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Denver Small Business

Vectra Bank Colorado Small Business Index for Colorado
December 2010 Release

January 13, 2011

Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado



  • The Vectra Bank Colorado Small Business Index for Colorado measured 107.7 in December 2010, up from a revised 105.6 in November 2010
  • Colorado’s unemployment rate was estimated at 8.6% in the latest month, up from the prior month’s 8.4% rate.  Total employment fell by 10,100 jobs during the past 12 months
  • A continuation of historically low borrowing costs for a third year will benefit Colorado’s small business sector.  The Federal Reserve is expected to keep its key interest rate unchanged for most or all of 2011
  • The U.S. economy added an estimated 103,000 net new jobs in December, weaker than expectations of a 150,000-170,000 job rise.  Better news saw job data of October and November revised to show 70,000 more jobs than initially reported.  The U.S. unemployment rate dropped to 9.4% in December, versus November’s 9.8% rate.  A decline in the estimated labor force accounted for much of the unemployment rate decline

As expected, the Chairman of the Federal Reserve, Ben Bernanke, reaffirmed the Fed’s commitment to aggressive monetary policy in testimony last Friday to the Senate Budget Committee.  Mr. Bernanke noted the Fed’s concern that “new adverse shocks” to the economy could lead to deflationary pressures.  He also reaffirmed the Fed’s  “unwavering commitment to price stability” and the Fed’s long-term implicit inflation target of “2.0% or a bit less.”

The Chairman also noted that the Fed’s current program to purchase $600 billion of additional U.S. Treasury securities would continue through June.  The Fed had earlier purchased $1.7 trillion of U.S. Treasury and mortgage-backed securities in an attempt to push long-term interest rates lower. 

While the initial attempt was successful in pushing 30-year fixed-rate conventional mortgages to 50-year lows near 4.20%, the latest effort has been met with higher long-term rates, with comparable 30-year fixed-rate mortgages averaging 4.82% during the past two weeks.  Reasons for the increase include financial market anxiety about the possible inflationary impact of the Fed’s second program and greater evidence that the U.S. economy is picking up speed.

The Fed’s most important interest rate, the federal funds rate, has been at a historic low target range of 0.00%-0.25% since December 2008.  The prime lending rate has been at a historic low of 3.25% since that time.  Financial market players believe the Fed will keep this rate unchanged through most or all of 2011.

The Small Business Index makes the assumption that most small businesses are net borrowers.  As a result, borrowing costs will remain attractive for the small business sector.  In addition, the Fed suggests that credit has become more available for both large and small business borrowers in recent months.

The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.6% in the most recent month, up from the 8.4% rate of the prior month.  The 8.6% rate compares to the 7.4% rate 12 months ago.  A higher Colorado jobless rate is a positive contributor to the Index as it suggests increased access to labor for small businesses. Other associated factors typically tied to a higher unemployment rate, such as lesser job creation, lesser income gains and lower retail sales, pull the Index lower.

The state’s unemployment rate averaged 7.7% during 2009, 4.9% in 2008, 3.9% in 2007, and 4.4% in 2006.  Colorado’s jobless rate averaged 4.6% between 1990 and 2005.

The last 12 months have seen an estimated decline in Colorado employment of 10,100 jobs (down 0.5%), which compares to a revised loss of 14,100 jobs in the prior year-over-year period.  Colorado lost 106,300 jobs in 2009, added 19,000 jobs in 2008, added 52,200 jobs in 2007, and added 53,100 jobs in 2006.   

These job totals compare to gains averaging 46,500 net new jobs annually between 1990 and 2005.  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 107.7 in December 2010, up from a revised 105.6 in November 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.

Colorado Small Business Index

The U.S. Department of Labor reported a net gain of 103,000 jobs in December 2010, much weaker than the 150,000-170,000 net gain expected.  The rise of 113,000 jobs in the private sector was also weaker than expectations.  Better news saw October and November job data revised to show the addition of 70,000 more jobs than originally reported. 

The U.S. unemployment rate dropped to 9.4% in December, versus November’s 9.8% rate.   A decline of an estimated 260,000 participants in the labor force accounted for much of the rate decline.  A gain of 297,000 net new jobs in the household survey (from which the unemployment rate is derived) accounted for the balance of the rate decline.  The current 9.4% jobless rate compares to the 9.9% rate of one year ago and greatly exceeds the 7.3% rate of December 2008. 

Goods-producing employment fell by 2,000 jobs in December.  Manufacturing employment rose by 10,000 positions, while construction lost 16,000 jobs.  Mining and logging employment rose by 4,000 jobs.

Private-sector service-providing employment rose in December by 115,000 positions.  The leisure & hospitality sector added 47,000 jobs, while the education & health services sector added 44,000 jobs.  The retail trade sector added 12,000 positions in December, while professional & business services added 7,000 jobs.  Overall government employment fell by 10,000 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 loss of 4.8 million jobs during 2009 easily surpassed the 2008 total.  The most recent recession was the first since the Great Depression to see all net job gains of the prior expansion eliminated.

The American economy added an estimated 1.1 million net new jobs during 2010, or 94,000 per month.  Roughly 130,000 net new jobs need to be added monthly just to meet the needs of a rising population, and just to keep the unemployment rate stable.


The January 2011 Vectra Bank Colorado Small Business Index for Colorado will be released on February 10, 2011.

Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado

©Copyright 2011 Thredgold Economic Associates