Colorado small business index climbs to a nearly five-year high

A monthly index tracking conditions for small businesses in Colorado has climbed to its highest level in nearly five years as the slowing pace of job losses buoys prospects for recovery.

The Vectra Bank Colorado Small Business Index (SBI) rose more than two points in November to 105.8. With gains in each of the last 14 months, the index has advanced to its highest level since hitting 106 in February 2006.

“Colorado’s year-over-year measurement of job losses has declined for 10 consecutive months. This strongly suggests that the state’s transition from painful recession to modest economic growth should take place during 2011’s first quarter,” said Jeff Thredgold, an economist who calculates the SBI.

The index tracks economic conditions from the perspective of small business owners and managers. Higher numbers are associated with generally more favorable conditions.

The statewide seasonally adjusted unemployment rate, the most heavily weighted of 14 components of the index, rose two-tenths to
8.4 percent in October, the estimate upon which the November SBI is based. 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 workers.

At the same time, though, the pace of job losses continues to slow. For the 12 months ending in October, nonfarm payrolls in Colorado declined 12,200. That compares to a loss of 20,700 jobs in the prior year-over-year period.

Thredgold said the recession pushed jobless rates in the region to their highest rates in a generation, in turn hurting retail sales and small businesses. But the return of national and global economic growth has led to modest job creation over the past  year. Colorado soon should transition to payroll gains over the next year, he said.

The performance of the national and global economies also are among the components of the SBI.

The Vectra Bank U.S. Small Business Index rose 1.5 points to climb to 115.2 in November despite a weaker-than-expected jobs report for the month.

According to the initial Department of Labor estimate, nonfarm payrolls in the U.S. rose only 39,000. Payroll estimates for the previous two months were revised upward a total of 38,000, however. The U.S. economy has added an estimated 951,000 net new jobs this year, an average of 86,000 a month.
The U.S. unemployment rate rose two-tenths to 9.8 percent after holding steady for three straight months at 9.6 percent.