Vectra Bank Colorado Small Business Index Reports Record Low Short-term Interest Rates Can Benefit Colorado's Small Businesses

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The Vectra Bank Colorado Small Business Index for Colorado measured 114.2 in November 2011, down from a revised 114.6 in October 2011.

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With all of the uncertainty in the world, there is at least one thing we can count on...financing costs will stay extremely low

The Vectra Bank Colorado Small Business Index for Colorado measured 114.2 in November 2011, down from a revised 114.6 in October 2011.


  •     Colorado’s unemployment rate was estimated at 8.1% in the latest month, down from the prior month’s 8.3% rate. Total employment grew by 32,000 jobs during the past 12 months.
  •     Colorado small businesses that are net borrowers of funds can take advantage of historically low short-term interest rates likely to remain in place throughout 2012 and much of 2013.
  •     The U.S. economy saw a net rise of 120,000 jobs during November, largely matching expectations. Estimated job gains of the two prior months were revised higher by 72,000 jobs. The U.S. unemployment rate declined from 9.0% in October to 8.6% in November, with a drop in the estimated labor force accounting for much of the decline.

Of all the issues that owners or managers of Colorado’s small businesses can complain about, the cost of short-term financing is not one of them. While obtaining credit in many cases is more difficult than a few years ago, and financial issues in Europe and U.S. political uncertainty have raised anxiety levels throughout the world, one constant is likely to remain in place throughout 2012 and perhaps well into 2013: the federal funds rate

The Federal Reserve’s most important interest rate—the federal funds rate—has been at an all-time low target range of 0.00%-0.25% since December 2008, a period of three years. Moreover, the Fed’s Open Market Committee has noted frequently its intent to keep that rate at the current level “until at least mid-2013.” Such a statement is almost unprecedented in the Fed’s history, as the institution has always preferred to keep financial market players guessing as to its next policy move.

The Federal Reserve has also enacted monetary policy initiatives in recent years that are also unprecedented, with the intent of helping stabilize the domestic and global economies. Such policy moves as two bouts of “quantitative easing,” Operation Twist, and the latest move to enhance dollar availability for European banks come to mind. In addition, the lowest level of long-term interest rates in 60 years can be of value to those businesses with access to longer-term fixed-rate financing.

The level of short-term financing costs is a component of the Small Business Index for Colorado.

The Vectra Bank Colorado Small Business Index for Colorado measured 114.2 in November 2011, down from a revised 114.6 in October 2011. The Index measures business conditions from the viewpoint of the Colorado small business owner or manager.

A lower Index number is associated with less 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 Colorado unemployment rate—the most heavily weighted component of the Vectra Bank Colorado Small Business Index for Colorado—was estimated at 8.1% in the most recent month, down from the 8.3% rate of the prior month. The 8.1% rate compares to the 8.9% rate 12 months ago. A lower Colorado jobless rate is a negative contributor to the Index as it suggests decreased access to labor for small businesses. Other associated factors typically tied to a lower unemployment rate, such as greater job creation, greater income gains and higher retail sales, pull the Index higher.

The state’s unemployment rate averaged 8.9% during 2010, 8.3% during 2009, 4.8% in 2008, 3.7% in 2007 and 4.3% in 2006. Colorado’s jobless rate averaged 4.6% between 1990 and 2005.

The last 12 months saw an estimated increase in Colorado employment of 32,000 jobs. This increase compares to a revised gain of 20,900 jobs in the prior year-over-year period. Colorado lost 25,500 jobs in 2010, lost 104,700 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 gains leading to greater income creation and stronger retail spending have a positive impact upon Colorado’s small businesses and the Index.

The U.S. Department of Labor reported a net gain of 120,000 jobs in November 2011, largely matching the 125,000 gain expected. In addition, estimated job gains of the two prior months were revised higher by 72,000 jobs.

The U.S. unemployment rate declined sharply to 8.6% in November, versus the 9.0% rate of October and the 9.1% rate of the three prior months. Much of the rate decline was tied to 315,000 people leaving

the estimated labor force…and no longer being counted as unemployed. The remainder of the decline was tied to a stronger job gain estimate in the household survey than in the “official” establishment survey. The current 8.6% jobless rate compares to the 9.8% rate of one year ago, the 9.9% rate of November 2009, and the 6.8% rate during November 2008.

Goods producing employment fell by 6,000 jobs in November, with a loss in construction (down 12,000 jobs) offsetting small gains in manufacturing (up 2,000 jobs) and mining and logging (up 4,000 jobs). Private-sector service providing employment rose by 146,000 jobs in November, led by gains in retail trade (up 50,000 jobs), professional & business services (up 33,000 jobs) and education & health services (up 27,000 jobs). Overall government employment fell by another 20,000 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 net loss of 5.1 million jobs during 2009 easily surpassed the 2008 total. The American economy added 940,000 net new jobs during 2010, or 78,000 per month. Gains-to-date during 2011 have totaled 1,448,000 jobs, or 132,000 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. Consistently stronger gains are necessary to lead the unemployment rate lower.

The December 2011 Vectra Bank Colorado Small Business Index for Colorado will be released on January 12, 2012.


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Meghan Dougherty

Loren Faye
Vectra Bank
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