Sacramento region drops on Prosperity Index

Sacramento region drops on Prosperity Index

Sacramento Business Journal - 9:09 AM PDT Friday, August 17, 2007

by Kelly Johnson

Staff writer

The Sacramento region is falling behind even more of its competitors when it comes to business climate.

The region fell in the second quarter from No. 9 to 10th place among 11 western U.S. markets with which Sacramento competes for new businesses, according to the latest Prosperity Index report released today. The area comprising Sacramento, Placer, Yolo, El Dorado, Sutter and Yuba counties dropped below Portland, Ore. Sacramento's business climate remained better than that of Denver and topped the national average.

The Prosperity Index is compiled by the Sacramento Regional Research Institute, a joint venture of California State University Sacramento and the Sacramento Area Commerce and Trade Organization. The institute compiles a business climate report each quarter and a larger report annually that also includes comparisons of "people" and "place" measurements. The next annual report will be released in the fall.

In the business component for the second quarter, the Sacramento region scored 3.5 out of a possible 10, down from 4.3 in the first quarter. Scores fell for job growth, unemployment rate and payroll growth, while the area posted gains in venture capital investment, office vacancy rate and growth of new businesses.

Salt Lake City took the top slot among 11 Western markets for business climate, overtaking Phoenix. In other changes since the first-quarter report, Denver and the national average switched places on the list, with the United States average falling to last place. This demonstrates, the report said, "that all of these competitive economies in the western United States present some of the strongest business climates in the nation."

What's happening, said institute director Ryan Sharp, is that all the regions are experiencing slower job and payroll growth. Salt Lake City is just slowing more gradually than everyone else. Like Sacramento, the regions studied have been dealt a slowdown in construction, financial activities and other sectors.

When the institute released its first Prosperity Index in February 2006 for the third quarter of 2005, the region ranked No. 9 for business climate. Since then, the Sacramento region has ranked either ninth or 10th for business climate except for one quarter -- the fourth quarter of 2005 -- when it reached No. 7.

The intent of the report is to help business and community leaders see how Sacramento stacks up in economic prosperity and the areas where it needs to improve to remain competitive.

Any index that provides benchmarks for improvement has value, said Jim Williams, one of three chairs of Partnership for Prosperity, a coalition of local groups that is developing an economic development plan for the region.

"It's useful for tracking performance in certain arenas," said Williams, principal of Williams + Paddon Architects + Planners Inc. He noted, however, that every business makes decisions based on many different factors -- and not all of them can be reflected in such a comparison.