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

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

HIGHLIGHTS

• The Zions Bank Small Business Index for Utah was 99.5 in February 2008, down from a revised 100.9 in January 2008

• Utah’s unemployment rate was estimated at 3.3% in the latest month, up from the 3.2% rate of the prior month.  Total Utah employment is up an estimated 33,800 jobs during the past 12 months

• Less robust growth in Utah 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 Utah 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.

UTAH EMPLOYMENT
The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 3.3% in the latest month, up from the 3.2% rate of the prior month.  The 3.3% rate compares to a 2.6% rate during the same month one year ago.  A jobless rate of 2.3% in February 2007 ranked with the lowest ever recorded in the state and was the lowest in the continental U.S.  A higher Utah unemployment rate is a positive contributor to the Index as it implies increased access to Utah labor.

Utah’s unemployment rate averaged 2.6% in 2007, 2.9% in 2006, 4.3% in 2005, and 4.9% during the 2000-2004 period.  These rates compare to an average Utah unemployment rate of 3.5% between 1995 and 1999.

Total Utah employment rose by an estimated 33,800 jobs (up 2.8%) over the past 12 months.  This rise compares to a gain of 44,800 jobs in the prior year-over-year period.  The 2.8% rise is one of the strongest job growth rates in the nation.

Utah added 53,200 jobs in 2007, 55,200 jobs in 2006, 43,700 jobs in 2005, and 30,200 jobs in 2004.  These totals compare to gains averaging 38,000 new jobs annually during the 1994-2000 period and a net loss of 1,300 jobs in 2001 through 2003.  More recently, weaker job gains, leading to lesser income creation and softer retail spending, have a negative impact upon Utah’s small businesses…and therefore, the Index. 

The Zions Bank Small Business Index for Utah was 99.5 during February 2008, down from a revised 100.9 during January 2008.  The Index measures business conditions from the viewpoint of the Utah small business owner or manager.

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

LOCAL PERFORMANCE

Cache County employment grew by 1,300 jobs (2.7%) in the latest 12-month period.  The area’s jobless rate was 2.1%, up from the 1.6% rate of one year ago.

Weber County experienced job growth of 2,400 jobs (2.5%) from a year ago.  Joblessness registered 3.6%, up from the 2.7% unemployment rate one year ago.

Davis County payrolls expanded by 1,500 jobs (1.5%) in the past year.  The unemployment rate was 2.8% in the latest month, up from 2.2% one year ago.

Salt Lake County employment rose by 16,500 jobs (2.8%) over the year.  The county’s unemployment rate was 2.8% in the latest month, up from 2.2% last year.

Utah County employment grew by 5,900 jobs (3.2%) over the last 12 months.  The area’s jobless rate was 2.6%, up from the 2.0% rate of one year ago.

Washington County payrolls expanded by 1,500 jobs (3.0%) in the past year.  The unemployment rate was 3.2% in the latest month, up from 2.4% one year ago.

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 Utah will be released on April 8, 2008.

©Copyright 2007 Thredgold Economic Associates