Vectra Bank Colorado Small Business Index for Colorado
August 14, 2010
July 2010 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
SLOWING U.S. ECONOMIC GROWTH WILL
IMPACT COLORADO’S SMALL BUSINESSES
- The Vectra Bank Colorado Small Business Index for Colorado measured 99.5 in July 2010,
up from a revised 98.5 in June 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 32,400 jobs during the past 12 months
- Slowing U.S. economic growth will place a damper on Colorado’s small business sector
- The U.S. economy lost an estimated 131,000 net jobs in July, worse than expectations of a 90,000
job decline. The loss of 143,000 temporary Census jobs was the culprit, with private businesses adding
71,000 jobs during the month. June job data was revised to show 96,000 additional lost jobs. The U.S.
unemployment rate remained at 9.5% in July, as more than 180,000 people left the labor force
RECORD LOW INTEREST RATES TO CONTINUE
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. economy grew at a 2.4% real (after inflation) annual rate during 2010’s second quarter, just slightly less than expected. In addition, all of the U.S. economic data of the past three years was revised, in some cases for the fifth time, to more accurately reflect what is happening in the American economy.
Revised data suggests the recession was actually worse than previously thought. In addition, the U.S.
economic recovery of roughly the past year has been a little weaker than originally suggested by government estimates.
What many refer to as the “Great Recession” has been over for about a year, according to a
majority of forecasting economists. The actual scorekeeper for the U.S. economy, the Business Cycle Dating Committee of
the National Bureau of Economic Research, is likely to make that call later this year or early in 2011. The NBER
previously announced that the recession officially began in December 2007.
Weaker U.S. economic growth suggests Colorado’s small business sector will be impacted somewhat negatively.
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 8.3% 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 32,400 jobs (down 1.4%), which compares to
a revised loss of 46,300 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 98.3 in June 2010, up from 96.5 in May 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 131,000 jobs in July 2010, worse than economists’ expectations.
However, the loss of 143,000 temporary Census jobs, as expected, was the primary reason for the decline. The rise of
71,000 jobs in the private sector was less than the 90,000 gain expected. June job data was revised to show 96,000
additional lost jobs.
The U.S. unemployment rate was unchanged at 9.5% in July, matching the lowest level of the past 12 months.
However, the decline resulted primarily from more than 180,000 people–presumably less optimistic about finding a
job–leaving the labor force. The current 9.5% jobless rate compares to the 9.4% rate of one year ago and greatly
exceeds the 5.8% rate of July 2008.
Goods-producing employment rose by 33,000 jobs in July. Manufacturing employment rose by 36,000 positions, while
construction lost 11,000 jobs. Mining and logging employment rose by 8,000 jobs.
Private–sector service–providing employment rose in July by 38,000 positions. The professional & business
services sector lost 13,000 jobs, while the leisure & hospitality sector added 6,000 jobs. The education & health
services sector added 30,000 positions in July. Overall government employment fell by 202,000 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 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 630,000 net new
jobs this year. An estimated 196,000 additional Census jobs will be ended in coming months, suggesting weak “headline”
employment totals into the Fall.
The August 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on September 9, 2010.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2010 Thredgold Economic Associates