Zions Bank Small Business Index for Utah
October 2009 Release
November 10, 2009
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank
UTAH'S SMALL BUSINESSES BENEFITING FROM A RETURN OF U.S. ECONOMIC GROWTH
HIGHLIGHTS
- The Zions Bank Small Business Index for Utah was 75.7 in October 2009, up significantly from a revised 70.4 in September 2009
- Utahfs unemployment rate was estimated at 6.2% in the latest month, up from the 6.0% rate of the prior month. Total Utah employment fell an estimated 51,500 jobs during the past 12 months
- A return of U.S. economic growth is a precondition for the Utah economy—and the small business sector—to return to growth in 2010. The U.S. economy is finally growing again
- The U.S. economy lost an estimated 190,000 net jobs in October, slightly more than the 175,000 decline expected. However, job losses in August and September were revised to show 91,000 fewer positions eliminated. The U.S. unemployment rate rose to 10.2%
in October, a 26-year high, from 9.8% in September
U.S. ECONOMIC GROWTH RETURNS
The American economy returned to growth during 2009fs third quarter, a welcome departure from an extended period of painful economic contraction. While the return to growth is obviously a positive development, it does not suggest that problems with housing,
commercial real estate, rising unemployment and continuing job losses are behind us.
The estimated 3.5% real annual growth pace during July to September compared to a 6.4% real annual rate of decline during 2009fs first quarter and a 0.7% real annual rate of decline during the second quarter. The six-month swing from the first quarter decline
was the largest six-month turnaround since 1980 (CNNMoney.com). The U.S. economy shrank 3.8% after inflation in the 12-months ended in June, the most painful decline since the Great Depression.
Overall consumer spending rose at a 3.4% annual rate, the strongest gain in nearly three years. Much of the growth was attributed to U.S. Government stimulus, including the Cash for Clunkers program and the $8,000 first-time homebuyerfs credit. Another
harbinger of future U.S. economic growth was the ongoing decline in business inventories. GDP is a measure of what is produced, not what is sold. Store shelves and warehouses are now so empty as to require additional manufacturing output in coming quarters.
The announced return to U.S. economic growth does not mean the recession is gofficiallyh over. The scorekeeper for the economy, the National Bureau of Economic Research (NBER), will make that call sometime in 2010, and will likely suggest the recession
officially ended during the just-concluded summer months. The NBER announced on December 1, 2008 that the current recession officially started in December 2007.
The U.S. economy is not off to the races. The economy is expected to maintain a modest growth pace during the fourth quarter, as well as during 2010 and 2011. A key to sustainable growth will be how the private sector rebounds—consumers and businesses—with
the government then (hopefully) reining in its enormous expansionist ambitions.
Utahfs current economic recession cannot conclude without a prior return of U.S. economic growth, as well as a return of global growth. Both preconditions are now being met. U.S. economic performance is a component of the Utah Small Business Index, with
stronger performance a positive contributor to 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 6.2% in the latest month, up from 6.0% during the prior month. The 6.2% 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.
Utahfs 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 51,500 jobs (down 4.1%) over the past 12 months. This decrease compares to a revised loss of 56,700 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 Utahfs small businessescand therefore, the Index.
The Zions Bank Small Business Index for Utah was 75.7 during October 2009, up from a revised 70.4 during September 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 2,500 jobs (-4.9%) in the latest 12-month period. The areafs jobless rate was 4.3%, up from the 2.7% rate of one year ago.
Weber County experienced a decrease of 5,500 jobs (-5.7%) from a year ago. Joblessness registered 7.1%, up from the 4.1% unemployment rate one year ago.
Davis County payrolls declined by 3,300 jobs (-3.2%) in the past year. The unemployment rate was 5.8% in the latest month, up from 3.2% one year ago.
Salt Lake County employment fell by 25,800 jobs (-4.3%) over the year. The countyfs unemployment rate was 6.2% in the latest month, up from 3.3% last year.
Utah County employment declined by 8,200 jobs (-4.4%) over the last 12 months. The area's jobless rate was 5.8%, up from the 3.2% rate of one year ago.
Washington County payrolls declined by 2,600 jobs (-5.0%) in the past year. The unemployment rate was 8.1% in the latest month, up from 5.0% one year ago.
NATIONAL EMPLOYMENT
The U.S. Department of Labor reported a net loss of 190,000 jobs in October 2009, the 22nd monthly decline in a row, and slightly more than the estimated loss near 175,000 jobs. However, previously reported job losses
during August and September were revised to show the net loss of 91,000 fewer jobs. The
U.S. economy has now lost 7.3 million jobs since the gGreat Recessionh began in December 2007.
The U.S. unemployment rate rose to 10.2% in October, a 26-year high, versus 9.8% in September. The current 10.2% jobless rate compares to the 6.6% rate of one year ago and is more than double the 4.8% rate of October 2007. The average hourly wage rose
0.3% (five cents) to $18.72 hourly, a rise of 2.4% during the past 12 months.
Goods-producing employment continued to decline in October, with a net loss of 129,000 jobs. Manufacturing employment fell by 61,000 positions, while construction lost another 62,000 jobs.
Service-providing employment also declined in October by 61,000 positions. The professional & business services sector gained 18,000 jobs, while the retail trade sector lost 40,000 jobs in October. Government employment was unchanged, while the education
& health services sector added 45,000 positions in October.
The net decline of 3.1 million jobs during 2008 was the worst year since 1945. The loss of 4.2 million jobs during 2009's first 10 months has already surpassed the 2008 total. The net decline of 7.3 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 continues to emerge from the worst recession in the post-Depression period.
The November 2009 Zions Bank Small Business Index for Utah will be released on December 8, 2009.
Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Zions Bank
(801)614-0403
©Copyright 2009 Thredgold Economic Associates
