Vectra Bank Colorado Small Business Index for Colorado
August 11, 2011
July 2011 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
A STRUGGLING U.S. ECONOMY AND
A U.S. DEBT DOWNGRADE WON’T
HELP COLORADO’S SMALL BUSINESS SECTOR
- The Vectra Bank Colorado Small Business Index for Colorado measured 113.6 in
July 2011, down from a revised 115.4 in June 2011
- Colorado’s unemployment rate was estimated at 8.5% in the latest
month, down from the prior month’s 8.7% rate. Total employment grew by
14,300 jobs during the past 12 months
- Very weak U.S. economic growth and a U.S. debt downgrade by Standard &
Poor’s will provide little boost to a growing Colorado small business sector
- The U.S. economy added an estimated 117,000 net new jobs in July, slightly
above expectations. In addition, estimated job gains of the two prior months
were revised higher by 56,000 jobs. The U.S. unemployment rate declined to 9.1% in
July, versus June’s 9.2% rate
A STRUGGLING AMERICAN ECONOMY
Major economic revisions by the U.S. Commerce Department covering the past eight years were less than inspiring. Revised data now suggests that the Great Recession was deeper and more painful than previously reported. In addition, the economic recovery officially in place since June 2009 has also been weaker than initially reported.
Data for 2011’s first half illustrated the economic weakness. Second quarter 2011 GDP (gross domestic product, the sum total of all goods produced and services provided on U.S. soil) rose at a 1.3% real (after inflation) annual rate, weaker than expected. More ominous was a sharp downward revision to first quarter GDP. The economy actually grew at a very weak 0.4% real annual pace, rather than the 1.9% real annual pace reported earlier, an estimate already revised twice.
Numerous forecasters have lowered their expectations of U.S. economic growth over the next few quarters. More bearish views see another downturn in the economy.
High levels of domestic and global anxiety about weak U.S and global economic growth were only exacerbated by the Standard & Poor’s downgrade of U.S. outstanding debt. Stock markets around the world have taken painful hits in recent days.
Colorado’s small business sector is directly impacted by what happens around the nation and around the world. Rising investor anxiety and declining stock prices hurt business and consumer confidence, thereby impairing small business performance.
The levels of U.S. and global economic performance are components of the Small Business Index, as are U.S. regional forecasts of economic growth. Downward revisions to such forecasts serve to pull the Index lower.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.5% in the most recent month, down from the 8.7% rate of the prior month. The 8.5% rate compares to the 8.8% 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 8.9% during 2010, 8.3% during 2009, 4.9% 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 14,300 jobs. This increase compares to a revised gain of 300 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 was 113.6 in July 2011, down from a revised 115.4 in June 2011. The Index measures business conditions from the viewpoint of the Colorado small business owner or manager.
A lower Index number is associated with less 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 117,000 jobs in July 2011, slightly stronger than the 85,000 net gain expected. In addition, estimated job gains of the two prior months were revised higher by 56,000 jobs.
The U.S. unemployment rate declined to 9.1% in July, versus June’s 9.2% rate. The current 9.1% jobless rate compares to the 9.5% rate of one year ago, the 9.5% rate of July 2009, and the 5.8% rate during July 2008.
Goods producing employment rose by 42,000 jobs in July, with gains in manufacturing (up 24,000 jobs), construction (up 8,000 jobs), and mining & logging (up 10,000 jobs). Private sector service providing employment rose by 112,000 jobs in July, led by gains in education & health services (up 38,000 jobs) and professional & business services (up 34,000 jobs). Overall government employment fell by 37,000 jobs during the month, impacted by 23,000 temporary job losses in the state of Minnesota.
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.
The American economy added 940,000 net new jobs during 2010, or 78,000 per month. We estimate a net gain of just below 1.8 million jobs during 2011. 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 August 2011 Vectra Bank Colorado Small Business Index for Colorado will be released on September 8, 2011.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2011 Thredgold Economic Associates