Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank

WEAKER IDAHO PERSONAL INCOME GROWTH WILL IMPACT STATE’S SMALL BUSINESS SECTOR

• The Zions Bank Small Business Index for Idaho registered 79.2 in February 2008, down from a revised 81.9 in January 2008

• Idaho’s unemployment rate was estimated at 2.8% in the most recent month, down from the 3.1% rate of the prior month.  Idaho employment rose by an estimated 6,300 jobs during the past 12 months

• Less robust growth in Idaho total personal income will lead retail spending lower

• The U.S. economy lost an estimated 63,000 net jobs in February, sharply below expectations.  The U.S. unemployment rate was at 4.8%

WEAKER PERSONAL INCOME GROWTH
Less impressive employment creation during 2007, as well as sluggish job gains expected in 2008 and 2009, will lead to slower growth in Idaho total personal income.  Such income is the primary contributor to overall consumer spending in the state and typically consists of more people working and a modest rise in the average wage. 

Economic weakness early in the current decade led to a sharp decline in total personal income growth.  Such performance led to sluggish retail sales during that period.  More impressive job gains during 2004 to 2007 led incomes and retail spending higher.

Total personal income and retail sales are components of the Small Business Index.  Slower gains in each contributor are a negative development for the Index.

IN IDAHO
The Idaho unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Idaho—was estimated at 2.8% in the most recent month, down from the 3.1% rate of the prior month.  The estimated 2.8% rate matches the 2.8% rate of one year ago.  A lower Idaho unemployment rate is a negative for the Index as it implies lesser labor availability for Idaho’s small businesses.

The Idaho jobless rate averaged an estimated record low of 2.6% in 2007, 3.4% in 2006, 3.9% in 2005, and 5.0% during the period 2000-2004.  By comparison, the Idaho jobless rate averaged 5.6% during the 1990-99 period.

The latest 12-month rise in Idaho employment estimated at 6,300 jobs (up 0.8%) compares to a revised gain of 10,600 jobs in the prior year-over-year period.  Idaho added 17,200 jobs in 2007, 27,100 jobs in 2006, 23,400 net new jobs in 2005, and an average of 7,100 jobs annually during the 2001-2004 period. 

These totals also compare to gains averaging 17,600 net new jobs annually during the 1991-2000 period.  More recently, weaker job growth, leading to slower income creation and softer retail spending, has a negative impact upon Idaho’s small businesses…and therefore, the Index.

The Zions Bank Small Business Index for Idaho came in at 79.2 during February 2008, down from a revised 81.9 during January 2008.  The Index measures business conditions from the viewpoint of the Idaho small business owner or manager. 

A lower Index number is associated with less favorable business “conditions” for Idaho’s small businesses.  The Index uses 100.0 for calendar year 1997 as its base year.  The Index also includes revisions to various historical and new forecast components as they become available.

NATIONAL EMPLOYMENT
The U.S. Department of Labor reported a net decline of 63,000 jobs in February 2008, the largest decline in more than four years, and below the consensus forecast of a gain of 25,000 jobs.  The previously reported employment loss for January 2008 was revised slightly lower to 22,000. 

The U.S. unemployment rate was 4.8% in February, down slightly from January’s 4.9% rate, tied to a sharp decline in the estimated labor force.  December 2007’s 5.0% jobless rate was the highest in two years.  The average hourly wage rose 0.3% (five cents) to $17.80 hourly, a rise of 3.7% over the past 12 months.

Goods-producing employment continued to decline in February, with a net loss of 89,000 jobs.  Manufacturing lost another 52,000 jobs, while construction employment fell by 39,000 positions.

Service-providing employment led the way in February with a rise of 26,000 net new jobs.  The government sector added 38,000 jobs, while the education & health services sector added 30,000 net new jobs.  The leisure & hospitality sector added 21,000 positions.  The professional & business services sector lost 20,000 jobs during the month. 

Revised estimates now suggest the U.S. economy added 1.1 million net additional jobs in 2007, an average of 91,000 net new jobs monthly, and the weakest year for job gains since 2003.  The 91,000 average monthly gain was down 48% from the 175,000 average monthly gain in 2006. 

The March 2008 Zions Bank Small Business Index for Idaho will be released on April 9, 2008.

©Copyright 2007 Thredgold Economic Associates