"The economy as a whole, and business confidence in Massachusetts along with it, is basically treading water."
Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA) was talking about the latest Associated Industries of Massachusetts Business Confidence Index, which edged up four-tenths of a point in April to 50.5, but remained 6.6 points below its level of last April.
Employer confidence, according to Torto, reflects an economy doing well on measures of resilience and stability but struggling in dynamic areas such as consumer spending, job creation and exports. He notes that while economic growth was apparently greater in the first quarter of 2013 than in the prior quarter both nationally (2.5 percent annualized) and in Massachusetts (3.9 percent), its strong start has been fading.
"We're not going under, but we're not making much forward progress either.” Torto said.
Ambivalence is the watchword throughout the April Business Confidence Index, as employers remain mildly optimistic about the economy, but far less so than a year ago.
The Current Index, which assesses overall business conditions at the time of the survey, rose by a modest six-tenths to 49.2, and the Future Index, measuring expectations for six months out, crept up two-tenths to 51.8. The Company Index, reflecting survey respondents' assessments of conditions for their own operations, was unchanged in April at 54.2, and the Sales Index held steady at 55.3.
"The Employment Index did see a small gain, adding eight-tenths to 52.1," said BEA member Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight, "but employers are not planning much hiring at this point. For the past six months 30 percent of respondents have reported adding staff while 22 percent reduced, and for the next period 20 percent plan to add personnel and 15 percent foresee reductions, with 64 percent expecting to stand pat."
Richard C. Lord, President and Chief Executive Officer of AIM, said the employment number remain a matter of concern.
"The hiring numbers are positive, but less than robust," he said, "and the same can be said of recent state employment reports. Massachusetts is adding jobs, and employers tell us they are again raising wages above inflation, but unemployment remains unacceptably high, with particularly adverse effects on less skilled and less experienced jobseekers."
"There is no magic here. We need better business conditions that bring sustained growth, workers with the skills to be productive in our 21st-century economy, and firm steps to resolve deterrents to hiring such as the uncertain cost impacts of implementing the Affordable Care Act.”
The AIM Index, which has appeared since July 1991, is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.
Total nonfarm payroll employment rose by 165,000 in April, and the unemployment rate was little changed at 7.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in professional and business services, food services and drinking places, retail trade, and health care.
This is the opening paragraph of the government’s April employment report – called the Employment Situation news release for April - issued this morning. Initial media reaction was tepid (“hardly impressive” – CNN) but the markets are up – and they’re right. This is an encouraging report.
A gain of 165,000 jobs in April is respectable, and beats expectations. Revisions to the February and March figures add 114,000 jobs to the year’s total. (March’s revised 138,000 looks a lot better than the 88,000 initially reported.) The headline unemployment rate is down a tenth, which if nothing else will help consumer confidence. We are chipping away at the numbers of long-term unemployed and discouraged workers.
Additionally, most of the sectors gaining jobs – professional and business services, food services and drinking places, retail trade – are those that tend to do well in a growing economy. Expansion in these areas reflects, to a considerable extent, increases in discretionary spending by businesses and households.
The news could be better, of course. We would like to see more job creation; sustained gains of the order of February’s (revised) 332,000 would bring unemployment down rapidly. A large number of people who want full-time jobs are working part-time, pointing to severely restricted opportunities for the less skilled. But the good signs predominate.
We know that the economy has cooled somewhat after starting 2013 strong, and that employers facing business uncertainties, productivity concerns, and rising nonwage employment costs (notably those arising from the Affordable Care Act) have been careful about adding personnel. The April employment report suggests, however, that the slowdown is less serious than many had feared.
Governor Deval Patrick filed legislation yesterday to freeze unemployment insurance rates for 2013 and reconfigure the contributions employers make under health care reform.
The proposal to freeze UI rates at the current Schedule E for a fourth consecutive year would roll back a $500 million increase on Massachusetts employers that took effect January 1. Massachusetts House Speaker Robert DeLeo has already expressed support for the freeze, which would still leave the fund used to pay benefits to unemployed people with a balance of $600 million at the end of 2013.
Governor Patrick said at an afternoon news conference that the four consecutive rate freezes have saved Massachusetts employers approximately $1.7 billion. The governor also suggested that long-term structural reform of the UI system, long sought by Associated Industries of Massachusetts, could take place during the current legislative session.
