Utah's small businesses continue to struggle to find good workers amid the state's impressive economic environment, according to a report released Tuesday by Zions Bank.

The bank's Small Business Index fell to 112.1 in October, from a revised 115.3 in September. The index measures business conditions from the viewpoint of the Utah small-business owner or manager. It uses 100 for calendar year 1997 as its base and includes revisions to various historical or forecast components as they become available. A higher figure is associated with favorable business conditions.

"That (112.1) means, in rough terms, that the outlook for Utah's small businesses is roughly 12 percent higher than in 1997, with 1997 being the base year," said Kendall Oliphant, senior vice president at Thredgold Economic Associates, which prepared the report. "So things are looking better for small businesses now than they were nine years ago. And it's true that things are definitely going well: we have the second-highest job growth rate in the nation, and the second-to-lowest unemployment rate."

The unemployment rate, the most heavily weighted component of the index, registered 2.8 percent according to the state's most recent data, down from the prior month's 3.2 percent. A lower unemployment rate is a negative contributor to the index, because it suggests businesses are facing an increasingly shallow labor pool.

"Small businesses need two main things to perform well: they need customers, but they also need employees," Oliphant said. "When you have an extremely low unemployment rate, it makes it hard to find employees. Although, everything else happening in the economy is making it easy to find customers for most businesses, which is why the numbers stay so high."

Job growth rose 5 percent during the year-over period, according to the latest state data. Job growth is a positive contributor to the index, because it suggests income generation and stronger retail spending.

Utah's hot job market contrasts with data released last week by the U.S. Labor Department, which reported that 92,000 new jobs were created in October, short of analysts' expectations. The nation's unemployment rate was 4.4 percent last month, down from September's 4.6 percent.

Looking ahead, Oliphant said it's unlikely that Utah will be able to sustain its current high growth/low-unemployment environment.

"One of the reasons why job growth will slow somewhat in Utah is because it will be hard to find people to fill positions," Oliphant said. "You can't create a job if there's nobody there to fill it, and that will influence job gains in coming months — exactly how much remains to be seen."

Thredgold Economic Associates also will be keeping an eye on the Federal Reserve, Oliphant said. Sentiment among analysts and economists has shifted from wondering whether the Fed will keep raising interest rates, to when it will start bringing them down to, in recent days, whether it will raise them again.

"There's a lot of uncertainty out there about what the Fed is going to do in the coming months," he said. "We believe it won't do anything through the end of the first quarter of next year. After that, most see (the Fed) dropping rates slightly."

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