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Denver Small Business

Vectra Bank Colorado Small Business Index for Colorado
June 2010 Release

July 14, 2010

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



  • The Vectra Bank Colorado Small Business Index for Colorado measured 98.3 in June 2010, up from 96.5 in May 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 46,700 jobs during the past 12 months
  • The Federal Reserve’s key short–term interest rate is expected to remain at a record low level well into 2011, benefiting Colorado’s small businesses that are net borrowers
  • The U.S. economy lost an estimated 125,000 net jobs in June, in line with expectations.  The loss of 225,000 temporary Census jobs was the culprit, with private businesses added 83,000 jobs during the month.  The U.S. unemployment rate declined from 9.7% in May to 9.5% in June, as more than 650,000 people left the labor force

The most important of all short-term interest rates—the federal funds rate—has been at a record low target level of 0.00% – 0.25% since mid-December 2008, a period of nearly 19 months. Given renewed domestic and global financial market anxiety about slowing economic growth, as well as high anxiety about sovereign (national) debt levels across Europe, the Federal Reserve will be in no hurry to push the federal funds rate higher.

Fed Funds Rate

Most forecasters now suggest that the Fed will delay any modest increase in the federal funds rate until sometime during 2011’s first half. Some economists suggest the rate will stay at its current level well into 2012.

Fortunately for the Fed, extremely low levels of consumer inflation allow it to remain on the sidelines for an extended period. In fact, many economists would suggest that the risk of deflation, or declining prices, is the greater threat to the U.S. and global economies as 2010’s second half begins.

The level of short–term interest rates is a component of the Colorado Small Business Index. The Index assumes that a majority of Colorado’s small businesses are net borrowers. While credit availability is a critical issue for many small businesses, the cost of such credit will remain historically low.

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 8.2% rate 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. 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, 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 46,700 jobs (down 2.1%), which compares to a revised loss of 56,300 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.

vectra bank colorado small business index for colorado

The U.S. Department of Labor reported a net loss of 125,000 jobs in June 2010, in line with economists’ expectations. However, the loss of 225,000 temporary Census jobs, as expected, was the primary reason for the decline. The rise of 83,000 jobs in the private sector was less than the 100,000 gain expected.

The U.S. unemployment rate declined from 9.7% in May to 9.5% in June, the lowest level of the past 12 months. However, the decline resulted primarily from more than 650,000 people–presumably less optimistic about finding a job–leaving the labor force. The current 9.5% jobless rate matches the 9.5% rate of one year ago and greatly exceeds the 5.5% rate of June 2008.

Goods-producing employment declined by 8,000 jobs in June. Manufacturing employment rose by 9,000 positions, while construction lost 22,000 jobs. Mining and logging employment rose by 5,000 jobs.

Private-sector service providing employment rose in June by 91,000 positions. The professional & business services sector gained 46,000 jobs, while the leisure & hospitality sector added 37,000 jobs. The education & health services sector added 22,000 positions in June. Overall government sector employment fell by 208,000 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.

The economy has now added an estimated 882,000 net new jobs this year, with roughly one-third of these jobs tied to the Census. An estimated 339,000 additional Census jobs will end in coming months, suggesting weak “headline” employment totals during summer months.


The July 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on August 12, 2010.

Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado

©Copyright 2010 Thredgold Economic Associates