“There is an interest we share with the legislative leadership in comprehensive UI reform and I think it will happen,” he said.
Richard C. Lord, President and Chief Executive Officer of AIM, said the governor’s support of a rate freeze and structural UI reform will strengthen the Massachusetts economy.
“AIM has been at the forefront of efforts to ease the burden of unemployment insurance taxes on the Massachusetts job market, so we are gratified by the legislation filed by Governor Patrick,” Lord said.
“Approval of a freeze will provide $500 million to employers to invest in the people and equipment that will create economic stability in a still-uncertain global recovery.”
The proposed health-care funding changes include the elimination of two key employer contribution requirements - the Fair Share contribution created under the 2006 Massachusetts Health Care Reform law and the Medical Security Program under which employers contribute money to provide low-income unemployed people with health insurance. Administration officials say both programs will be unnecessary under federal health care reform.
The Medical Security Program surcharge will be replaced by an “employer responsibility contribution” of $50 per employee per year to subsidize unemployed people obtaining health insurance either though MassHealth or the Commonwealth Health Insurance Connector. Administration and Finance Secretary Glen Shor said the new fee will end up being less than the $67.20 per employee that companies paid into the Medical Security Fund during 2012.
AIM supports the move to eliminate the Fair Share and Medical Security assessments, but needs to study details of the new levy.
The Fair Share contribution will end on June 30. The provision mandates that employers with 11 or more full-time equivalent employees make a “fair and reasonable” contribution toward the health-care costs of employees or pay an assessment of up to $295 per employee per year.
Three years after the onset of the great recession, is Massachusetts an economic success story or merely an economic story successfully told?
The question lies at the heart of Common Wealth 2012, the annual statement by Associated Industries of Massachusetts of the principles and beliefs that will guide Bay State employers on public policy issues during the New Year. AIM released the report this morning.
The innovation- and technology-driven Massachusetts economy has in many ways become the envy of the country. The Bay State navigated a four-year fiscal crisis without raising income taxes and its 7 percent unemployment rate remains well below the rest of the nation.
Economic output in Massachusetts grew almost twice as fast as the national economy during 2011. Workers here earn an average of 24 percent more than their colleagues elsewhere and enjoy third highest per capita personal income. Manufacturing productivity is among the highest in the world.
But lurking behind these unprecedented accomplishments is a sobering fact – the Massachusetts economy has not created a net new job since 1999.
Amid constant rhetoric from both Democratic and Republican administrations about the importance of job creation, there were 3,247,200 jobs in Massachusetts in July of 1999, and 3,245,400 in November 2011. The commonwealth’s employment base remains 140,000 jobs below its 2001 peak and analysts estimate that another 200,000 Massachusetts residents currently work in part-time positions because they cannot find full-time employment.
The overall numbers include profound shifts in the types of jobs driving the economy. Employment in manufacturing declined from 16.1 percent to 8.0 percent of the total job base in the past two decades, while education and health services grew from 15.9 percent to 20.9 percent and professional and business services grew from 11.5 percent to 14.8 percent.
So how are we really doing in Massachusetts? Is the commonwealth leading the nation by using its considerable university, research and advanced manufacturing assets to remake its economy for the new century? Or has it failed the ultimate measure of the success for an economy or political enterprise - to create employment opportunities for citizens?
Both statements are true. While the commonwealth must continue to nurture the infrastructure of innovative people who keep Massachusetts at the forefront of economic engines such as biosciences, pharmaceuticals, financial services and manufacturing, it must simultaneously ensure that the rest of the economy from which most residents make a living does not fall off the tracks behind those engines.
The alternative is an illusory economic prosperity that looks good on the surface but really worsens income disparities as fewer people fill fewer jobs with higher incomes and educational requirements that most people can’t meet.
We have stated previously that the creation of a job and a person’s ability to do it weaves together every important aspect of social and economic stability – the desire for a better life, the ability to support a family, the confidence to start a business, and the need to support efficient government management of services such as education, health care, and public safety. The current economy has strained the delicate balance of person, employer and job, not only for the 240,000 unemployed residents of Massachusetts and 13 million jobless nationwide, but also for the millions of others who fear losing jobs enough to drive home sales to a 20-year low.
