVA, the nation's biggest supplier of electricity, announced Wednesday that it will lay off 7,500 of its 34,000 workers to remain competitive and ensure its survival.

The 22 percent reduction, to be completed by Oct. 1, is in line with TVA Chairman Marvin Runyon's goal of making the utility businesslike and capable of competing with privately owned utilities. The layoffs, as well as other changes, are an effort to avoid a rate increase of about $300 million in the budget year that begins Oct. 1.

TVA will lay off 988 workers in Knoxville, its headquarters, and transfer 250 additional jobs to Chattanooga. That will leave Knoxville with about 3,300 TVA employees.

Chattanooga will suffer a total reduction of 775 jobs, leaving the city with about 4,800 TVA jobs. An additional 329 employees will be laid off at Muscle Shoals, Ala., leaving that city with more than 1,800 TVA jobs.

''It's tough on some of those laid off,'' said Knox County executive Dwight Kessel.''I'm sure they have house and car payments. But in a community our size, 1,000 people laid off is not a disaster, although it certainly is very real to those people.''

Knoxville has a population of about 175,000. The county has a population of some 321,000, Kessel said.

The largest employer in the Knoxville area is Martin Marietta Energy Systems, with 15,700 employees. Martin Marietta also runs the Department of Energy's facilities in Oak Ridge, about 25 miles away.

Kessel estimates the layoffs will have some ''ripple effect'' because there will be fewer paychecks spent on goods and services.

George Korda, a spokesman for Mayor Victor Ashe, said, ''Obviously, in the short run it's a difficult thing. That's why the mayor and Chamber of Commerce and TVA are cooperating on a large-scale job fair in July, to help people who have been affected get back on their feet, hopefully in the Knoxville area.''

That job fair is just one of several efforts to provide TVA employees who are losing their jobs with new opportunities. Similar efforts are under way in Chattanooga and northern Alabama. TVA also is putting together a job bank with cooperation of area businesses.

''Certainly this will have some impact,'' Korda said. ''But overall, the area's economy is strong, and diversifying more than ever. The outlook with a healthy TVA is very good.''