Small businesses likely to see less growth

Utah's small businesses are "fighting two headwinds," which likely will mean modest slowing in growth through 2005, according to a report released Tuesday by Zions Bank.

The Zions Bank Small Business Index fell to 110.3 in April from a revised 110.8 in March. 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 conditions for Utah's small businesses. The index uses 100.0 for calendar year 1997 as its base.

"The index dipped a bit, but it's no big deal," said Jeff Thredgold, economic consultant to Zions Bank. "Utah's numbers continue to be strong. We're up over 40,000 jobs over the past 12 months, which is pretty good after being in recession for the last few years. We've had a solid recovery. Labor markets are getting tighter. Home values are going to rise more than they have in probably the last five or six years."

But, Thredgold said, two "headwinds" are pushing against Utah's small businesses: rising interest rates and slowing in the broader economy. The Federal Reserve will raise short term interest rates at least twice more, Thredgold said. Additional increases will be predicated on job growth.

"The Fed is kind of withdrawing the punch bowl from the party, so to speak," Thredgold said.

At the same time, Thredgold said that the 18-month period ending in December 2004 was the strongest 18-month period in the nation's economy in the last 20 years.

In Utah, total employment rose by about 40,300 jobs, or 3.7 percent, over the past 12 months, according to the Zions report. Job gains have a positive impact on the index, because they suggest there will be greater income and retail spending.

The most heavily weighted component of Zions' index, the state's unemployment rate, was estimated at 4.8 percent in March (the latest data available), unchanged from the month before.

Going forward, Thredgold warned, "Don't expect Utah's number to get any stronger in terms of job growth. It will still be solid, but not quite as impressive as it has been. The index may have topped out for a little while.

"We've had a nice recovery. But when you're fighting those headwinds . . . The Utah economy will do well, just perhaps not as well as it has in the last 12 to 15 months."

The U.S. Department of Labor reported last week that 274,000 net new jobs were created nationwide in April, exceeding analysts' expectations. The nation's unemployment rate was 5.2 percent in April, unchanged from the prior month.

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E-mail: jnii@desnews.com