It is the challenge of simultaneously developing new and established sectors of the economy that motivates the public policy work that Associated Industries of Massachusetts conducts on behalf of Bay State employers. The work takes on a particular importance at the dawn of 2012 as the prospect of federal budget reductions and continued economic problems in Europe and elsewhere threaten the growth of key Massachusetts industries such as defense, health care and education.
AIM looks forward to working with state and federal policymakers during 2012 to create an environment to encourage the ingenuity and entrepreneurial energy that has historically driven the Massachusetts economy. AIM stands for jobs, economic opportunity, fiscal predictability, business formation, innovation, education, and a government that acknowledges that the private sector has the unique ability and responsibility to create the Common Wealth for the people of Massachusetts
The Great Recession and subsequent sluggish recovery have widened the gap between economic “haves” and “have-nots” from the local to the global level, a panel of economists said this morning.
Raymond Torto, Carol McMullen and Alan Clayton-Matthews told more than 200 business leaders at the AIM Executive Forum in Waltham that overall economic stability in the U.S. and abroad masks wide variations in the outlook of cities, states, towns, nations and individuals.
“If the head is in the oven and the feet are in the refrigerator, then on average, you are warm,” said McMullen, a veteran private investor and corporate board member.
She said that while the national economy has been growing at a steady two-and-a-half percent annually, some absolute levels of economic activity remain near recessionary levels. And the economic bifurcation is global, she said, warning that Europe stands at the verge of another recession as leaders on the continent dither over its debt problems.
“It could get really ugly,” she said.
Clayton-Matthews, a professor of economics at Northeastern University, continued the feast-or-famine theme by saying that Massachusetts is performing better economically than the nation as a whole, but still finds pockets of strength and weakness within its own borders. He noted that while metropolitan Boston lost 4.3 percent of its job base during the recession, the decline in Springfield reached 5.4 percent. The jobless rate in cities such as Springfield, Fall River and Lawrence remains almost twice the statewide average.
“It has been an extremely unequal recession,” he said.
“For communities that have been tied in with the technology sector and that have an educated work force, they have not had a recession at all. They are doing fine.”
Torto, Global Chief Economist at CB Richard Ellis Group, said that commercial real estate is likewise winnowing strong markets from weak ones and well-capitalized developers from smaller ones. He said the growth of biosciences and technology companies has remained concentrated in the traditional strongholds of Cambridge and Boston instead of spreading throughout the state.
“It’s where they want to be,” Torto said.
He maintained that the private sector nationally remains reluctant to invest its cash reserves to create jobs because business executives lack confidence in the ability of governments in Europe in the United States to resolve their debt and deficit issues.
All three members of the panel, moderated by WBZ radio business anchor Anthony Silva, agreed that Massachusetts faces a significant risk in Europe because 25 percent of Bay State exports go to the continent.
What would you ask three world-class economists if you had the chance? Would you ask about prospects for the Massachusetts economy and your business in 2012? Will the European debt crisis push the US back into recession? Will housing finally bottom out?
Well, your chance is here.
The AIM Executive Forum on Friday, January 13 in Waltham will feature three prominent economists who will dust off their crystal balls and look at where the economy will go during 2012. Speakers include Raymond Torto, right, Global Chief Economist for CB Richard Ellis Group; Carol McMullen, Corporate Director and Private Investor; and Alan Clayton-Matthews, Professor at Northeastern University.
We’re giving employers throughout Massachusetts an opportunity to submit questions for our three experts. All you need to do is to post your question in the comments section below. We’ll select the best questions and let our economists have at it.
If we use your question, we’ll thank you with complimentary admission to a future Executive Forum. If more than one person submits the same question, the first person to post it receives the free ticket.
We will also take questions during the event on Twitter, @aimbusinessnews, #aimeconomicoutlook.
Meanwhile, we invite you to register to attend the Executive Forum for a morning of networking, good food and interesting conversation. The Forum, sponsored by NSTAR, runs from 7:45-9:30 a.m. at the Waltham Westin Hotel.
The Patrick administration yesterday unveiled an economic development plan it says will help Massachusetts compete in the global economy by making strategic investments in education, innovation and infrastructure.
