Utah's small businesses gain strength

Job gains and economic growth helped boost the strength of Utah's small businesses in June, according to a new report.

The Zions Bank Small Business Index for Utah rose to 99.9 in June from a revised 98.7 in May. The index measures business conditions from the viewpoint of the Utah small-business owner or manager. A higher index number is associated with more favorable business conditions for Utah's small businesses. The index uses 100.0 for calendar year 1997 as its base year.

Jeff Thredgold, economic consultant to Zions Bank, wrote in his report on the index that the Utah unemployment rate of 4.6 percent in May (the most recent figures available) compares to a jobless rate of 5.7 percent during the same month a year ago.

The unemployment rate is the most heavily weighted component of the Zions index. A lower rate is a negative contributor to the index, because it implies decreased access to Utah labor.

However, total Utah employment rose by an estimated 16,300 jobs over the past 12 months, the strongest gain since 2000, Thredgold wrote.

"Stronger job gains, leading to greater income creation and rising retail spending, (have) a positive impact upon Utah's small businesses, and therefore, the index," he wrote.

The net gain of 112,000 new jobs nationwide in June — though below analysts' predictions — also shows continuing growth in the employment market. Thredgold wrote that the U.S. economy has added about 1.27 million net new jobs during 2004's first six months.

"Impressive U.S. economic growth suggests that solid employment gains are likely to continue," he wrote. "Strong job gains should occur even as short-term interest rates rise."

And that increase in rates has begun. The Federal Reserve's decision last month to raise its key rate to 1.25 percent from the prior 46-year low of 1 percent should be the first of several 0.25 percent increases this year, Thredgold wrote.

"Even as short-term interest rates likely move higher, they will remain historically low," he wrote. "Financing costs are a component of the Utah Small Business Index, with an assumption that most small businesses are net borrowers."

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