On the second day of the stock market's dramatic pull-back amid inflation and interest rate concerns, a report released Tuesday said Utah's economy remains hot to the touch.

The Zions Bank Small Business Index rose to 115.4 in May, up from a revised 114.9 in April.

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.

"We're up a little bit, really for two primary reasons," said Jeff Thredgold, economic consultant to Zions Bank and head of Thredgold Economic Associates. "One, our unemployment rate went up from 3.4 percent to 3.5 percent. Again, from the viewpoint of the small-business owner or manager, that implies a little better labor availability in what is an incredibly tight labor market right now. Two, job growth was just a little bit stronger (in May). The Utah economy is still running at 90 miles an hour."

During the past 12 months, Utah added about 47,900 jobs.

The state's strength reflects a pocket of economic activity — including Western states like Nevada and Idaho — amid the broader tumult, Thredgold said.

"Utah is still strong," he said. "Right now we're running 90 miles per hour. Idaho is running 100. Idaho has surpassed Nevada as the single strongest job creation state, according to the latest data. Utah is still fourth.

"You can't really find people to hire. . . . But one of the byproducts is strong job growth and strong home price appreciation, and (going forward) that will continue to be there."

The U.S. Department of Labor reported a net national gain of 75,000 jobs in May, short of Wall Street's projected gain of 170,000 jobs. And this week, the Dow Jones industrial average tumbled nearly 250 points in two days, after Federal Reserve Chairman Ben Bernanke told an international banking forum in Washington, D.C., that there is "strong consensus" at the Fed to keep inflation low and that recent up-ticks in inflation readings "bear watching."

Thredgold said he was surprised the market reacted as violently as it did on Monday and, to a lesser degree, Tuesday.

"Bernanke has been in office for about four months now, and there have been some people who have questioned his inflation-fighting resolve," Thredgold said. "He had to make 'the speech' or 'the statement' that made it clear that the Fed will be vigilant at fighting inflation. And over time, that's a positive thing.

"Over time, as the markets become more comfortable with him at the helm, long-term investors and lenders will become more comfortable putting money in long-term assets. It's like he's giving us our medicine now so we won't get sick later, and as patients we'll have more confidence in the doctor."

Thredgold predicted two more interest rate increases by year's end.

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