Vectra Bank Colorado Small Business Index for Colorado
October 14, 2010
September 2010 Release
Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
COLORADO’S SMALL BUSINESSES WILL BENEFIT FROM SOLID GLOBAL ECONOMIC PERFORMANCE
- The Vectra Bank Colorado Small Business Index for Colorado measured 103.3 in September 2010, up from a revised 101.6 in August 2010
- Colorado’s unemployment rate was estimated at 8.2% in the latest month, up from the prior month’s 8.0% rate. Total employment fell by 27,100 jobs during the past 12 months
- A global economy remaining on a solid growth pace will continue to benefit the Colorado economy. Real (after inflation) global growth averaging 4.5% during 2010 and 2011 will boost demand for Colorado goods and services and boost foreign visitation to the state
- The U.S. economy lost an estimated 95,000 net jobs in September, much worse than expectations of a 5,000 job decline. The loss of 77,000 temporary Census jobs was a factor, with private businesses adding 64,000 jobs during the month. A surprising cut of 83,000 jobs at the state & local level, most of them school teachers, also led to the job weakness. Job losses in July and August were revised to show even greater losses. The U.S. unemployment rate remained at 9.6% in September
GLOBAL ECONOMIC GROWTH
The solid growth pace of the global economy, led by Asia, will continue to boost Colorado economic performance. Most estimates suggest the global economy will maintain solid performance throughout 2011. The latest estimate of the International Monetary Fund sees global economic growth at a 4.8% real (after inflation) annual pace in 2010, slowing to a still solid 4.2% real annual rate during 2011.
The global economy had fallen into its first recession since just after WWII during 2008 and 2009. The global economy returned to modest growth during late 2009. This development, combined with the “official” return of the U.S. economy to modest growth in June 2009, have provided the impetus for Colorado and many other states to return to modest levels of economic growth.
As before, global economic strength is primarily led by Asia, with the entire region expected to grow at nearly a 7.0% annual rate next year. China and India will lead the way, while Japan lags. Growth in the U.S. and across Europe will be positive, but substantially trail that of Asia.
Solid global economic performance enhances the ability of Colorado firms to sell goods and services around the globe. Such global economic strength also boosts the number of visitors to the state. The performance of the global economy is a component of the Small Business Index, as is the performance of the regional and U.S. economies.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.2% in the most recent month, up from the 8.0% rate of the prior month. The 8.2% rate compares to the 7.9% rate 12 months ago. A higher Colorado jobless rate is a positive contributor to the Index as it suggests increased 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 27,100 jobs (down 1.2%), which compares to a revised loss of 27,900 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 103.3 in September 2010, up from a revised 101.6 in August 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 95,000 jobs in September 2010, much worse than the 5,000 net loss expected. The loss of 77,000 temporary Census jobs, as expected, was a primary reason for the decline. Surprisingly, state & local governments cut 83,000 jobs in September, mostly school teachers. The rise of 64,000 jobs in the private sector was close to expectations. In addition, July and August job data was revised to show even greater losses.
The U.S. unemployment rate remained at 9.6% in September. The current 9.6% jobless rate compares to the 9.8% rate of one year ago and greatly exceeds the 6.2% rate of September 2008.
Goods-producing employment declined by 22,000 jobs in September. Manufacturing employment fell by 6,000 positions, while construction lost 21,000 jobs. Mining and logging employment rose by 5,000 jobs.
Private-sector service-providing employment rose in September by 86,000 positions. The professional & business services sector added 14,000 jobs, while the leisure & hospitality sector added 38,000 jobs. The education & health services sector added 17,000 positions in September. Overall government employment fell by 159,000 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 860,000 net new jobs this year, or 96,000 per month. 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 October 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on November 11, 2010.
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2010 Thredgold Economic Associates