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Show The Ogden Valley news Page 14 Volume XV Issue XV July 15, 2008 Weber County’s Small Businesses Impacted By Rising Inflation Pressures—The Fed to the rescue? Highlights • Weber County experienced job growth of 1,800 jobs (1.8%) from a year ago. Joblessness registered 3.3%, up from the 2.7% unemployment rate one year ago. • The Zions Bank Small Business Index for Utah was 87.0 in June 2008, down from a revised 88.9 in May 2008. • Utah's unemployment rate was estimated at 3.2% in the latest month, up from the prior month's 3.1% rate. Total Utah employment is up an estimated 17,900 jobs during the past 12 months. • Rising inflation pressures have hurt thousands of Utah's small businesses. The likely inflation "remedy" may not feel much better. • The U.S. economy lost an estimated 62,000 net jobs in June, matching expectations. The U.S. unemployment rate remained at 5.5%, a four-year high. Inflation . . . And The Fed Ever increasing energy and food prices have placed greater pressure upon the Federal Reserve, the nation’s central bank, to address the inflation issue. The Fed’s primary focus has now shifted from (A) providing liquidity and monetary ease in whatever amount necessary to deal with one major domestic and global financial crisis after another; to (B) making it clear that its primary focus is now inflation containment. Even as the Fed undertakes this shift in focus, the path will be littered with obstacles. The Fed cannot force energy prices lower. It can, however, tighten monetary policy enough to minimize the impact of high energy costs on longer-term prices. The most favorable development would be to see energy prices decline sharply during the next 6-12 months. Financial markets are already “pricing in” expectations that the Fed’s next change to its key short-term interest ratethe federal funds rate-will be to move it higher. The federal funds target rate has been at 2.00% since April 30, following seven rate cuts totaling 3.25%. Some suggest the Fed could push its key rate higher as early as August 5, although most forecasters suggest that the Fed is more likely to keep the rate unchanged until later in the year...or early in 2009. The Fed is not alone in its newfound focus on inflation containment. Other central banks around the globe are also seeing opportunities to turn their primary attention away from the global credit squeeze and toward constraining inflation. The state’s small business sector has been hurt by sharply higher costs for energy and numerous materials. The inflation “medicine” that the Fed may deliver during the next year will also be painful to many small businesses. The Utah Small Business Index makes the assumption that most small businesses are net borrowers of operating funds. As a result, higher short-term interest rates would be a negative development for many small businesses. The Zions Bank Small Business Index for Utah was 87.0 during June 2008, down from a revised 88.9 during May 2008. The Index measures business conditions from the viewpoint of the Utah small business owner or manager. A lower Index number is associated with less favorable business “conditions” for Utah’s small businesses. The Index uses 100.0 for calendar year 1997 as its base year. The Index includes revisions to various historical and new forecast components as they become available. Utah Employment The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah-was estimated at 3.2% in the latest month, up from the 3.1% rate of the prior month. The 3.2% rate compares to a 2.6% rate during the same month one year ago. A higher Utah unemployment rate is a positive contributor to the Index as it implies increased access to Utah labor. Utah’s unemployment rate averaged 2.7% in 2007, 3.0% in 2006, 4.2% in 2005, and 4.9% during the 2000-2004 period. These rates compare to an average Utah unemployment rate of 3.5% between 1995 and 1999. Total Utah employment rose by an estimated 17,900 jobs (up 1.4%) over the past 12 months. This rise compares to a revised gain of 23,100 jobs in the prior year-overyear period. The 1.4% rise still ranks as one of the ten strongest job growth rates in the nation. Utah added 47,800 jobs in 2007, 55,700 jobs in 2006, 43,700 jobs in 2005, and 30,200 jobs in 2004. These totals compare to gains averaging 38,000 new jobs annually during the 1994-2000 period and a net loss of 1,300 jobs in 2001 through 2003. More recently, weaker job gains, leading to lesser income creation and softer retail spending, have a negative impact upon Utah’s small businesses...and therefore, the Index. Local Performance Weber County experienced job growth of 1,800 jobs (1.8%) from a year ago. Joblessness registered 3.3%, up from the 2.7% unemployment rate one year ago. Davis County payrolls expanded by 200 jobs (0.2%) in the past year. The unemployment rate was 2.8% in the latest month, up from 2.3% one year ago. Cache County employment grew by 1,400 jobs (2.9%) in the latest 12-month period. The area’s jobless rate was 2.2%, up from the 1.8% rate of one year ago. Salt Lake County employment rose by 8,800 jobs (1.5%) over the year. The county’s unemployment rate was 2.9% in the latest month, up from 2.3% last year. Utah County employment declined by 200 jobs (-0.1%) over the last 12 months. The area’s jobless rate was 2.8%, up from the 2.2% rate of one year ago. Washington County payrolls expanded by 800 jobs (1.6%) in the past year. The unemployment rate was 3.5% in the latest month, up from 2.4% one year ago. National Employment The U.S. Department of Labor reported a net decline of 62,000 jobs in June 2008, matching economists’ consensus view, and the sixth monthly decline in a row. Losses of the two prior months were revised to even greater declines by a combined 52,000 jobs. The U.S. unemployment rate was unchanged at 5.5% in June. The 5.5% rate is the highest since October 2004. The current 5.5% jobless rate compares to a 4.5% rate of one year ago. The average hourly wage rose 0.3% (six cents) to $18.01 hourly, a rise of 3.4% over the past 12 months. Goods-producing employment continued to decline in June, with a net loss of 69,000 jobs. Construction employment fell by 43,000 positions, while manufacturing lost another 33,000 jobs. Service-providing employment was also weak in June with a rise of only 7,000 net new jobs. The education & health services sector added 29,000 net new jobs during the month, while the professional & business services sector lost 51,000 jobs. The government sector added 29,000 net new jobs during the month, while the leisure & hospitality sector added 24,000 jobs. The estimated net decline of 438,000 jobs during 2008’s first half was a painful contrast to the average annual gain of 1.9 million net new jobs during 2005 to 2007. However, the average loss of 73,000 jobs monthly during 2008’s first six months was much less painful than the 181,000 average monthly job loss during the 2001 recession. The July 2008 Zions Bank Small Business Index for Utah will be released on August 5, 2008. Zions Bank is Utah’s oldest financial institution, and is the only local bank with a statewide distribution of branches, operating 114 full-service branches throughout Utah. Founded in 1873, Zions has been serving the communities of Utah for 135 years. 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