Plunge in first index of '07 belies 'rock solid' economy

It's not as bad as it looks.

The Zions Bank Small Business Index, a measure of business conditions from the viewpoint of Utah's small-business owners and managers, plummeted to 107.3 in January from 116.8 in December.

The index 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.

Kendall Oliphant, senior vice president at Thredgold Economic Associates, said January's index results don't paint a picture of nose-diving business conditions from December to January. Rather, he said, they're more a "best guess" at what's to come.

Thredgold Economic Associates prepared the Zions report.

"The main cause of the jump is actually that it's a new calendar year," Oliphant said. "We move from historical data to estimates (at the first of the year), so what January's number really says is that this is our best guess of how things are going to go in 2007."

But the index itself dropped last month, precipitously. An omen of things to come? Not so much, according to Oliphant.

"Yes, it's true that things are going to calm down a little bit in Utah in 2007," he said. "But that's not new. We knew that. We've been firing on all cylinders-plus for the last few years. So things will slow down somewhat, but not enough to make anyone worry."

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

Job growth, another factor used in the index, rose 4.7 percent over the past 12 months — the strongest rate in the nation. During the year-over period, Utah added 55,700 jobs.

By comparison, the U.S. Labor Department reported earlier this month a net gain of 111,000 jobs in January, which fell short of the expected 150,000 increase. The national unemployment rate was 4.6 percent, up slightly from December's 4.5 percent rate.

While job growth slows, Utah's unemployment rate will creep up a bit during the year, Oliphant said. Add to that a "moderate" increase in bankruptcy filings — due in part to a return to semi-normalcy after 2005's dramatic bankruptcy law changes — and Oliphant said it is likely a bit of pressure will come off the throttle during the next 12 months.

Still, Oliphant characterized the state's economic health as "rock solid."

"Utah will still be in the top five to 10 states for some time to come, most likely, in terms of job growth, quality of jobs and unemployment staying low," he said.

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E-mail: jnii@desnews.com