Improving labor conditions bolster Colorado small business index

A monthly index tracking economic conditions for small businesses in Colorado continues to rise, in part because of improving national and state labor conditions.

“Stronger employment gains reported for February, should they continue, will provide support for more impressive small business performance in Colorado and across the nation. A return of much stronger U.S. job gains in coming months will bode well for Colorado’s small business sector,” said Jeff Thredgold, a corporate economist who calculates the Vectra Bank Colorado Small Business Index (SBI).s

The SBI climbed to 113.2 in February, up four-tenths from a revised 112.8 in January. With increases in each of the last 17 months, the index has reached its highest level since climbing to 111.1 in June 2005.

The index tracks economic conditions from the perspective of small business owners and managers. Higher numbers reflect more favorable conditions.

Job growth on both the national and state levels have bolstered the SBI, Thredgold said.

U.S. nonfarm payrolls grew an estimated 192,000 in February, while estimated gains for January and December were revised upward a combined 58,000. The national unemployment rate slipped another tenth to 8.9 percent in February.

The February SBI is based on Colorado labor estimates for December, when the seasonally adjusted jobless rate initially was estimated at 8.8 percent and nonfarm payrolls grew 5,200 over the past year. According to more recent estimates for January, the state unemployment rate rose to 9.1 percent and nonfarm payrolls increased 13,100 over the past year.

A higher jobless rate actually pushes up the index because it suggests improved access to labor for small businesses, which typically encounter difficulty in competing against larger firms to recruit and retain employees. Job gains tend to increase incomes and retail sales, in turn pushing up the SBI.

The Vectra Bank U.S. Small Business Index rose six-tenths to 116.4 in February.

While one good month doesn’t constitute a trend, Thredgold said he expects job gains to become the norm rather than the exception in coming months. The private sector is likely to add to payrolls as corporate profits continue to rise and productivity gains tied to technology largely have run their course, he said.

Job losses in construction over the past four years that have resulted in an unemployment rate estimated at nearly 22 percent, the highest of any sector, should give way to a modest resurgence in residential and commercial construction employment, he added.

At the same time, though, state and local government employment is expected to continue to decline as a result of shortfalls in tax revenues, Thredgold said. State and local governments have eliminated a total of 377,000 jobs since September 2008.

On a larger scale, political instability in Northern Africa and the Middle East and the resulting rising oil prices as well as issues related to European debt could slow the economy and moderate job gains, he added.

 

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Posted by on Mar 10 2011. Filed under Business News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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