The 34-page blueprint, Choosing to Compete in the 21st Century, is the first to be developed under a 2010 law requiring the governor of Massachusetts to submit to the legislature an economic plan at the beginning of his or her administration. The plan includes five primary initiatives:
- advancing education and workforce development for middle-skill jobs through coordination of education;
- economic development and workforce development programs;
- supporting innovation and entrepreneurship;
- supporting regional development through infrastructure investments and local empowerment; and
- increasing the ease of doing business; and addressing our cost competiveness
An Economic Development Planning Council made up of 34 state officials and business executives developed the plan over eight months. Michael Hogan, President and Chief Executive Officer of the A.D. Makepeace Company in Wareham and a member of the Associated Industries of Massachusetts Board of Directors, represented AIM on the council.
"The Economic Development Planning Council plan will help continue to support the economic growth we have seen, while identifying ways to make Massachusetts more competitive in the world economy and allow the administration to work with our partners in the business and academic communities to make the commonwealth stronger in the long term," Secretary of Housing and Economic Development Gregory Bialecki said in a statement.
The plan contains 55 specific recommendations that strongly reflect the administration’s emphasis on supporting innovation industries and emerging technologies.
Key recommendations, taken directly from the plan, include:
- Design and develop a cohesive, coordinated workforce development system with clear leadership - The commonwealth requires a more cohesive and coordinated “workforce development system” and employers, education and workforce training providers, and others should be engaged in designing this system.
- Protect and maintain full funding of currently well-performing programs such as the Workforce Training Program.
- Strengthen and support the innovation community - Increasingly, the commonwealth will succeed in sectors where its public and private universities, research institutions and companies collaborate to drive discovery and address barriers to development and commercialization that no one institution can do by itself.
- Engage in on-going state regulatory review - In order to enhance the long-term health and prosperity of the state, it is important to maintain a transparent and consistent regulatory process that considers the economic impact of government regulation.
- Contain the increasing cost of health care while protecting access and quality - The commonwealth needs to maintain an appropriate balance between providing both top quality and unimpeded access to health care for its citizens while at the same time carefully watching the increasing cost impact on businesses and jobs.
- Reduce energy costs while creating a diversified energy portfolio that balances competitive pricing with sustainability - While containing the growth of energy costs is a paramount concern in the short-term, it is equally important to focus on longer-term, sustainable energy sources that will fuel our growing economy.
- Make the tax structure more simple, competitive, and predictable by addressing the use of tax-based business incentives - Businesses make location and expansion decisions based not only on the overall business tax burden, but also on the simplicity, fairness and predictability of the tax system. A competitive tax system for Massachusetts should address both aspects. An appropriate area of focus is the use, effectiveness and accountability of tax-based business incentives in the state.
The legislature will conduct a hearing on the administration plan early in 2012.
What do you think? Please share your opinions in the comment space below or contact me directly at email@example.com.
Massachusetts employers see the economic glass half full, despite the ongoing European debt crisis and the failure to the Congressional super-committee to agree on a deficit-reduction plan for the United States.
The AIM Business Confidence Index (BCI) jumped 3.7 points in November to 50.1, edging above neutral on a 100-point scale. Economists say employers appear to have accepted the slow, halting nature of the economic recovery and do not believe that fiscal problems on both sides of the Atlantic will push the nation back into recession.
The November increase broke a three-month decline in employer confidence, but still left the BCI two points lower than a year ago.
“Massachusetts employers foresee slow improvement rather than deterioration,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc., the chair of AIM’s Board of Economic Advisors (BEA).
He noted that while the November Business Confidence survey was taken before the bipartisan Congressional super-committee announced its failure to reach agreement, the result was a foregone conclusion for most respondents. Fifty-nine percent of employers who participated said they were discouraged by the deficit debate, and only 20 percent expected a positive outcome.
AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Its historical high was 68.5, attained in 1997 and 1998; its all-time low was 33.3 in February 2009.
Employers remain far more optimistic about conditions six months from now than about current conditions. The BCI’s Future Index surged 6.3 points during November to 51.3, while the assessment of current conditions rose slightly to 48.9.
And confidence is strongest close to home. Only 1 percent of survey respondents called current national conditions ‘good’, compared to 12 percent who viewed state conditions as good and 40 percent who were bullish about their own companies.
