Vectra Bank Colorado Small Business Index for Colorado
September 14, 2010
August 2010 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
A LESSER CHANCE OF A “DOUBLE–DIP” IS
GOOD NEWS FOR COLORADO’S SMALL BUSINESSES
- The Vectra Bank Colorado Small Business Index for Colorado measured
101.8 in August 2010, up from a revised 101.0 in July 2010
- Colorado’s unemployment rate was estimated at 8.0% in the latest month, unchanged from the prior month’s 8.0% rate.
Total employment fell by 25,500 jobs during the past 12 months
- Revised (and stronger) U.S. employment data of recent months reduces the likelihood of a double–dip recession…good
news for Colorado’s small business sector
- The U.S. economy lost an estimated 54,000 net jobs in August, better than expectations of
a 105,000 job decline. The loss of 114,000 temporary Census jobs was the culprit, with private
businesses adding 67,000 jobs during the month. June and July job data was revised to show 123,000 more jobs.
The U.S. unemployment rate rose to 9.6% in August, versus 9.5% in July, as 550,000 people entered the labor force
A “DOUBLE–DIP” SEEMS UNLIKELY
The U.S. Commerce Department’s first revision of second quarter 2010 GDP to a 1.6% real
(inflation adjusted) annual rate was announced on August 27. The first estimate in late July was of a 2.4%
real annual growth pace. GDP, or Gross Domestic Product, is an estimate of the value of all goods produced and
services provided inside U.S. borders, measured as an annual growth rate or annual rate of decline, with the impact
of inflation removed.
The U.S. Commerce Department’s second and third official revisions will occur during
late September and late October. The data will be revised again at least one more time over the next few years.
Most estimates for third and fourth quarter U.S. economic growth are just slightly stronger than the 1.6% second quarter pace.
Given extremely weak data regarding existing home sales and new home sales reported over the past few weeks,
a few bearish economists expect a slight contraction in third quarter growth. However, new and revised employment data
released on Friday, September 3 reduce the odds of a decline in U.S. economic growth. In addition, stronger–than–expected
data on U.S. manufacturing activity and on consumer confidence reduce the odds of another bout of economic decline.
Weak U.S. economic growth suggests Colorado’s small business sector will receive little benefit. The performance of the
U.S. economy is a component of the Small Business Index, as is the performance of the regional and global economies.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index
for Colorado—was estimated at 8.0% in the most recent month, unchanged from the 8.0% rate of the prior month.
The 8.0% rate compares to the 8.1% rate 12 months ago. A lower Colorado jobless rate is a negative contributor to the
Index as it suggests decreased access to labor for small businesses. Other associated factors typically tied to a
lower unemployment rate, such as greater job creation, greater income gains and greater retail sales, raise the Index higher.
The state’s unemployment rate averaged 7.7% during 2009, 4.9% in 2008, 3.9% in 2007, 4.4% in 2006, and 5.3% during
the period 2001-2005. The Colorado unemployment rate averaged 2.7% during calendar year 2000, the lowest average annual rate
on record. Colorado’s jobless rate averaged 4.4% during the 1990s.
The last 12 months have seen an estimated decline in Colorado employment of 25,500 jobs (down 1.1%), which compares to a
revised loss of 34,000 jobs in the prior year-over-year period. Colorado lost 106,300 jobs in 2009, added 19,000 jobs in 2008,
added an average of 44,600 jobs annually during 2004 to 2007, lost an average of 37,000 jobs in both 2002 and 2003, and gained
13,100 jobs in 2001.
These job totals compare to gains averaging 77,000 new jobs annually during the 1993-2000 period. More recently, job declines,
leading to slower income creation and weaker retail sales, have had a negative impact upon Colorado small businesses…and
therefore the Index.
The Vectra Bank Colorado Small Business Index for Colorado was 101.8 in August 2010, up from a revised 101.0
in July 2010. The Index measures business conditions from the viewpoint of the
Colorado small business owner or manager.
A higher Index number is associated with more favorable business conditions for Colorado’s small businesses.
The Index uses 100.0 for calendar year 1997 as its base year. The Index also includes revisions to various historical
and new forecast components as they become available.
The U.S. Department of Labor reported a net loss of 54,000 jobs in August 2010, less painful than economists’
expectations of 105,000 lost jobs. The loss of 114,000 temporary Census jobs, as expected, was the primary reason for the decline.
The rise of 67,000 jobs in the private sector was more than expected. In addition, June and July job data was revised to show
123,000 more people at work.
The U.S. unemployment rate rose to 9.6% in August, following two months at 9.5%. The increase resulted from an estimated
550,000 people–presumably more optimistic about finding a job–entering the labor force. The current 9.6% jobless rate
compares to the 9.7% rate of one year ago and greatly exceeds the 6.1% rate of August 2008.
Goods’producing employment was flat in August. Manufacturing employment fell by 27,000 positions, while
construction added 19,000 jobs. Mining and logging employment rose by 8,000 jobs.
Private-sector service–providing employment rose in August by 67,000 positions. The professional & business services
sector added 20,000 jobs, while the leisure & hospitality sector added 13,000 jobs. The education & health services
sector added 45,000 positions in August. Overall government employment fell by 121,000 jobs during the month, including a
loss of 114,000 temporary Census jobs.
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.
Excluding the impact of Census and other government jobs, the economy has now added an estimated 763,000 net new
jobs this year. An estimated 82,000 additional Census jobs will be ending in coming months, suggesting weak “headline”
employment totals in September and possibly October.
The September 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on October 14, 2010.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2010 Thredgold Economic Associates