Zions Bank Small Business Index for Idaho
May 2010 Release
June 9, 2010
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank
GLOBAL ECONOMIC PERFORMANCE WILL IMPACT IDAHO'S SMALL BUSINESS SECTOR
HIGHLIGHTS
- The Zions Bank Small Business Index for Idaho registered 97.6 in May 2010, up from a revised 95.9 in April
- Idaho's unemployment rate was estimated at 9.0% in the most recent month, down from the 9.1% rate of the prior month. Idaho employment fell by an estimated 8,600 jobs during the past 12 months
- Current stress in the global economy tied primarily to Europe and China will impact Idaho's small businesses
- The U.S. economy gained an estimated 431,000 net new jobs in May, less than the 520,000 expected. Moreover, 95% of the jobs were temporary Census jobs, with the 41,000 rise in private-sector jobs disappointing. The U.S. unemployment rate declined to 9.7% in May from 9.9% in April, as more than 320,000 people left the labor force
GLOBAL STRESS
Overall global economic growth returned during 2009's final few months, led by an Asian rebound. The rebound followed the first global recession since just after World War II. At the moment, two stories dominate the outlook for the global economy…Europe and China.
The ability of wealthier European nations (such as Germany and France) and the International Monetary Fund to alleviate investor anxiety about massive debt levels of Greece, Portugal, Spain, etc. will be critical to the future of the euro currency, as well as to the European economy. Regaining investor confidence is mandatory.
At the same time, steps by China's political leadership to slow this behemoth's economy down are underway. Whether such steps can be successful, while avoiding a real estate bust, will go a long way to determining Asia's near-term economic future.
The much weaker euro currency versus the U.S. dollar will negatively impact U.S. and Utah exports to Europe, while expected Chinese economic slowing will likely have a lesser U.S. and Utah impact. Global economic performance is a component of the Utah Small Business Index
IN IDAHO
The Idaho unemployment rate-the most heavily weighted component of the Zions Bank Small Business Index for Idaho-was estimated at 9.0% in the most recent month, down from the 9.1% rate of the prior month. The estimated 9.0% rate compares to the 7.4% 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 8.0% in 2009, 4.9% in 2008, 3.0% in both 2006 and 2007, and 3.7% in 2005. By comparison, the Idaho jobless rate averaged 4.9% between 2000 and 2004, and 5.5% during the 1990 to 1999 period.
The latest 12-month decline in Idaho employment estimated at 8,600 jobs (down 1.4%) compares to a revised loss of 11,100 jobs in the prior year-over-year period. Idaho lost 38,800 jobs in 2009, lost 6,100 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 businesses…and therefore, the Index.
The Zions Bank Small Business Index for Idaho was 97.6 during May 2010, up from a revised 95.9 during April. 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 “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 gain of 431,000 jobs in May 2010, roughly 100,000 less than economists' expectations. Moreover, 95% of the gains were temporary Census jobs which will be eliminated later this year. The rise of only 41,000 jobs in the private sector was disappointing.
The U.S. unemployment rate declined from 9.9% in April to 9.7% in May, matching the rate during January to March of this year. The decline resulted primarily from more than 320,000 people-presumably less optimistic about finding a job-leaving the labor force. The current 9.7% jobless rate compares to the 9.4% rate of one year ago and is nearly double the 5.4% rate of May 2008.
Goods-producing employment rose by a miserly 4,000 jobs in May. Manufacturing employment rose by 29,000 positions, while construction lost 35,000 jobs.
Private-sector service-providing employment rose in May by 37,000 positions. The professional & business services sector gained 22,000 jobs, while the education & health services sector added 17,000 positions in May.
The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945. The loss of 4.8 million jobs during 2009 easily surpassed the 2008 total. The net decline of 8.4 million jobs is a painful contrast to the average gain of 1.9 million net new jobs annually during 2005 to 2007.
The economy has now added just under one million net new jobs this year, with roughly half of these jobs tied to the Census. Just as the 431,000 "headline" number overstated the true May employment picture, so will data in June and July likely be impacted the same way.
The June 2010 Zions Bank Small Business Index for Idaho will be released on July 7, 2010.
Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Zions Bank
(801)614-0403
©Copyright 2010 Thredgold Economic Associates
