A sluggish economy and geopolitical unrest may lead to another interest rate cut by mid-2003, but one Utah economist expects the state's economy to post modest growth by year's end.
The Utah Zions Bank Small Business Index for February declined to 90.9, compared to 92.1 in January. The index measures business conditions from the point of view of small-business owners or managers. A lower number is associated with less-favorable conditions. The index uses 100 for calendar year 1997 as its base year.
Jeff Thredgold, economic consultant to Zions Bank, said February's index registered lower results in part because of the artificial employment boost in February 2002. The year-over change in total employment, which spiked by 10,000 jobs during the 2002 Olympic Winter Games, is one of the factors used to calculate the index.
"Not coincidentally, total employment in Utah was down about 10,500 jobs from a year ago," Thredgold said. "Even when you account for the Olympic build-up, there are still fewer jobs. And fewer jobs means less income, which means less spending, etc. That pulled the index down."
The most heavily weighted component of the index, the state's unemployment rate, was unchanged from January's revised 5.3 percent.
Nationally, the lingering effects of the recession combined with mounting political crises continue to block economic recovery and growth. That has led more analysts to expect the Federal Reserve to cut short-term interest rates by May, Thredgold said. The Fed cut its key rate 11 times in 2001, but it has not acted since November 2002, when the federal funds rate was lowered to 1.25 percent. Thredgold predicted the rate could go as low as 0.75 percent this year.
Despite the uncertainty, the index suggests better times ahead, Thredgold said.
"The index's overall trend is improving in Utah," he said. "We do expect to see a fairly decent increase in the index next month, tied to stronger employment figures.
"But whether it's next month or the month after, it will happen. Utah's numbers are slowly getting better, as they are throughout the region."