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

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

IDAHO’S SMALL BUSINESS SECTOR IMPACTED BY DEEPENING U.S. RECESSION

HIGHLIGHTS

• The Zions Bank Small Business Index for Idaho registered 67.2 in February 2009, up from a revised 64.2 in January 2009

• Idaho’s unemployment rate was estimated at 6.8% in the most recent month, up from the revised 6.6% rate of the prior month.  Idaho employment declined by an estimated 22,000 jobs during the past 12 months

• The current painful U.S. recession, already 15 months in duration, is likely to continue throughout most of 2009, negatively impacting Idaho’s small business sector 

• The U.S. economy lost an estimated 651,000 net jobs in February, matching economists’ expectations.  In addition, job losses in December and January were revised higher by a combined 161,000 jobs.  The U.S. unemployment rate rose to a 25-year high of 8.1%

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A LONG AND DEEP U.S. RECESSION

The U.S. Commerce Department reported in late January 2009 that the American economy contracted at a 3.8% real (after inflation) annual rate during 2008’s final quarter.  The Commerce Department’s first official revision to the data, based on more complete economic information, (with one more revision coming in late March), now suggests the U.S. economy contracted at a 6.2% real annual rate during the October to December 2008 quarter. 

The revised 6.2% real annual rate of decline in the economy was the worst quarterly performance since 1982.  Most estimates for the current quarter are around a 5.5% to 7.0% real annual rate of contraction, with a decline closer to 1.5%-3.5% during the April to June quarter.

One key factor in the downward revision was a larger-than-previously-reported drop in consumer spending.  Consumer spending, which represents roughly 70% of total U.S. economic activity, actually contracted at a 4.3% annual rate last quarter, the most since 1980. 

The 4.3% rate of contraction, when combined with the 3.8% rate of decline during the prior quarter, was the first time consumer spending has weakened by at least a 3.0% annual rate during consecutive quarters since recordkeeping began in 1947…a mere 61 years (bloomberg.com). 

The consensus of forecasting economists has suggested in recent weeks 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.

Much of the developed world is also struggling with recession or subdued growth.  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 6.8% in the most recent month, up from the revised 6.6% rate of the prior month.  The estimated 6.8% rate is a substantial increase from the 3.9% 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 22,000 jobs compares to a loss of 28,400 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 651,000 jobs in February 2009, the 14th monthly decline in a row.  In addition, previously estimated job losses during December and January were revised higher by 161,000 jobs.  The U.S. economy has now lost nearly 4.4 million jobs since the recession began in December 2007, with more than half of the losses during the past four months.  

The U.S. unemployment rate jumped to 8.1% in February, the highest in 25 years, versus 7.6% in January.  The current 8.1% jobless rate compares to the 4.8% rate of one year ago.  The average hourly wage rose 0.2% (three cents) to $18.47 hourly, a rise of 3.6% over the past 12 months.

Goods-producing employment continued to decline sharply in February, with a net loss of 276,000 jobs.  Manufacturing employment fell by 168,000 positions, while construction lost another 104,000 jobs. 

Service-providing employment also declined sharply in February by 375,000 positions.  The professional & business services sector lost 180,000 jobs, while the leisure & hospitality sector lost 33,000 jobs.  The retail trade sector lost 40,000 jobs in February.  The education & health services sector added 26,000 positions in February, while the government sector added 9,000 jobs.

The revised net decline of nearly 3.1 million jobs during 2008 was the worst year since 1945.  The sharp decline was also a painful contrast to the average gain of 1.9 million net new jobs annually during 2005 to 2007.  Such job losses are likely to build in coming months as the U.S. economy struggles with the worst recession in the post-WWII period.

The March 2009 Zions Bank Small Business Index for Idaho will be released on April 8, 2009.

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

©Copyright 2008 Thredgold Economic Associates