Zions Bank Small Business Index for Idaho
October 2009 Release
November 11, 2009
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank
IDAHO'S SMALL BUSINESSES BENEFITING FROM A RETURN OF U.S. ECONOMIC GROWTH
HIGHLIGHTS
- The Zions Bank Small Business Index for Idaho registered 78.6 in October 2009, up from a revised 73.6 in September 2009
- Idaho's unemployment rate was estimated at 8.9% in the most recent month, up from the 8.8% rate of the prior month. Idaho employment declined by an estimated 32,700 jobs during the past 12 months
- A return of U.S. economic growth is a precondition for the Idaho economy—and the small business sector—to return to growth in 2010. The U.S. economy is finally growing again
- The U.S. economy lost an estimated 190,000 net jobs in October, slightly more than the 175,000 decline expected. However, job losses in August and September were revised to show 91,000 fewer positions eliminated. The U.S. unemployment rate rose to 10.2%
in October, a 26-year high, from 9.8% in September
U.S. ECONOMIC GROWTH RETURNS
The American economy returned to growth during 2009's third quarter, a welcome departure from an extended period of painful economic contraction. While the return to growth is obviously a positive development, it does not suggest that problems with housing,
commercial real estate, rising unemployment and continuing job losses are behind us.
The estimated 3.5% real annual growth pace during July to September compared to a 6.4% real annual rate of decline during 2009's first quarter and a 0.7% real annual rate of decline during the second quarter. The six-month swing from the first quarter decline
was the largest six-month turnaround since 1980 (CNNMoney.com). The U.S. economy shrank 3.8% after inflation in the 12-months ended in June, the most painful decline since the Great Depression.
Overall consumer spending rose at a 3.4% annual rate, the strongest gain in nearly three years. Much of the growth was attributed to U.S. Government stimulus, including the Cash for Clunkers program and the $8,000 first-time homebuyer's credit. Another
harbinger of future U.S. economic growth was the ongoing decline in business inventories. GDP is a measure of what is produced, not what is sold. Store shelves and warehouses are now so empty as to require additional manufacturing output in coming quarters.
The announced return to U.S. economic growth does not mean the recession is gofficiallyh over. The scorekeeper for the economy, the National Bureau of Economic Research (NBER), will make that call sometime in 2010, and will likely suggest the recession
officially ended during the just-concluded summer months. The NBER announced on December 1, 2008 that the current recession officially started in December 2007.
The U.S. economy is not off to the races. The economy is expected to maintain a modest growth pace during the fourth quarter, as well as during 2010 and 2011. A key to sustainable growth will be how the private sector rebounds—consumers and businesses—with
the government then (hopefully) reining in its enormous expansionist ambitions.
Idaho's current economic recession cannot conclude without a prior return of U.S. economic growth, as well as a return of global growth. Both preconditions are now being met. U.S. economic performance is a component of the Idaho Small Business Index, with
stronger performance a positive contributor to the Index.
IDAHO EMPLOYMENT
The Idaho unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Idaho—was estimated at 8.9% in the most recent month, up slightly from the 8.8% rate of the prior month. The estimated 8.9% rate compares to the 5.4%
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 4.9% in 2008, 3.0% in both 2006 and 2007, 3.7% in 2005, and 4.9% during the period 2000-2004. By comparison, the Idaho jobless rate averaged 5.5% during the 1990-99 period.
The latest 12-month decline in Idaho employment estimated at 32,700 jobs (down 5.0%) compares to a loss of 36,800 jobs in the prior year-over-year period. Idaho lost 6,500 jobs during 2008, added an average of 22,300 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 businessescand therefore, the Index.
The Zions Bank Small Business Index for Idaho was 78.6 during October 2009, up from a revised 73.6 during September 2009.
The Index measures business conditions from the viewpoint of the Idaho small business owner or manager.
A higher Index number is associated with more favorable business gconditionsh 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 loss of 190,000 jobs in October 2009, the 22nd monthly decline in a row, and slightly more than the estimated loss near 175,000 jobs. However, previously reported job losses
during August and September were revised to show the net loss of 91,000 fewer jobs. The
U.S. economy has now lost 7.3 million jobs since the gGreat Recessionh began in December 2007.
The U.S. unemployment rate rose to 10.2% in October, a 26-year high, versus 9.8% in September. The current 10.2% jobless rate compares to the 6.6% rate of one year ago and is more than double the 4.8% rate of October 2007. The average hourly wage rose
0.3% (five cents) to $18.72 hourly, a rise of 2.4% during the past 12 months.
Goods-producing employment continued to decline in October, with a net loss of 129,000 jobs. Manufacturing employment fell by 61,000 positions, while construction lost another 62,000 jobs.
Service-providing employment also declined in October by 61,000 positions. The professional & business services sector gained 18,000 jobs, while the retail trade sector lost 40,000 jobs in October. Government employment was unchanged, while the education
& health services sector added 45,000 positions in October.
The net decline of 3.1 million jobs during 2008 was the worst year since 1945. The loss of 4.2 million jobs during 2009's first 10 months has already surpassed the 2008 total. The net decline of 7.3 million jobs is a painful contrast to the average gain
of 1.9 million net new jobs annually during 2005 to 2007. Job losses are expected to lessen in coming months as the U.S. economy continues to emerge from the worst recession in the post-Depression period.
The November 2009 Zions Bank Small Business Index for Idaho will be released on December 9, 2009.
Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Zions Bank
(801)614-0403
©Copyright 2009 Thredgold Economic Associates
