Zions Bank Small Business Index for Utah
May 2010 Release
June 8, 2010
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Zions Bank
GLOBAL ECONOMIC PERFORMANCE WILL IMPACT UTAH'S SMALL BUSINESS SECTOR
HIGHLIGHTS
- The Zions Bank Small Business Index for Utah was 103.5 in May 2010, up from a revised 98.5 in April 2010
- Utah's unemployment rate was estimated at 7.3% in the latest month, up from the 7.2% rate of the prior month. Total Utah employment fell an estimated 7,100 jobs during the past 12 months
- Current stress in the global economy tied primarily to Europe and China will impact Utah's small businesses
- The U.S. economy gained an estimated 431,000 net new jobs in May, less than the 520,000 expected. Moreover, 95% of the jobs were temporary Census jobs, with the 41,000 rise in private-sector jobs disappointing. The U.S. unemployment rate declined to 9.7% in May from 9.9% in April, as more than 320,000 people left the labor force
GLOBAL STRESS
Overall global economic growth returned during 2009's final few months, led by an Asian rebound. The rebound followed the first global recession since just after World War II. At the moment, two stories dominate the outlook for the global economy…Europe and China.
The ability of wealthier European nations (such as Germany and France) and the International Monetary Fund to alleviate investor anxiety about massive debt levels of Greece, Portugal, Spain, etc. will be critical to the future of the euro currency, as well as to the European economy. Regaining investor confidence is mandatory.
At the same time, steps by China's political leadership to slow this behemoth's economy down are underway. Whether such steps can be successful, while avoiding a real estate bust, will go a long way to determining Asia's near-term economic future.
The much weaker euro currency versus the U.S. dollar will negatively impact U.S. and Utah exports to Europe, while expected Chinese economic slowing will likely have a lesser U.S. and Utah impact. Global economic performance is a component of the Utah Small Business Index.
UTAH EMPLOYMENT
The Utah unemployment rate-the most heavily weighted component of the Zions Bank Small Business Index for Utah-was estimated at 7.3% in the latest month, up from 7.2% during the prior month. The 7.3% rate compares to a 6.7% 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 6.6% during 2009, 3.7% in 2008, 2.8% in 2007, and 3.0% in 2006. These rates compare to an average Utah unemployment rate of 5.0% during the 2001 to 2005 period, and an average 3.5% rate between 1995 and 2000.
Total Utah employment fell by an estimated 7,100 jobs (down 0.6%) over the past 12 months. This decrease compares to a revised loss of 21,500 jobs in the prior year-over-year period. Utah lost 60,700 jobs in 2009, lost 800 jobs in 2008, and added 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 103.5 during May 2010, up from 98.5 during April 2010. 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 600 jobs (-1.3%) in the latest 12-month period. The area's jobless rate was 5.0%, up from the 4.9% rate of one year ago.
Weber County experienced a decrease of 2,900 jobs (-3.1%) from a year ago. Joblessness registered 7.9%, up from the 7.7% unemployment rate one year ago.
Davis County payrolls increased by 300 jobs (0.3%) in the past year. The unemployment rate was 6.5% in the latest month, up from 5.8% one year ago.
Salt Lake County employment fell by 5,000 jobs (-0.9%) over the year. The county's unemployment rate was 6.8% in the latest month, up from 6.2% last year.
Utah County employment declined by 2,800 jobs (-1.6%) over the last 12 months. The area's jobless rate was 6.9%, up from the 6.2% rate of one year ago.
Washington County payrolls declined by 1,300 jobs (-2.7%) in the past year. The unemployment rate was 9.4% in the latest month, up from 8.9% one year ago.
NATIONAL EMPLOYMENT
The U.S. Department of Labor reported a net gain of 431,000 jobs in May 2010, roughly 100,000 less than economists' expectations. Moreover, 95% of the gains were temporary Census jobs which will be eliminated later this year. The rise of only 41,000 jobs in the private sector was disappointing.
The U.S. unemployment rate declined from 9.9% in April to 9.7% in May, matching the rate during January to March of this year. The decline resulted primarily from more than 320,000 people-presumably less optimistic about finding a job-leaving the labor force. The current 9.7% jobless rate compares to the 9.4% rate of one year ago and is nearly double the 5.4% rate of May 2008.
Goods-producing employment rose by a miserly 4,000 jobs in May. Manufacturing employment rose by 29,000 positions, while construction lost 35,000 jobs.
Private-sector service-providing employment rose in May by 37,000 positions. The professional & business services sector gained 22,000 jobs, while the education & health services sector added 17,000 positions in May.
The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945. The loss of 4.8 million jobs during 2009 easily surpassed the 2008 total. The net decline of 8.4 million jobs is a painful contrast to the average gain of 1.9 million net new jobs annually during 2005 to 2007.
The economy has now added just under one million net new jobs this year, with roughly half of these jobs tied to the Census. Just as the 431,000 "headline" number overstated the true May employment picture, so will data in June and July likely be impacted the same way.
The June 2010 Zions Bank Small Business Index for Utah will be released on July 6, 2010.
Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Zions Bank
(801)614-0403
©Copyright 2010 Thredgold Economic Associates
