Conditions for Utah's small businesses slipped a bit in August, despite better access to labor, according to a report released Tuesday.

The Zions Bank Small Business Index for Utah was 85.2 in August, down from a revised 85.3 in July.

The index measures business conditions from the viewpoint of the Utah small-business owner or manager. It uses 100.0 for calendar year 1997 as its base, and a lower index number is reflective of less-favorable business conditions.

The most heavily weighted element of the index is Utah's unemployment rate, which was estimated at 3.5 percent, up from a revised 3.3 percent in the prior month and up from 2.7 percent a year earlier. A higher Utah unemployment rate is a positive contributor to the index because it implies increased access to Utah labor.

"Total Utah employment rose by an estimated 7,300 jobs (up 0.6 percent) over the past 12 months," Jeff Thredgold, economic consultant to Zions Bank and president of Thredgold Economic Associates, said in the report. "This rise compares to a revised gain of 10,800 jobs in the prior year-over-year period. The 0.6 percent rise marks the lowest 12-month employment growth rate since the September 2002 to September 2003 period."

Meanwhile, the national economy lost an estimated 84,000 net jobs in August, and the U.S. unemployment rate rose to a five-year high of 6.1 percent.

"The estimated net decline of 605,000 jobs during 2008's first eight months was a painful contrast to the average annual gain of 1.9 million net new jobs during 2005 to 2007," Thredgold wrote. "However, the average loss of 76,000 jobs monthly during 2008 has been less painful than the 181,000 average monthly job loss during the 2001 recession."

Thredgold noted that the Federal Reserve has left its key short-term interest rate, the federal funds rate, unchanged since April 30, and he expects the Fed to keep the current 2 percent target rate perhaps into 2009.

"If the economy grows faster than expected, or if inflation pressures rise further, the Fed could begin to push its key rate higher before year-end," he wrote. "Conversely, if the outlook for the economy worsens, or if credit markets 'freeze up' again, the Fed could respond with another aggressive rate cut."

Higher short-term interest rates would hurt many small businesses, while lower financing costs would help, he said.

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