Small business index slides for a fourth straight month

Jeff Thredgold

Jeff Thredgold

A monthly index tracking conditions for small businesses in Colorado continues to decline as weakening global and national economies affect the state.

“It’s unfortunate that the inherent strength of the Colorado economy, like many of its neighbors, is held back by external political and economic developments,” said Jeff Thredgold, a corporate economist who calculates the Vectra Bank Colorado Small Business Index (SBI).

The SBI fell nearly two points in July to 113.6. With declines in each of the last four months, the index has retreated to its lowest level since it stood at 112.8 in January. Prior to the four-month slide, the index had advanced 18 straight months. The SBI measures conditions from the perspective of a small business owner or manager. Lower numbers reflect less favorable conditions.

The statewide seasonally adjusted unemployment rate, the most heavily weighted of 14 components of the SBI, fell two-tenths to 8.5 percent in June, the latest month for which estimates are available. A lower jobless rate actually pulls down the index because it suggests less access to labor for small businesses, which typically encounter difficulty competing against larger firms to recruit and retain employees.

At the same time, though, the pace of job growth in Colorado accelerated in June with an estimated increase of 14,300 in nonfarm payrolls over the past year. Job growth, income gains and the resulting increase in retail sales all push up the SBI.

Thredgold said high levels of anxiety about U.S. and global economic growth were only exacerbated by the announcement from Standard & Poor the rating agency had downgraded U.S. debt. Small businesses in Colorado are affected by rising investor anxiety, falling stock prices and lower consumer confidence, he said. Consequently, U.S. and global economic performance are components of the SBI.

Thredgold said revised information indicates the Great Recession was deeper and more painful and that economic recovery over the past two years has been weaker than first believed. Gross Domestic Product, the broad measure of goods and services produced in the country, grew at an annual rate of only 1.3 percent during the second quarter, he said. Estimated GDP growth during the first quarter was revised downward to just 0.4 percent.

Thredgold said numerous forecasters have lowered their expectations for economic growth over the next few quarters, while some forecasters expect another downturn.

The Vectra Bank U.S. Small Business Index fell two points in July to 111.1, the lowest level in nearly a year.

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