Vectra Bank Colorado Small Business Index for Colorado
February 9, 2012
January 2012 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
MODEST U.S. ECONOMIC GROWTH DOES
LITTLE FOR COLORADO’S SMALL BUSINESSES
- The Vectra Bank Colorado Small Business Index for Colorado measured 116.0 in January 2012, up from a revised 112.0 in December 2011
- Colorado’s unemployment rate was estimated at 7.9% in the latest month, down from the prior month’s 8.0% rate. Total employment grew by 24,400 jobs during the past 12 months
- Modest U.S. economic growth has added little to the performance of Colorado’s small business sector. Such limited growth is expected to continue, despite massive fiscal and monetary stimulus. Still, modest U.S. economic growth of the past 30 months is substantially better than the economic weakness during the Great Recession
- The U.S. economy saw a net rise of 243,000 jobs during January, exceeding consensus expectations of a 135,000 rise. Estimated job gains of the two prior months were revised higher by 60,000 jobs. The U.S. unemployment rate declined from 8.5% in December to 8.3% in January, the lowest level in nearly three years
LIMITED PERFORMANCE OF THE U.S. ECONOMY
The U.S. economy grew at a real (inflation adjusted) annual rate of 2.8% during 2011’s final quarter, slightly below expectations. Such growth exceeded the weaker 1.8% real annual growth pace in the prior quarter and the dismal 0.9% real annual growth pace during 2011’s first six months.
During all of 2011, the American economy grew at a 1.7% real rate. Such modest growth was sharply below the 3.0% growth pace during 2010, but much better than the 3.5% real contraction in U.S. economic output during 2009.
Most forecasting economists expect real growth in 2012 near 2.2%. Such a modest growth pace is negatively impacted by ongoing financial stress across Europe, high energy prices, weak American housing markets, and major anxiety about the size and direction of the U.S. government. Budget deficits exceeding $1.2 trillion during each of the past three years has also added to consumer and corporate anxiety.
One could argue that the massive amount of fiscal and monetary stimulus thrown at the American economy should have led to stronger performance. One change over the past six months is that the odds of another U.S. recession seem to have diminished.
The performance of the U.S. economy is a component of the Small Business Index for Colorado, as are the performances of the regional and the global economies. Stronger levels of performance boost the Index.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 7.9% in the most recent month, down from the 8.0% rate of the prior month. The 7.9% rate compares to the 8.9% 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 higher retail sales, pull the Index higher.
The state’s unemployment rate averaged 8.6% during 2011, 8.9% during 2010, 8.3% during 2009, 4.8% in 2008, 3.7% in 2007, and 4.3% in 2006. Colorado’s jobless rate averaged 4.6% between 1990 and 2005.
The last 12 months saw an estimated increase in Colorado employment of 24,400 jobs (up 1.1%). This increase compares to a revised gain of 26,900 jobs in the prior year-over-year period. Colorado lost 25,500 jobs in 2010, lost 104,700 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 gains leading to greater income creation and stronger retail spending, have a positive impact upon Colorado’s small businesses…and therefore, the Index.
The Vectra Bank Colorado Small Business Index for Colorado measured 116.0 in January 2012, up from a revised 112.0 in December 2011. 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 gain of 243,000 jobs in January 2012, exceeding consensus expectations of a 135,000 job rise. Estimated job gains of the two prior months were revised higher by 60,000 jobs.
The U.S. unemployment rate declined to 8.3% in January, the lowest in nearly three years, versus the 8.5% rate of the prior month. The current 8.3% jobless rate compares to the 9.1% rate of one year ago, the 9.7% rate of January 2010, and the 7.8% rate during January 2009.
Goods producing employment rose by 81,000 jobs in January, led by an estimated 50,000 gain in manufacturing jobs, a 21,000 rise in construction jobs, and a 10,000 rise in mining & logging employment. Private-sector service providing employment rose by 176,000 jobs in January, led by an estimated 70,000 gain in professional & business service jobs. Leisure & hospitality added 44,000 jobs, while education & health services employment rose by an estimated 36,000 jobs. Overall government employment fell by another 14,000 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. Annual revisions to more recent data now show the American economy added 1,027,000 net new jobs during 2010, or 86,000 per month. Job gains during 2011 totaled 1,820,000 jobs, or 152,000 per month.
The February 2012 Vectra Bank Colorado Small Business Index for Colorado will be released on March 15, 2012.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2013 Thredgold Economic Associates