Utah small-business outlook bright

Utah's small businesses should continue to see steady, if measured, growth in the near term, even in the face of recent interest rate hikes, according to a new report from Zions Bank.

The bank's Small Business Index, released Wednesday, fell to 102.5 in January 2005 from a revised 103.7 in December 2004.

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.

"The economy is doing well in Utah, the region and the nation," said Jeff Thredgold, economic consultant to Zions Bank. "U.S. economic growth (in 2004), after inflation, was the best we've seen in five years. This year should be a little softer than last year, but we should still see solid, sustainable growth."

Utah's unemployment rate, the most heavily weighted component of the index, was estimated at 4.4 percent in December (the most recent data available), down from the previous month's revised 4.6 percent.

"On the surface, decline in the unemployment rate is good news for the economy and the state," Thredgold said. "But from the small-business owner's standpoint . . . it's actually a negative thing, because it suggests they'll have a harder time finding qualified people."

Total employment in Utah, another key factor in the index, rose by about 35,100 jobs (or 3.2 percent) during the past 12 months, Thredgold reported. Job gains have a positive impact on the index, because they suggest there will be greater income and retail spending.

"Job growth stayed solid," Thredgold said. "At 35,000 new jobs, it's still the best we've seen in the last six years. The headline for this month will be that even as short-term interest rates rise — and they will continue to rise — the economy is still doing pretty well."

In 2005, steady employment gains are likely to continue, which will contribute to measured economic growth, Thredgold said. He predicted net national average employment gains of 175,000 to 200,000 new jobs monthly in 2005, similar to the 181,000 average monthly gains in 2004.

On Feb. 2, the Fed increased short-term interest rates from 2.25 percent to 2.5 percent. Analysts anticipate that more tightening is in store at the Fed's March and May meetings.

"Even as (interest) rates rise, you'll see more stories in the Utah and regional press about a stronger economy," he said. "The word hasn't totally gone out that the economy has turned around. We had our first recession in 50 years in 2001-2003. We've had a pretty good bounce since late 2003 and into 2004.

"A lot of people are feeling better, and there are jobs available. That said, I still don't know that a lot of people on the street are aware that the economy is doing better."

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