Vectra Bank Colorado Small Business Index for Colorado
January 2010 Release

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

HIGHER REGIONAL UNEMPLOYMENT RATES HURT COLORADO’S AND NEIGHBORS’ SMALL BUSINESSES

HIGHLIGHTS

• The Vectra Bank Colorado Small Business Index for Colorado measured 81.5 in January 2010, up from a revised 74.5 in December

• Colorado’s unemployment rate was estimated at 7.5% in the latest month, up from the prior month’s 6.9% rate.  Total employment fell by 87,700 jobs during the past 12 months

• Colorado’s small business sector has seen business conditions deteriorate since the Great Recession began in December 2007, with a sharply higher jobless rate and weaker consumer spending.  Neighboring states have experienced similar business challenges

• The U.S. economy lost an estimated 20,000 net jobs in January, worse than the slight gain expected.  November’s estimated job gain was revised higher, while December’s estimated loss was revised to reflect a greater job loss.  The U.S. unemployment rate dropped to 9.7% in January

REGIONAL UNEMPLOYMENT HIGHER
Severe U.S. economic weakness during 2008 and much of 2009 has pushed unemployment rates of states within the Rocky Mountain region, as well as across the nation, sharply higher.  However, jobless rates have likely peaked in many states, while other states may see jobless rates move slightly higher in coming months.  All 50 states are currently in recession, but will eventually benefit from the return of U.S. economic growth during the past six months.

The two most recent recessions of the early 1990s and during much of 2001 each ran eight months.  The Great Recession officially began in December 2007, and likely concluded during the summer of 2009, with a duration of roughly 20-22 months.  It has been the longest, the deepest, the most pervasive, and the most costly since the Great Depression. 

The Great Recession, resulting initially from severe housing sector weakness and a freeze-up of domestic and global credit markets, has ravaged employment across the nation.  Total U.S. job losses since the recession began now total more than eight million.  All states within the Rocky Mountain region have experienced job losses, as well as much higher levels of unemployed workers. 

The Colorado unemployment rate and year-over-year gains or losses in employment are key components of the Colorado Small Business Index, as is the performance of the regional and U.S. economies.  A higher unemployment rate is a positive contributor to the Index as it suggests greater labor availability for local employers.  However, a rising jobless rate also suggests weaker job gains (or greater losses), lesser income growth, and slower retail spending, all factors which lead the Index lower.

COLORADO EMPLOYMENT
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 7.5% in the most recent month, up from the 6.9% rate of the prior month.  The 7.5% rate compares to the 5.8% rate of 12 months ago.  A higher Colorado jobless rate is a positive contributor to the Index as it suggests greater access to labor for small businesses.

The state’s unemployment rate averaged 7.3% 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 87,700 jobs (down 3.8%), which compares to a revised loss of 90,400 jobs in the prior year-over-year period.  Colorado added 18,000 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 a negative impact upon Colorado small businesses…and therefore the Index.

NATIONAL EMPLOYMENT
The U.S. Department of Labor reported a net loss of 20,000 jobs in January 2010, worse than the slight gain expected.  The previously reported loss of 85,000 jobs during December was revised to a loss of 150,000 jobs.  However, November’s 4,000 estimated job gain was revised to reflect 64,000 net new jobs. 

The U.S. unemployment rate declined to 9.7% in January 2010, versus 10.0% in December.  The rise occurred as more than 540,000 people reported finding jobs in January when measured by the household survey, from which the unemployment rate is derived.  The current 9.7% jobless rate compares to the 7.7% rate of one year ago and is nearly double the 5.0% rate of January 2008. 

Goods-producing employment continued to decline in January, with a net loss of 60,000 jobs.  Manufacturing employment actually rose by 11,000 positions, the first gain in three years, while construction lost another 75,000 jobs. 

Service-providing employment rose in January by 48,000 positions.  The professional & business services sector gained 44,000 jobs (mostly “temp” jobs), while the retail trade sector added 42,000 jobs.  Government employment fell by 8,000 jobs (all state and local jobs), while the education & health services sector added 16,000 positions in January.

Annual benchmark revisions to prior employment data now suggest job losses were even greater during the past two years.  The revised net decline of 3.6 million jobs during 2008 was 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.  Modest job gains and occasional losses could be reported in coming months as the U.S. economy continues to emerge from the worst recession in the post-Depression period. 

The February 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on March 11, 2010.

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

©Copyright 2009 Thredgold Economic Associates