Zions Bank Small Business Index for Utah
July 2009 Release
August 11, 2009

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

LIKELY END OF U.S. RECESSION WILL BENEFIT UTAH’S SMALL BUSINESSES

HIGHLIGHTS

• The Zions Bank Small Business Index for Utah was 68.1 in July 2009, up from a revised 65.6 in June 2009

• Utah’s unemployment rate was estimated at 5.7% in the latest month, up from 5.4% in the prior month.  Total Utah employment fell an estimated 46,100 jobs during the past 12 months

• The likely conclusion to the longest, deepest, and most painful U.S. recession since the Great Depression will be of great benefit to Utah’s small business sector

• The U.S. economy lost an estimated 247,000 net jobs in July, less than the 325,000 decline expected.  In addition, job losses in May and June were revised to show 43,000 fewer positions eliminated.  The U.S. unemployment rate dipped to 9.4% in July from a 26-year high of 9.5% in June

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OVER & DONE WITH

The “Great Recession” is no more…it’s over…it has very likely run its course.

While this is good news, it does not mean that all of our problems with housing, foreclosures, bankruptcies, etc. are now behind us.  It does not mean that impending challenges with commercial real estate valuations and financing are behind us.  It does not mean that the nation’s unemployment rate and overall job losses will immediately stop rising to even more painful levels…

…but a very likely return to positive U.S. economic growth this quarter…and next quarter…and throughout 2010 is a precondition to dealing with all of the serious issues noted above.

Second quarter 2009 economic data released on July 31 by the U.S. Commerce Department contained many favorable tidbits.  The American economy did contract…again…during 2009’s second quarter. 

However, the modest 1.0% real (after inflation) annual rate of decline was much better than the revised 6.4% real annual rate of decline during 2009’s first quarter, the worst quarter in 27 years (see chart).  The U.S. economy has now recorded four consecutive quarters of economic contraction, the only such occurrence since recordkeeping began in 1947.

In addition, the vast majority of forecasting economists expect that U.S. GDP (the broadest measure of all goods produced and services provided in the American economy) will turn positive this quarter, with growth continuing at a positive if not exactly blockbuster pace.

U.S. economic performance is a component of the Utah Small Business Index.  Stronger (or less weak) U.S. economic growth is a positive contributor to the Index and will lead to stronger regional and state performance during the next 12-18 months.

UTAH EMPLOYMENT

The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 5.7% in the latest month, up from the 5.4% rate of the prior month.  The 5.7% 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 fell by an estimated 46,100 jobs (down 3.7%) over the past 12 months.  This decrease compares to a revised loss of 43,000 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 2,300 jobs (-4.5%) in the latest 12-month period.  The area’s jobless rate was 4.6%, up from the 2.8% rate of one year ago.

Weber County experienced a decrease of 4,600 jobs (-4.8%) from a year ago.  Joblessness registered 6.9%, up from the 3.9% unemployment rate one year ago.

Davis County payrolls declined by 3,300 jobs (-3.1%) in the past year.  The unemployment rate was 5.3% in the latest month, up from 3.4% one year ago.

Salt Lake County employment fell by 23,300 jobs (-3.8%) over the year.  The county’s unemployment rate was 5.8% in the latest month, up from 3.4% last year.

Utah County employment declined by 9,000 jobs (-4.9%) over the last 12 months.  The area’s jobless rate was 5.5%, up from the 3.5% rate of one year ago.

Washington County payrolls declined by 1,900 jobs (-3.6%) in the past year.  The unemployment rate was 7.4% in the latest month, up from 4.5% one year ago.

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net loss of 247,000 jobs in July 2009, the 19th monthly decline in a row, but less than the estimated loss near 325,000 jobs.  Previously reported job losses during May and June were revised to show the net loss of 43,000 fewer jobs.  The U.S. economy has now lost 6.7 million jobs since the “Great Recession” began in December 2007, with more than half of the losses during 2009’s first seven months.

The U.S. unemployment rate declined to 9.4% in July, versus 9.5% in June, a 26-year high.  The current 9.4% jobless rate compares to the 5.8% rate of one year ago.  The average hourly wage rose 0.2% (three cents) to $18.56 hourly, a rise of 2.5% during the past 12 months.

Goods-producing employment continued to decline in July, with a net loss of 128,000 jobs.  Manufacturing employment fell by 52,000 positions, while construction lost another 76,000 jobs. 

Service-providing employment also declined in July by 119,000 positions.  The professional & business services sector lost 38,000 jobs, while the retail trade sector lost 44,000 jobs in July.  The government sector added 7,000 jobs, while the education & health services sector added 17,000 positions in July.

The net decline of nearly 3.1 million jobs during 2008 was the worst year since 1945.  The loss of nearly 3.6 million jobs during 2009’s first seven months has already surpassed the 2008 total.  The net decline of 6.7 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 lessen in coming months as the U.S. economy likely emerges from the worst recession in the post-Depression period.  Most forecasters see the recession now concluding, with a consensus view that slightly positive GDP will be achieved in the current quarter.

 

The August 2009 Zions Bank Small Business Index for Utah will be released on September 8, 2009.

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

©Copyright 2008 Thredgold Economic Associates