Zions Bank: Small Business Index: MOUNTAIN STATES FACE NEAR-RECORD JOBLESS RATES EVEN AS U.S. RECESSION ENDS

Zions Bank Small Business Index for Utah
August 2009 Release
September 8, 2009

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

MOUNTAIN STATES FACE NEAR-RECORD JOBLESS RATES EVEN AS U.S. RECESSION ENDS

HIGHLIGHTS

The Zions Bank Small Business Index for Utah was 69.9 in August 2009, up from a revised 69.0 in July 2009

Utah’s unemployment rate was estimated at 6.0% in the latest month, up from 5.7% in the prior month. Total Utah employment fell an estimated 52,600 jobs during the past 12 months

Even as the U.S. recession appears to be ending, Rocky Mountain states, as well as states across the nation, are facing record or near-record unemployment rates

The U.S. economy lost an estimated 216,000 net jobs in August, less than the 230,000 decline expected. However, job losses in June and July were revised to show 49,000 more positions eliminated. The U.S. unemployment rate jumped to 9.7% in August, a 26-year high, from 9.4% in July

REGIONAL UNEMPLOYMENT HIGHER

Severe U.S. economic weakness during 2008 and 2009 has pushed unemployment rates of states within the Rocky Mountain region, as well as across the nation, sharply higher. Such jobless rates could move slightly higher in coming months.

The two most recent recessions of the early 1990s and during much of 2001 each ran eight months. The current U.S. recession officially began in December 2007, and is now 21 months in duration, the longest and deepest since the Great Depression. Fortunately, most forecasters see a return of positive U.S. economic growth during 2009’s second half.

The current recession, resulting initially from severe housing sector weakness and a freeze-up of domestic and global credit markets, has ravaged employment across the nation. Total U.S. job losses since the recession began now total 6.93 million. All states within the Rocky Mountain region have experienced job losses, as well as much higher levels of unemployed workers.

The Utah unemployment rate and year-over-year gains or losses in employment are key components of the Utah Small Business Index, as is the performance of the regional and U.S. economies. A higher unemployment rate is a positive contributor to the Index as it suggests greater labor availability for local employers. However, a rising jobless rate also suggests weaker job gains (or greater losses), lesser income growth, and slower retail spending, all factors which lead the Index lower.

Regional unemployment rates

UTAH EMPLOYMENT

The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 6.0% in the latest month, up from the 5.7% rate of the prior month. The 6.0% rate compares to a 3.4% 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 52,600 jobs (down 4.2%) over the past 12 months. This decrease compares to a revised loss of 47,900 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.

The Zions Bank Small Business Index for Utah was 69.9 during August 2009, up from a revised 69.0 during July 2009. The Index measures business conditions from the viewpoint of the Utah small business owner or manager.

A higher Index number is associated with more 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 decreased by 2,600 jobs (-5.3%) in the latest 12-month period. The area’s jobless rate was 4.4%, up from the 2.6% rate of one year ago.

Weber County experienced a decrease of 4,900 jobs (-5.1%) from a year ago. Joblessness registered 7.2%, up from the 3.8% unemployment rate one year ago.

Davis County payrolls declined by 4,100 jobs (-3.9%) in the past year. The unemployment rate was 5.4% in the latest month, up from 3.2% one year ago.

Salt Lake County employment fell by 27,100 jobs (-4.5%) over the year. The county’s unemployment rate was 5.8% in the latest month, up from 3.2% last year.

Utah County employment declined by 8,900 jobs (-5.0%) over the last 12 months. The area’s jobless rate was 5.3%, up from the 3.2% rate of one year ago.

Washington County payrolls declined by 2,200 jobs (-4.2%) in the past year. The unemployment rate was 7.6% in the latest month, up from 4.5% one year ago.

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net loss of 216,000 jobs in August 2009, the 20th monthly decline in a row, but slightly less than the estimated loss near 230,000 jobs. Previously reported job losses during June and July were revised to show the net loss of 49,000 more jobs. The U.S. economy has now lost 6.93 million jobs since the “Great Recession” began in December 2007, with more than half of the losses during 2009’s first eight months.

The U.S. unemployment rate jumped to 9.7% in August, a 26-year high, versus 9.4% in July. The current 9.7% jobless rate compares to the 6.2% rate of one year ago. The average hourly wage rose 0.3% (six cents) to $18.65 hourly, a rise of 2.6% during the past 12 months.

Goods-producing employment continued to decline in August, with a net loss of 136,000 jobs. Manufacturing employment fell by 63,000 positions, while construction lost another 65,000 jobs.

Service-providing employment also declined in August by 80,000 positions. The professional & business services sector lost 22,000 jobs, while the retail trade sector lost 10,000 jobs in August. The government sector lost 18,000 jobs, while the education & health services sector added 52,000 positions in August.

The net decline of 3.08 million jobs during 2008 was the worst year since 1945. The loss of 3.85 million jobs during 2009’s first eight months has already surpassed the 2008 total. The net decline of 6.93 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 likely continues to emerge from the worst recession in the post-Depression period. Most forecasters see the recession now concluding, with a consensus view that positive GDP will be achieved in the current quarter and in subsequent quarters.

The September 2009 Zions Bank Small Business Index for Utah will be released on October 6, 2009.

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