Goldilocks, this is Utah calling.

Utah is looking for an economic "happy medium," a soft landing toward which it appears to be heading, according to a report released Tuesday by Zions Bank.

The bank's Small Business Index was 111.3 in December 2006, up from a revised 109.9 in November. 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 waiting for a happy medium between low unemployment — which is good for the economy because it means that people are finding jobs, making money and spending money at small businesses," said Kendall Oliphant, senior vice president at Thredgold Economic Associates, which prepared the Zions report. "But we need to find a happy medium, where businesses can also find workers. So the unemployment rate needs to be not too low, and not too high. Like Goldilocks."

The most heavily weighted component of the index, Utah's jobless rate, registered 2.6 percent, according to the state's most recent data, up from the previous month's 2.5 percent. A lower unemployment rate is a negative contributor to the index because it suggests businesses are facing an increasingly shallow labor pool.

The Goldilocks range for Utah unemployment is "probably somewhere in the 3 percent to 4 percent range," Oliphant said.

"I think most people agree that 2.5 percent unemployment is just not sustainable," he said. "In the short term, it's fine. A lot of people will find it easier to find work. But in the long term, businesses just can't keep creating jobs if there's nobody to hire."

Job growth, another factor used in the index, rose 4.9 percent over the past 12 months — the strongest rate in the nation. During the year-over period, Utah added 57,700 jobs.

Utah should make progress toward its soft landing in 2007, Oliphant said. Job growth will start to slow, mostly likely in the next few months, he said, and the unemployment rate will hit the 3 percent range at some point during the year.

Which is fine, given the strength of the state's economic fundamentals.

"We've got a strong housing market still, compared to the rest of the country," he said. "We've got job growth in every sector. People are moving to the state, which is how we're able to continue to create jobs with such low unemployment. So the fundamentals are there.

"The U.S. economy looks like it's holding its own. It slowed down recently, but it was supposed to slow down — the Federal Reserve was trying to slow things down, to make sure that inflation doesn't get out of hand."

And while a minority of economists expect the Fed to raise short-term interest rates in 2007, Thredgold Economic Associates' president, Jeff Thredgold, wrote in the Zions report that "we currently expect the Federal Reserve to remain on hold until its meeting in late June or early August, with an easing move then followed by one or two subsequent easing moves."

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