Zions Bank Small Business Index for Utah
May 2009 Release
June 9, 2009

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

GLOBAL ECONOMIC IMPROVEMENT WILL BOOST UTAH’S SMALL BUSINESSES IN THE COMING YEAR

HIGHLIGHTS

• The Zions Bank Small Business Index for Utah was 64.9 in May 2009, down from a revised 66.6 in April 2009

• Utah’s unemployment rate was estimated at 5.2% in the latest month, unchanged from the prior month’s rate.  Total Utah employment is down an estimated 39,800 jobs during the past 12 months

• Cache County employment decreased by 1,900 jobs (-3.7%) in the latest 12-month period.  The area’s jobless rate was 3.8%, up from the 2.3% rate of one year ago

• Rising expectations that the global economy will rebound during the next 6-12 months are a favorable development for thousands of Utah’s small businesses

• The U.S. economy lost an estimated 345,000 net jobs in May, roughly half the average loss of the prior six months and the best performance since September 2008.  Moreover, reported job losses in March and April were revised to show 82,000 fewer positions eliminated.  The U.S. unemployment rate rose to a 26-year high of 9.4%

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GLOBAL IMPROVEMENT

Economic and financial challenges abound for both developed and emerging nations across the global community.  However, significant increases in stock markets in recent months around the globe suggest the worst is behind us.  Renewed, but modest, U.S. economic growth expected before the end of 2009, combined with reasonably solid growth in China and India, suggest the global recession could conclude by mid-2010.

Japan is in serious recession, with the economy contracting at an alarming 15.2% annual rate during 2009’s first quarter.  A plunge in exports to the world is the culprit.  However, more recent signs suggest some level of economic stability may be at hand. 

China is dealing with major challenges tied to economic growth slowing from 120 miles per hour to near 75 mph.  China is making solid efforts to boost domestic demand within its economy, in part fueled by its own stimulus program.  India’s economic growth pace has slowed from near 9.0% annually to a 5.8% annual pace during 2009’s first quarter.  Stronger growth is likely over the next 12 months.

Europe and the U.K. are currently buried in serious economic downturns, with the likelihood that both could be laggards in 2010 as the global economy picks up speed.  Russian politicos are keeping their fingers crossed, hoping oil prices continue to rise. 

High levels of government inefficiency and rampant corruption are part and parcel of doing business in many South American nations.  Such a reality is more painful when commodity prices are lower than before.  Higher commodity prices now unfolding would be very beneficial to South America.

Mexico is getting hit from all sides, leading its economy to plunge at a 21% annual rate in the first quarter.  This nation’s critical tourism sector has been hammered.  Canada remains in recession as its top customer…the U.S.…buys less.  Eastern provinces deal with a weak auto sector, while the West deals with lesser commodity values.  Improving U.S. economic performance would lead to similar improvement in Canada.

Performance of both the U.S. and global economies are components of the Small Business Index.  A return to positive, if modest, U.S. economic growth would be a positive contributor to the Index.  A return to positive global economic growth would also lead the Index higher. 

UTAH EMPLOYMENT

The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 5.2% in the latest month, unchanged from the 5.2% rate of the prior month.  The 5.2% rate compares to a 3.3% rate during the same month one year ago.  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 3.4% during 2008, 2.7% in 2007, 3.0% in 2006, 4.1% 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 declined by an estimated 39,800 jobs (down 3.2%) over the past 12 months.  This decrease compares to a revised loss of 34,200 jobs in the prior year-over-year period.  Utah added 1,900 jobs in 2008, 49,600 jobs in 2007, 55,700 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, job losses, leading to lesser income creation and softer retail spending, have a negative impact upon Utah’s small businesses…and therefore, the Index. 

LOCAL PERFORMANCE

Cache County employment decreased by 1,900 jobs (-3.7%) in the latest 12-month period.  The area’s jobless rate was 3.8%, up from the 2.3% rate of one year ago.

Weber County experienced a decrease of 3,100 jobs (-3.2%) from a year ago.  Joblessness registered 5.8%, up from the 3.3% unemployment rate one year ago.

Davis County payrolls declined by 2,200 jobs (-2.1%) in the past year.  The unemployment rate was 4.4% in the latest month, up from 2.8% one year ago.

Salt Lake County employment fell by 21,200 jobs (-3.5%) over the year.  The county’s unemployment rate was 4.9% in the latest month, up from 2.8% last year.

Utah County employment declined by 7,700 jobs (-4.1%) over the last 12 months.  The area’s jobless rate was 4.6%, up from the 2.8% rate of one year ago.

Washington County payrolls declined by 1,700 jobs (-3.2%) in the past year.  The unemployment rate was 6.6% in the latest month, up from 3.6% one year ago.

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net loss of 345,000 jobs in May 2009, the 17th monthly decline in a row, but sharply below the estimated loss near 520,000 jobs.  Moreover, previously reported job losses during March and April were revised to show the net loss of 82,000 fewer jobs.  The U.S. economy has now lost 6.0 million jobs since the recession began in December 2007, with nearly half of the losses during the past five months alone.

The U.S. unemployment rate jumped to 9.4% in May, the highest in 26 years, versus 8.9% in April.  The current 9.4% jobless rate compares to the 5.5% rate of one year ago.  The average hourly wage rose two cents to $18.54 hourly, a rise of 3.1% over the past 12 months.

Goods-producing employment continued to decline sharply in May, with a net loss of 225,000 jobs.  Manufacturing employment fell by 156,000 positions, while construction lost another 59,000 jobs. 

Service-providing employment also declined in May by 120,000 positions.  The professional & business services sector lost 51,000 jobs, while the retail trade sector lost 18,000 jobs in May.  The education & health services sector added 44,000 positions in May, while the government sector lost 7,000 jobs.

The net decline of nearly 3.1 million jobs during 2008 was the worst year since 1945, with an additional 2.9 million jobs lost in 2009’s first five months.  The net decline of 6.0 million jobs is 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 continue in coming months as the U.S. economy struggles with the worst recession in the post-WWII period.  Note, however, that most forecasters see the recession concluding before the end of the year.

The June 2009 Zions Bank Small Business Index for Utah will be released on July 7, 2009.

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

©Copyright 2008 Thredgold Economic Associates