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Written by Jeff Thredgold, President, Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
The U.S. economy grew at a soft 2.0 percent real (after inflation) annual rate during 2010's third quarter, largely matching economists' forecasts. Such growth represented the fifth consecutive quarter of U.S. economic growth since the Great Recession officially ended in June 2009.
By comparison, U.S. growth over the past 30 years has averaged 3.6 percent annually after inflation, or twice the pace of the past two quarters. Thredgold reported that in his view, "Weaker U.S. economic growth in recent quarters has resulted from the facts that 1) the recent election cycle provided a major distraction from growth, and 2) recovery from the ravages of the Great Recession, the most painful economic and financial hit to our economy and our lives collectively in 80 years, does not happen quickly."
A declining number of forecasting economists continue to suggest that a double-dip recession is likely in 2011. Prior forecasts of some economists of a rapid recovery from the Great Recession have also declined. Thredgold's long-term view of an economy struggling along at a modest 2.0 percent to 3.0 percent real annual pace remains on track.
Republican gains in the 2010 mid-term elections were premised on the concept of slowing growth in federal spending, generating smaller budget deficits, and reducing health care and financial system bureaucracy. Whether the two sides can work together to address critical issues remains unanswered.
The performance of the U.S. economy is a component of the Small Business Index, as is the performance of the regional and global economies. Stronger U.S. economic growth is a positive contributor to the Index.
The Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.2% in the most recent month, up from the 8.1% rate of the prior month. The 8.2% rate compares to the 7.7% rate 12 months ago. A higher Colorado jobless rate is a positive contributor to the Index as it suggests increased access to labor for small businesses. Other associated factors typically tied to a higher unemployment rate, such as lesser job creation, lesser income gains and lower retail sales, pull the Index lower.
The state's unemployment rate averaged 7.7% during 2009, 4.9% in 2008, 3.9% in 2007, and 4.4% in 2006. Colorado's jobless rate averaged 4.6% between 1990 and 2005.
The last 12 months have seen an estimated decline in Colorado employment of 23,800 jobs (down 1.1%), which compares to a revised loss of 25,500 jobs in the prior year-over-year period. Colorado lost 106,300 jobs in 2009, added 19,000 jobs in 2008, added 52,200 jobs in 2007, and added 53,100 jobs in 2006.
These job totals compare to gains averaging 46,500 net new jobs annually between 1990 and 2005. More recently, job declines, leading to slower income creation and weaker retail sales, have had a negative impact upon Colorado small businesses…and therefore the Index.
The Vectra Bank Colorado Small Business Index for Colorado was 103.2 in October 2010, up from a revised 102.9 in September 2010. The Index measures business conditions from the viewpoint of the Colorado small business owner or manager.
A higher Index number is associated with more favorable business conditions for Colorado's small businesses. The Index uses 100.0 for calendar year 1997 as its base year. The Index also includes revisions to various historical and new forecast components as they become available.
The U.S. Department of Labor reported a net gain of 151,000 jobs in October 2010, much stronger than the 68,000 net gain expected. The rise of 159,000 jobs in the private sector was also greater than expectations. In addition, August and September job data was revised to show the addition of 110,000 more jobs that originally reported.
The U.S. unemployment rate remained at 9.6% in October. The current 9.6% jobless rate compares to the 10.1% rate of one year ago and greatly exceeds the 6.6% rate of October 2008.
Goods-producing employment rose by 5,000 jobs in October. Manufacturing employment fell by 7,000 positions, while construction added 5,000 jobs. Mining and logging employment rose by 7,000 jobs.
Private-sector service-providing employment rose in October by 154,000 positions. The professional & business services sector added 46,000 jobs, while the leisure & hospitality sector lost 5,000 jobs. The education & health services sector added 53,000 positions in October, while retail trade added 28,000 jobs. Overall government employment fell by 8,000 jobs during the month.
The U.S. economy suffered a net decline of 3.6 million jobs during 2008, the worst year since 1945. The loss of 4.8 million jobs during 2009 easily surpassed the 2008 total. The most recent recession was the first since the Great Depression to see all net job gains of the prior economic expansion eliminated.
The American economy added an estimated 874,000 net new jobs so far this year, or 87,000 per month. Roughly 130,000 net new jobs need to be added monthly just to meet the needs of a rising population, and just to keep the unemployment rate stable.
The November 2010 Vectra Bank Colorado Small Business Index for Colorado will be released on December 9, 2010.
Jeff Thredgold
Thredgold Economic Associates
Economic Consultant to Vectra Bank Colorado
©Copyright 2010 Thredgold Economic Associates
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