Small-business conditions slip in Utah

Utah small-business conditions slipped in October below the lowest annual figure in at least 17 years, in part because of tighter access to labor, according to a report released Tuesday.

A lower Utah unemployment rate — implying a smaller available labor pool for Utah companies — contributed to the Zions Bank Small Business Index for Utah falling to 84.0 in October, down from a revised 85.4 in September.

That's below the lowest annual index figure since at least 1991. The annual index has been as high as 126.4 in 1994 and as low as 85.5 in 2001. It was at 123.0 as recently as 2005.

The index measures business conditions from the viewpoint of the Utah small-business owner or manager, with a lower number being associated with less-favorable business conditions. The index uses 100.0 for calendar year 1997 as its base, and it includes revisions to various historical and new forecast components as they become available.

The most heavily weighted component of the index, Utah's unemployment rate, was an estimated 3.5 percent in the latest month, down from 3.7 in the prior month.

The 3.5 percent rate compares with 2.8 percent a year earlier. Utah's total employment rose an estimated 1,800 jobs, or 0.1 percent, during that period. That's 500 jobs better than the prior year-over-year period but the 0.1 percent growth rate is the lowest 12-month growth since the year after July 2002.

Nationally, the unemployment rate in October was the highest in 14 years, 6.5 percent, and above the 4.8 percent rate a year earlier.

"The retail trade sector lost 38,000 jobs in October, an ominous sign as the critical holiday season approaches," wrote Jeff Thredgold, economic consultant to Zions Bank and author of the report.

"The estimated net decline of nearly 1.2 million jobs during 2008's first 10 months is a painful contrast to the average annual gain of 1.9 million net new jobs during 2005 to 2007," he wrote. "Such losses are likely to build in coming months as the U.S. economy struggles with possibly the worst recession since the early 1980s."

Thredgold suggested that severe U.S. economic weakness, combined with declining inflation pressures, would force the Federal Reserve to cut its key interest rate to its lowest level on record, "thereby benefiting many of Utah's small businesses."

The Fed cut the federal funds target rate Oct. 29 to 1.0 percent, matching the levels of the June 2003-04 period and the lowest rate in 50 years. It was the ninth trim during the current economic downturn.