Small-biz index puts spin on dismal science.

• Author: Taylor, Mike

SINCE 1997, ECONOMIST JEFF THREDGOLD HAS PUT together a monthly Colorado Small-Business Index that even he admits is counterintuitive. For instance, a drop in state unemployment sounds favorable from an overall economic standpoint and is useful press-release fodder for politicians, but it registers as a negative in Thredgold's index.

Why? Because Thredgold isn't reporting on general economic conditions with the index (although he does that, too, elsewhere); he's reporting strictly on conditions for small businesses. There is a difference.

"The governor of Colorado can sit up and say unemployment's going down, the economy's getting better," explains Thredgold, who produces the index for VectraBank Colorado and similar reports for three other states. "But if you're running a small business, that's not good news, because you're struggling to find bodies."

That was the case with Thredgold's September Colorado Small Business Index, when state unemployment dropped to 5.0 percent compared to 5.3 percent the previous month. Unemployment is just one of 13 components of Thredgold's index, but it is the most heavily weighted of them. Thus, with fewer people out of work but also a reduction in available workers, Colorado's small-business index in September fell to 106.0, compared with 107.9 in August.

That's not to say Thredgold sees much positive about times like 2001, when talented workers abounded but places for them to work were vanishing. Or the piping-hot Internet and tech days of 1999 and 2000 when recent college grads had employers over such a barrel the prospective workers could command foosball tables in the office, elimination of dress codes and unlimited caffeinated beverages in every cube--or so the myth goes.

"Five or six years ago, Colorado business was booming, but unemployment in Denver was 2.5 percent," says Thredgold, whose Thredgold Economic Associates is based in Salt Lake City. "There were strong levels of retail sales, strong income growth, but you couldn't find bodies to hire. Then three years later, you could have all the help you wanted, but nobody was walking in the door to do any business."

He sees Colorado currently at a happy medium where favorable small-business conditions are concerned, with unemployment in the low 5-percent range.

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"Business activity is good, it's slowly getting better," Thredgold says. "You can find good people to hire, but it's a little tougher, now. But it's certainly not like...