Rising small business index reflects recovery in Colorado

A monthly measure of economic conditions for small businesses in Colorado continues to rise, adding to the evidence a recovery is gaining traction.

“Colorado’s painful recession during much of the past three years will give way to more solid performance over the balance of 2011 and especially in 2012. It’s about time,” said Jeff Thredgold, an economist who calculates the Vectra Bank Colorado Small Business Index (SBI).

The SBI climbed to 121.5 in March, up nine-tenths from a revised 120.6 for February. The index tracks economic conditions from the perspective of a small business owner or manager. Higher numbers reflect more favorable conditions.

The seasonally adjusted unemployment rate, the most heavily weighted of 14 components of the SBI, edged up two-tenths to 9.3 percent in February, the month for which the March index 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 employees.

Between February 2010 and February 2011, nonfarm payrolls in Colorado grew an estimated 13,800. That compares to a revised gain of 17,200 net new jobs in the prior year-over-year figure. While the latest number is smaller, job gains lead to increased income creation and retail sales and push up the SBI.

A number of other factors also have contributed to gains in the SBI, including job growth nationally and a rebound in personal income, Thredgold said.

For March, nonfarm payrolls rose an estimated 216,000 in the United States as the monthly jobless rate slipped a tenth to 8.8 percent. Since February 2010, private sector employment has increased by 1.8 million.

Thredgold projected a net gain of 2.4 million jobs in 2011, an average increase of about 200,000 a month, A gain of 130,000 jobs a month is needed to keep pace with a growing population and keep the unemployment rate stable.

Seven consecutive quarters of U.S. economic growth has bolstered total personal income, Thredgold said. Modestly stronger gains in total personal income are likely for most states in 2011. Even stronger gains are likely in 2012 and 2013 as job and income gains return to traditional levels, he added.