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Show Page 8 The Ogden Valley news Volume XIX Issue VII July 15, 2011 Weber County’s Small Businesses Will Continue to Benefit from Low Financing Costs Highlights • The Zions Bank Small Business Index for Utah was 117.2 in May 2011, down from 118.6 in April 2011. 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’s unemployment rate was estimated at 7.4% in the latest month, down from the 7.6% rate of the prior month. Total Utah employment grew by an estimated 18,900 jobs during the past 12 months. • Weber County lost 600 jobs (down 0.6%) in the latest 12-month period. Joblessness registered 8.1%, down from the 8.7% unemployment rate one year ago. • Despite the high level of uncertainty involving domestic politics and the global economy, one thing is certain…low financing costs will continue to benefit Utah’s small businesses. • The U.S. economy added an estimated 54,000 net new jobs in May, sharply below expectations. In addition, estimated job gains of the two prior months were revised lower by 39,000 jobs. The private sector’s addition of 83,000 jobs in May was the smallest gain in 11 months. The U.S. unemployment rate rose to 9.1% in May, versus April’s 9.0% rate. A 272,000-person increase in the estimated labor force within the household survey accounted for much of the rise. Low Financing Costs to Continue Major uncertainty exists regarding the need to increase the nation’s debt ceiling before early August. Republicans are demanding substantial entitlement spending adjustments from the Democratic Administration and Senate in order to support the debt ceiling increase. In addition, a likely default or re-pricing of Greek national (sovereign) debt could occur at any time. Whether similar adjustments will be made to high national debt levels in Ireland and Portugal remain uncertain. In addition, political and military conflicts in Northern Africa and the Middle East have pushed oil prices higher. Whether such prices will move higher still, or eventually plunge, remains to be seen. One thing is near certain, however. The level of the most important of all short-term interest rates—the federal funds rate—is not expected to change any time soon. This rate, to which all other short-term interest rates are largely tied, has been at an all-time low target range of 0.00%-0.25% since December 2008, a period of 30 months. Most forecasters see the rate remaining at this level through at least the end of the year. Of greater uncertainty is whether the Federal Reserve will decide to pursue a third major program of monetary stimulus, known as “quantitative easing”…or QE3. Such a program could be enacted to buffer recent signs of significant U.S. economic slowing. QE2, a $600 billion program to buy U.S. Government securities in order to stimulate the economy, concludes at the end of this month. Most financial market players would prefer not to see a third program, as it could jeopardize the Fed’s hard-earned inflation fighting credibility. The level of short-term financing costs is a component of the Small Business Index, as is the pace of U.S. economic growth. Weaker U.S. economic growth would likely contribute to weaker regional performance, also a component of the Small Business Index. Local Performance Weber County lost 600 jobs (down 0.6%) in the latest 12-month period. Joblessness registered 8.1%, down from the 8.7% unemployment rate one year ago. Davis County payrolls increased by 1,300 jobs (1.3%) in the past year. The unemployment rate was 6.6% in the latest month, down from 7.1% one year ago. Salt Lake County employment rose by 7,200 jobs (1.3 %) over the year. The county’s unemployment rate was 6.9% in the latest month, down from 7.4% last year. Cache County employment was unchanged in the latest 12-month period. The area’s jobless rate was 5.2%, down from the 5.6% rate of one year ago. Utah County employment rose by 3,600 jobs (2.0%) over the last 12 months. The area’s jobless rate was 7.2%, down from the 7.7% rate of one year ago. Washington County payrolls increased by 700 jobs (1.4%) in the past year. The unemployment rate was 9.3% in the latest month, down from 10.3% one year ago. Utah Employment The Utah unemployment rate—the most heavily weighted component of the Zions Bank Small Business Index for Utah—was estimated at 7.4% in the latest month, down from the prior month’s 7.6% rate. The 7.4% rate compares to an 7.9% rate during the same month one year ago. A lower Utah unemployment rate is a negative contributor to the Index as it implies decreased access to Utah labor. Other associated factors typically tied to a lower unemployment rate, such as greater job creation, greater income gains and higher retail sales pull the Index higher. U t a h ’ s unemployment rate averaged 7.7 during 2010, 7.1% during 2009, 3.7% in 2008, 2.8% in 2007, and 3.0% in 2006. These rates compare to an average Utah unemployment rate of 5.0% during the 2001 to 2005 period, and an average 3.5% rate between 1995 and 2000. Total Utah employment grew by an estimated 18,900 jobs (up 1.6%) over the past 12 months. This increase compares to a revised gain of 19,100 jobs in the prior year-over-year period. Utah lost 7,800 jobs in 2010, lost 63,700 jobs in 2009, lost 800 jobs in 2008, and added 49,600 jobs in 2007, 55,700 jobs in 2006, 43,700 jobs in 2005, and 30,200 jobs in 2004. These t o t a l s compare to gains averaging 3 8 , 0 0 0 new jobs annually during the 1994-2000 period and a net loss of 1,300 jobs in 2001 through 2003. More recently, job gains leading to greater income creation and stronger retail spending, have a positive impact upon Utah’s small businesses… and therefore, the Index. National Employment The U.S. Department of Labor reported a net gain of 54,000 jobs in May 2011, much weaker than the 165,000 net gain expected. In addition, estimated job gains of the two prior months were revised lower by 39,000 jobs. The rise of 83,000 jobs in the private sector was also weaker than expectations and was the smallest gain in 11 months. The U.S. unemployment rate rose to 9.1% in May, versus April’s 9.0% rate. A 272,000 person rise in the estimated labor force accounted for most of the rate increase. The current 9.1% jobless rate compares to the 9.6% rate of one year ago, the 9.4% rate of May 2009, and the 5.4% rate during May 2008. Goods producing employment rose by an anemic 3,000 jobs in May, with a small loss in manufacturing employment largely offsetting small gains in construction and mining & logging. P r i v a t e sector service providing employment rose by 80,000 jobs in May, led by gains in professional & business services and education & health services. Overall government employment fell by 29,000 jobs during the month, tied to weakness at the state and local level. The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945. The net loss of 5.1 million jobs during 2009 easily surpassed the 2008 total. The American economy added 940,000 net new jobs during 2010, or 78,000 per month. We estimate a net gain of 2.2 million jobs during 2 0 1 1 . 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 June 2011 Zions Bank Small Business Index for Utah will be released July 12, 2011. Zions Bank is Utah’s oldest financial institution and is the only local bank with a statewide distribution of branches, operating 105 full-service branches throughout Utah. Zions Bank also operates 25 full-service branches in Idaho. Founded in 1873, Zions has been serving the communities of Utah for more than 135 years. Additional information available at <www.zionsbank.com> |