Vectra’s Colorado business index increases more than nation’s

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The Vectra Bank Colorado Small Business Index rose to 112.9 last month, up from a revised 106.3 in December. By way of comparison, the U.S. Small Business Index only rose slightly to 115.7 in January, up from 114.8 in December.

Several factors contributed to the state’s index rising, including the slight increase in the state’s unemployment rate from 8.6 percent to 8.8 percent in the latest month.

The unemployment rate is the most heavily weighted component of  Vectra’s business index for Colorado. A higher jobless rate suggests increased access to labor for small businesses, and thus is seen as a positive contributor to the index.

Other factors, however, that are usually related to a higher unemployment rate – such as decreased income gains, decreased job creation or lower retail sales – make the index lower.

Although total employment in Colorado grew by 5,200 jobs during the past 12 months, an increase of 0.2 percent, the state lost 106,300 jobs in 2009.

Job declines, until the most recent period, have had a negative impact upon small businesses, dragging down the index.

“Colorado’s swing from net job losses during the most recent 12-month period to net job gains should continue in coming months,” said Jeff Thredgold, corporate economist for Vectra. “Colorado’s economic recovery remains on track.”

At the same time, the national economy has begun to show more signs of self-sustaining growth. In other words, real growth, and not the somewhat artificial growth during late 2009 and in early 2010, which was largely generated by massive government stimulus. The gross national product grew at a 3.2 percent real annual rate (after inflation) during the fourth quarter of last year, the best performance since the first quarter of 2010.

National economic performance is also a component of the index for Colorado. Stronger growth contributes positively to the index, as it typically means greater outside stimulus for small business opportunities within the state. Global and regional economic performance are also components of the index.

The Vectra index measures business conditions from the viewpoint of managers or small business owners. As such, a higher index number is associated with more favorable business conditions for Colorado’s small businesses. The base year for the index is 1997, and 100.0 is the baseline.