Colorado small business index climbs as recession gives way to growth

Jeff Thredgold

A monthly index tracking conditions for small businesses in Colorado has climbed to its highest level in nearly four years as recession gives way to growth.

“Even as the U.S. economy has slowed, Colorado continues its transition from serious recession to modest growth,” said Jeff Thredgold, a corporate economist who calculates the Vectra Bank Colorado Small Business Index.

The index rose to 101.8 in August, up eight-tenths from a revised 101 for July. With gains in each of the last 11 months, the index has climbed to its highest level since hitting 104.8 in September 2006. At this time last year, the index stood at 74.7

The Small Business Index tracks economic conditions from the perspective of a small business owner or manager. Higher readings are associated with generally more favorable conditions.

The statewide seasonally adjusted unemployment rate, the most heavily weighted component of the index, remained unchanged at 8 percent in July, the latest month for which estimates are available. At the same time last year, the state jobless rate stood at 8.1 percent.

Meanwhile, though, the pace of job losses in Colorado has slowed. For the 12-month period ending in July, nonfarm payrolls decreased 25,200. That compares to a loss of 34,000 jobs in the previous year-over-year period.

Lower unemployment rates actually drive down the Small Business Index because they suggest less access to labor for small businesses, which typically encounter difficulty competing against larger firms to recruit and retain workers. But fewer job losses drive up the index because they suggest greater income gains and, in turn, higher retail sales.

The U.S. economy continues to slow, which will affect small businesses in Colorado — and the index — Thredgold said. Nonetheless, revised employment data suggests a return to recession is unlikely, he said.

The Vectra Bank U.S. Small Business Index rose eight-tenths to 101.8 for August.

Gross domestic product, the measure of goods and services produced in the U.S., grew at an annual rate of 1.6 percent during the second quarter, lower than the initial estimate of 2.4 percent. GDP growth for the third and fourth quarter is forecast at slightly higher than the second quarter, Thredgold said.

While weak home sales have prompted some economists to predict a third-quarter economic contraction, new and revised employment data reduce the odds of a so-called “double dip” recession, Thredgold said.

While overall nonfarm payrolls decreased an estimated 54,000 in August with the loss of 114,000 temporary census jobs, private-sector employment increased 67,000. That brings total job growth in the private sector to 763,000 this year.