Zions Bank Small Business Index for Idaho
January 2009 Release
February 11, 2009

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

THE U.S. RECESSION COULD CONTINUE THROUGHOUT 2009, HURTING IDAHO’S SMALL BUSINESSES

HIGHLIGHTS

• The Zions Bank Small Business Index for Idaho registered 69.4 in January 2009, down from a revised 73.3 in December 2008

• Idaho’s unemployment rate was estimated at 6.9% in the most recent month, up from the 6.6% rate of the prior month.  Idaho employment declined by an estimated 28,400 jobs during the past 12 months

• The current U.S. recession, which officially began in December 2007, could continue longer than the current consensus view of economists 

• The U.S. economy lost an estimated 598,000 net jobs in January, slightly exceeding economists’ expectations.  In addition, job losses in November and December were revised higher by a combined 66,000 jobs.  The U.S. unemployment rate rose to a 16-year high of 7.6%

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U.S. ECONOMIC PAIN

American economic pain was widespread during 2008’s final quarter, with the overall economy contracting at a 3.8% real (after inflation) annual rate.  The economy’s decline was the sharpest since the first quarter of 1982—a period of 26 years.  GDP, or gross domestic product, is the broadest and most complete measure of the nation’s overall economic activity. 

On the surface, the 3.8% annual rate of shrinkage was “good” news, since the consensus view of forecasting economists was for a 5.0%-5.5% real annual rate of decline.  However, the lesser rate of decline occurred for the wrong reason (a rise in inventories of goods), one which actually suggests that the U.S. economy will be weaker in 2009’s first half than was the prior view.  The 3.8% rate of decline followed a 0.5% real annual rate of decline during 2008’s third quarter. 

The U.S. economy will likely be weaker statistically during the current quarter than was the view a couple of weeks ago.  Current quarter weakness could reach a 5.0% real annual rate of decline. 

The consensus of forecasting economists has recently suggested that a return to minimal U.S. economic growth could begin as early as 2009’s third quarter.  However, recent U.S. economic data suggests that the current recession, now in its 15th month, could continue until near the end of 2009.  More bearish forecasters suggest a recovery will not unfold until well into 2010.

If misery loves company the U.S. has plenty, with much of the developed world also in the tank.  For the first time since WWII, the U.S., Europe, and Japan are in recession at the same time.

U.S. and global economic performance are components of the Small Business Index for Idaho.  As a result, weaker performance for both economies contributes to a lower Index measure.

IDAHO EMPLOYMENT

The Idaho unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Idaho—was estimated at 6.9% in the most recent month, up from the 6.6% rate of the prior month.  The estimated 6.9% rate is a substantial increase from the 3.1% rate of one year ago.  A higher Idaho unemployment rate is a positive for the Index as it implies greater labor availability for Idaho’s small businesses.

The Idaho jobless rate averaged 4.2% in 2008, 2.7% in 2007, 3.2% 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 decline in Idaho employment estimated at 28,400 jobs (down 4.3%) compares to a revised loss of 19,800 jobs in the prior year-over-year period.  Idaho lost 6,000 jobs during 2008, added an average of 22,600 jobs annually during 2005 to 2007, and gained an average of 7,100 jobs annually during the 2001-2004 period. 

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

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net loss of 598,000 jobs in January 2009, the 13th monthly decline in a row.  In addition, previously estimated job losses during November and December were revised higher by 66,000 jobs.  

The U.S. unemployment rate jumped to 7.6% in January, the highest in 16 years.  The current 7.6% jobless rate compares to the 4.9% rate of one year ago.  Better news saw the average hourly wage rise 0.3% (five cents) to $18.46 hourly, a rise of 3.9% over the past 12 months.

Goods-producing employment continued to decline sharply in January, with a net loss of 319,000 jobs.  Manufacturing employment fell by 207,000 positions, while construction lost another 111,000 jobs. 

Service-providing employment also declined sharply in January by 279,000 positions.  The professional & business services sector lost 121,000 jobs, while the leisure & hospitality sector lost 28,000 jobs.  The retail trade sector lost 45,000 jobs in January.  The education & health services sector added 54,000 positions in January, while the government sector added 6,000 jobs.

The revised net decline of nearly 3.0 million jobs during 2008 was the worst year since 1945.  The sharp decline was also a painful contrast to the average annual gain of 1.9 million net new jobs during 2005 to 2007.  Such losses are likely to build in coming months as the U.S. economy struggles with the worst recession in the post-WWII period.

The February 2009 Zions Bank Small Business Index for Idaho will be released on March 11, 2009.

Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Zions Bank
(801)614-0403

©Copyright 2008 Thredgold Economic Associates