Small Business Index falls to 67.5

An indicator of Utah's small-business strength took another tumble in January.

The Zions Bank Small Business Index fell last month from a revised 68.8 in December 2008 to 67.5 in January.

The index measures business conditions from the viewpoint of the Utah small-business owner or manager. A lower index number is associated with less favorable business conditions for Utah's small businesses, using 100.0 for calendar year 1997 as its base year.

Zions Bank economic consultant Jeff Thredgold said that the decrease showed that Utah is not immune to the impact of the current economic slowdown.

"It just reflects the fact that the U.S. recession is hitting every state, including Utah, hard," he said. "The biggest change in the index was that the next 12 months of Utah employment are starting to look pretty ugly."

The loss of 25,000 jobs last year had a significant negative impact on small businesses, particularly when just a few years ago the state led the nation in employment growth, he said. But the growing number of available workers could become a potentially positive indicator in the future.

"From the perspective of a small-business owner or manager, in theory, higher unemployment means that there are more people available to be hired," Thredgold said. "It's kind of a perverse logic, but looking from the viewpoint of a business manager, greater levels of labor to draw from is a positive thing."

But fewer jobs means less productivity, less retail spending and less tax revenue for the state, he said.

"It all pulls the index lower," a far cry from the way things were not so long ago, he said.

"Step back two or three years ago where we're at full employment and business sales are good, except you can't find anybody to hire to fill all your open positions," Thredgold said. "Now a small business can find all the talented people they want, but there is not as much business walking in the door."

The report said that the current U.S. recession, which officially began in December 2007, could continue longer than the current consensus view of economic analysts.

The U.S. economy lost an estimated 598,000 net jobs in January, with the national unemployment rate rising to a 16-year high of 7.6 percent, the report stated. Thredgold said the state should also expect to feel some of that same pain in the coming months.

"As long as the national economy is struggling and as long as financial markets are struggling, Utah is going to struggle," Thredgold said.

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