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Denver Small Business

Vectra Bank Colorado Small Business Index for Colorado
May 2010 Release

June 14, 2010


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

GLOBAL ECONOMIC PERFORMANCE WILL IMPACT COLORADO’S SMALL BUSINESS SECTOR

HIGHLIGHTS

  • The Vectra Bank Colorado Small Business Index for Colorado measured 96.5 in May 2010, up from a revised 93.1 in April
  • Colorado’s unemployment rate was estimated at 8.0% in the latest month, up from the prior month’s 7.9% rate. Total employment fell by 57,600 jobs during the past 12 months
  • Current stress in the global economy tied primarily to Europe and China will impact Colorado’s small businesses
  • The U.S. economy gained an estimated 431,000 net new jobs in May, less than the 520,000 expected. Moreover, 95% of the jobs were temporary Census jobs, with the 41,000 rise in private-sector jobs disappointing. The U.S. unemployment rate declined to 9.7% in May from 9.9% in April, as more than 320,000 people left the labor force

GLOBAL STRESS

Overall global economic growth returned during 2009’s final few months, led by an Asian rebound. The rebound followed the first global recession since just after World War II. At the moment, two stories dominate the outlook for the global economy‚ĶEurope and China.

The ability of wealthier European nations (such as Germany and France) and the International Monetary Fund to alleviate investor anxiety about massive debt levels of Greece, Portugal, Spain, etc. will be critical to the future of the euro currency, as well as to the European economy. Regaining investor confidence is mandatory.

At the same time, steps by China's political leadership to slow this behemoth’s economy down are underway. Whether such steps can be successful, while avoiding a real estate bust, will go a long way to determining Asia’s near–term economic future.

The much weaker euro currency versus the U.S. dollar will negatively impact U.S. and Colorado exports to Europe, while expected Chinese economic slowing will likely have a lesser U.S. and Colorado impact. Global economic performance is a component of the Colorado Small Business Index.

IN COLORADO

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, up from the 7.9% rate of the prior month. The 8.0% rate compares to the 8.1% 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 57,600 jobs (down 2.6%), which compares to a revised loss of 68,000 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 96.5 in May 2010, up from a revised 93.1 in April 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 sbi for colorado

NATIONAL EMPLOYMENT

The U.S. Department of Labor reported a net gain of 431,000 jobs in May 2010, roughly 100,000 less than economists' expectations. Moreover, 95% of the gains were temporary Census jobs which will be eliminated later this year. The rise of only 41,000 jobs in the private sector was disappointing.

The U.S. unemployment rate declined from 9.9% in April to 9.7% in May, matching the rate during January to March of this year. The decline resulted primarily from more than 320,000 people–presumably less optimistic about finding a job–leaving the labor force. The current 9.7% jobless rate compares to the 9.4% rate of one year ago and is nearly double the 5.4% rate of May 2008.

Goods–producing employment rose by a miserly 4,000 jobs in May. Manufacturing employment rose by 29,000 positions, while construction lost 35,000 jobs.

Private–sector service–providing employment rose in May by 37,000 positions. The professional & business services sector gained 22,000 jobs, while the education & health services sector added 17,000 positions in May.

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 just under one million net new jobs this year, with roughly half of these jobs tied to the Census. Just as the 431,000 “headline” number overstated the true May employment picture, so will data in June and July likely be impacted the same way.

 

The June 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on July 8, 2010.


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

©Copyright 2010 Thredgold Economic Associates