Zions Bank: Small Business Index: SOLID U.S. JOB GAINS A POSITIVE SIGN FOR UTAH'S SMALL BUSINESS SECTOR

Zions Bank Small Business Index for Utah
December Release
January 10, 2012

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

POSSIBLE THREATS TO UTAH SMALL BUSINESS PROSPERITY ARE PRIMARILY EXTERNAL

HIGHLIGHTS

The Zions Bank Small Business Index for Utah was 111.5 in December 2011, down from a revised 115.9 in November 2011
Utah’s unemployment rate was estimated at 6.4% in the latest month, down from the 7.0% rate of the prior month. Total Utah employment grew by an estimated 30,300 jobs during the past 12 months
Utah’s small business sector has rebounded reasonably well over the past 18 months. Threats to rising prosperity are now primarily tied to issues across Europe and the Middle East, as well as one in the nation’s capital
The U.S. economy saw a net rise of 200,000 jobs during December, exceeding consensus expectations of a 155,000 rise. Estimated job gains of the two prior months were revised lower by 8,000 jobs. The U.S. unemployment rate declined from a revised 8.7% in November to 8.5% in December, the lowest level in nearly three years

SMALL BUSINESS THREATS

Almost all states have added jobs during the most recent 12-month period. However, various external threats, or headwinds, could cloud the outlook for state and local performance during 2012.

The first of these threats involves continuing deterioration of the European economy, with major issues still to be resolved in regard to the ability of numerous euro-currency nations to finance massive budget deficits and associated national (sovereign) debt levels. Greece, Portugal, and Ireland have received substantial bailouts, while Italy and Spain are on the brink of requiring similar financial support. The most serious threat to the global and American economies would be the failure to achieve a successful resolution of these funding problems.

Another major threat to small (and large) business success within the U.S. is the eventual resolution of tensions between Iran and the rest of the world. Saber-rattling by the Iranian government about its nuclear weapon ambitions and its threat to close the Strait of Hormuz, thereby disrupting oil flows, threatens Middle Eastern peace and oil prices around the globe.

The U.S.-based threat to American small business prosperity involves the need for the Administration, the Democratic Senate, and the Republican House of Representatives to reach agreement next month on an extension of the payroll tax cut through the end of the year. Politicians at year-end 2011 extended the tax cut for only two months.

Political stalemate in Washington DC damaged this nation during the summer months. Eliminating uncertainty about this tax issue, as well as a decision whether to extend unemployment benefits or not, would boost small business confidence.

The performance of the global economy is a component of the Small Business Index for Utah, as is the performance of the U.S. economy. Stronger levels of performance boost the Index.

The Zions Bank Small Business Index for Utah was 111.5 in December 2011, down from a revised 115.9 in November 2011. The Index measures business conditions from the viewpoint of the Utah small business owner or manager.

A lower Index number is associated with less 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.

UTAH EMPLOYMENT

The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 6.4% in the latest month, down from the prior month’s 7.0% rate. The 6.4% rate compares to a 7.5% rate during the same month one year ago. A lower Utah unemployment rate is a negative contributor to the Index as it implies decreased access to Utah labor. Other associated factors typically tied to a lower unemployment rate, such as greater job creation, greater income gains, and stronger retail sales pull the Index higher.

Utah’s unemployment rate averaged 7.7% during 2010, 7.1% during 2009, 3.7% in 2008, 2.7% in 2007, and 2.9% 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 grew by an estimated 30,300 jobs (up 2.5%) over the past 12 months. This increase compares to a revised gain of 32,600 jobs in the prior year-over-year period. Utah lost 7,800 jobs in 2010, lost 63,700 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 gains leading to greater income creation and stronger retail spending, have a positive impact upon Utah’s small businesses…and therefore, the Index.

LOCAL PERFORMANCE

Cache County employment grew by 800 jobs (1.6%) in the latest 12-month period. The area’s jobless rate was 4.7%, down from the 5.9% rate of one year ago.

Weber County gained 200 jobs (0.3%) in the latest 12-month period. Joblessness registered 7.3%, down from the 8.6% unemployment rate one year ago.

Davis County had payrolls increase by 4,600 jobs (4.5%) in the past year. The unemployment rate was 6.0% in the latest month, down from 7.0% one year ago.

Salt Lake County employment rose by 14,100 jobs (2.4%) over the year. The county’s unemployment rate was 6.1% in the latest month, down from 7.4% last year.

Utah County employment rose by 7,500 jobs (4.2%) over the last 12 months. The area’s jobless rate was 6.3%, down from the 7.8% rate of one year ago.

Washington County payrolls increased by 700 jobs (1.5%) in the past year. The unemployment rate was 8.0% in the latest month, down from 9.9% one year ago.

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net gain of 200,000 jobs in December 2011, exceeding consensus expectations of a 155,000 job rise. Estimated job gains of the two prior months were revised lower by 8,000 jobs.

The U.S. unemployment rate declined to 8.5% in December, the lowest in nearly three years, versus the revised 8.7% rate of the prior month. The current 8.5% jobless rate compares to the 9.4% rate of one year ago, the 9.8% rate of December 2009, and the 7.3% rate during December 2008.

Goods producing employment rose by 48,000 jobs in December, led by an estimated 23,000 gain in manufacturing jobs, a 17,000 rise in construction jobs, and a 8,000 rise in mining & logging employment. Private-sector service providing employment rose by 164,000 jobs in December, led by an estimated 50,000 gain in transportation & warehousing jobs. Education & health services employment rose by an estimated 29,000 jobs, while retail trade added 28,000 jobs. Overall government employment fell by another 12,000 jobs during the month.

The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945. The net loss of 5.1 million jobs during 2009 easily surpassed the 2008 total. The American economy added 940,000 net new jobs during 2010, or 78,000 per month. Job gains during 2011 totaled 1,640,000 jobs, or 137,000 per month.

The January 2012 Zions Bank Small Business Index for Utah will be released on February 7, 2012.

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