Vectra Bank Colorado Small Business Index for Colorado
March 2010 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
SOLID U.S. JOB GAINS A POSITIVE SIGN
FOR COLORADO’S SMALL BUSINESS SECTOR
- The Vectra Bank Colorado Small Business Index for Colorado measured 90.8 in March 2010, up from 85.9 in February
- Colorado’s unemployment rate was estimated at 7.7% in the latest month, up from the prior month’s 7.4% rate. Total employment fell by 81,800 jobs during the past 12 months
- The strongest U.S. job gain in three years is one more sign of renewed U.S. economic growth, ultimately a positive development for Colorado’s small businesses
- The U.S. economy gained an estimated 162,000 net new jobs in March, slightly less than the 190,000 gain expected. However, job gains of the two prior months were revised higher. The U.S. unemployment rate remained at 9.7% in March
The American economy saw a net rise of 162,000 jobs during March, the strongest monthly gain in three years. The reported gain was slightly below expectations of a rise of 190,000 jobs. However, job data of the two prior months was revised to show 62,000 additional jobs.
Following revision, the U.S. economy has added jobs during three of the past five months. Consensus forecasts hold expectations of hundreds of thousands of new jobs to be reported over the next few months.
Yes…more than one-half million of the jobs to be reported in coming months will be temporary Census jobs. Yes, when these jobs are completed in 4-6 months, they will detract from employment totals then. However, the majority of jobs being created in the economy will be permanent jobs, providing meaningful income gains to tens of thousands of American families.
The U.S. economy added an average of 54,000 jobs monthly during 2010’s first quarter. While not impressive versus traditional employment gains, the 54,000 average rise is worlds apart from the 753,000 average monthly loss during 2009’s first quarter.
As expected, the nation’s unemployment (jobless) rate remained at 9.7% in March, matching the rate of the two prior months. It is still feasible that the rate could actually move slightly higher in coming months—despite solid job gains—as hundreds of thousands of people reenter the labor force in search of more plentiful jobs.
Where the Jobs Are
Of the 162,000 net new jobs reported for March, 48,000 were tied to the Census. With modest declines in other government employment sectors, 123,000 net new jobs were added in the private sector, the largest gain since May 2007. Some economists had feared that most, if not all, of the expected March gain would be temporary Census jobs.
Job gains in March were spread across the economy. An estimated 60% of industries added jobs in March, the highest share in four years (CNNMoney.com).
The goods-producing component of the economy added 41,000 net new jobs during March, the first gain in three years. The long-suffering construction sector added 15,000 jobs during the month, the first gain since the summer of 2007. Manufacturing added another 17,000 jobs, the third consecutive monthly gain, cementing the notion that the nation’s manufacturing sector has helped lead the way toward U.S. economic recovery.
The nation’s much larger service-providing sector added 82,000 jobs last month, with gains in wholesale and retail trade, transportation, professional & business services, leisure & hospitality, and education & health services. Job gains in the health care sector since the recession started in December 2007 now total 588,000, with 27,000 net new jobs in March.
Despite the more favorable nature of the March data, much in the way of employment pain and suffering still exists…
- The “underemployment rate”…the total of those officially counted as unemployed, those working part-time hours who would prefer to work full-time, and those discouraged workers who have left the labor force but would accept a job if one were offered, rose slightly to 16.9% from 16.8% in February
- A total of 15 million people are counted as unemployed, close to record levels
- Of the 15 million unemployed, a record 6.5 million, or 44% of the total, have been out of work for at least six months, a record high. That figure rose by 414,000 last month alone
A Better Story
The job gains and losses reported above, and the primary focus of media coverage of the job market, comes from a monthly survey of roughly 375,000 businesses, known as the establishment survey. The unemployment rate comes from a different survey, one conducted monthly of 60,000 households. It has a disadvantage of a smaller sample size, but includes estimates of the self-employed and other workers who are excluded from the larger establishment survey.
The more encouraging employment story being told by the household survey is worth mention. While the U.S. economy officially added 162,000 jobs during March, the household survey estimated a much stronger 264,000 rise.
More importantly, while the establishment survey noted a net gain of an identical 162,000 jobs during the first quarter just ended, the household survey estimates that total employment jumped by 1.1 million jobs during the quarter. Many economists would suggest that the household survey can be a better measure of job gains during transition periods from job contraction to job creation.
U.S. economic performance is a component of the Colorado Small Business Index. Employment gains and losses are key factors relative to U.S. economic growth or recession.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 7.7% in the most recent month, up from the 7.4% rate of the prior month. The 7.7% rate compares to a recent peak of 8.3% in June 2009 and a 7.3% 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.
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 81,800 jobs (down 3.6%), which compares to a revised loss of 98,800 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 a negative impact upon Colorado small businesses…and therefore the Index.
The Vectra Bank Colorado Small Business Index for Colorado was 90.8 in March 2010, up from 85.9 in February 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 April 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on May 13, 2010.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2010 Thredgold Economic Associates