The level of confidence among employers of their own operations may not be enough to stimulate hiring.
“The Company Index has been positive since March 2010, but despite November’s gain it is 10 points below its post-recession peak in April 2011,” noted BEA member Sara L. Johnson, Senior Research Director, Global Economics, IHS Global Insight.
Editor's Note - The following guest article was written by Massachusetts Lt. Governor Timothy P. Murray. AIM is part of an administration initiative to find employment opportunities for military veterans.
Massachusetts leads the nation in providing services for veterans and military families thanks to the strong commitment of our taxpayers, policy makers and advocates. During the month of November attention is given to honor our brave military servicemen and women. However, as citizens of this Commonwealth and this country, we have a collective obligation to support our veterans throughout the year.
As the chairman of the Governor’s Advisory Council on Veterans’ Services in Massachusetts, the Council has worked with our Department of Veterans’ Services over the last five years to review and access our current programs, and to always seek new, innovative ways to do more for our veterans.
It is critical that veterans receive re-employment and training opportunities as part of the range of services we provide when they transition home. With 385,000 veterans currently residing in Massachusetts and an influx of veterans expected to return home from the wars in Afghanistan and Iraq, Governor Patrick and I have asked the business community to consider hiring veterans for open positions and educating employers about the value of hiring a veteran.
Unfortunately, we see unemployment among veterans disproportionately higher than the civilian population and not enough companies are aware of available tax credits to hire veterans. Yet, veterans have bravely served our country and are proven to be reliable, diligent, and always ready to get the job done.
In early November, Associated Industries of Massachusetts joined the Patrick-Murray Administration and other business groups and associations to encourage their members to hire veterans in Massachusetts. Our Administration thanks the AIM Board of Directors and AIM staff for working with us on this important initiative.
Through the Massachusetts Department of Veterans’ Services and the Executive Office of Labor and Workforce Development, our administration is committed to working with AIM and its members to educate employers about the benefits of hiring veterans and also inform its members about what the state is doing to encourage the hiring of veterans.
Benefits of Hiring Massachusetts Veterans:
- Hiring a veteran can reduce a company’s health care costs if the veteran is already covered by his or her VA Healthcare.
- Companies may be eligible to participate in the federal Work Opportunity Tax Credit Program, which helps individuals who qualify as members of a target group to get a job, and it helps employers who hire qualified individuals by giving them a credit on their federal taxes.
- Companies may soon become eligible for additional tax incentives for hiring veterans. On Veterans Day, the U.S. Senate approved two federal tax credit provisions that were originally included in President Obama’s American Jobs Act. These provisions will incentivize businesses to hire veterans by providing tax credits up to $5,600 for businesses that hire veterans who have been looking for a job for more than six months and up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months. This legislation also expands educational and training opportunities for older veterans and provides disabled veterans up to one year of additional vocational rehabilitation and employment benefits.
Massachusetts’ Role in Supporting and Hiring Veterans:
While we are working with the private sector to support the hiring of more veterans, the Patrick-Murray Administration is also leading by example by implementing a series of initiatives to encourage the hiring of veterans in Massachusetts:
- Governor Patrick and I will propose up to $2.86 million in additional funding in the Fiscal Year 2013 budget, including $500,000 in funding for the Massachusetts Manufacturing Extension Partnership to train and employ veterans who qualify for state benefits.
- Governor Patrick and I directed our Secretary of Administration and Finance and the Commonwealth’s Chief Human Resources Officer to establish an interagency task force with our Secretary of Veterans’ Services to review all Commonwealth hiring guidelines and policies to foster increased employment opportunities for our veterans within all secretariats and levels of state government.
- Governor Patrick and I created a Veterans’ Re-Employment and Training sub-committee of the Governor’s Advisory Council on Veterans’ Services.
With more military servicemen and women expected to return home, there will be an increased need for services and we need to do our part to ensure veterans are aware of these services.
In addition to financial benefits for hiring veterans, there is a range of available resources such as health and human services, housing, and education. All 351 cities and towns are required to have a Veteran Service Office working in the municipality to inform the community of these services, and the Massachusetts Department of Veterans Services (www.mass.gov/veterans) is also an available resource.
By working together, we can raise awareness of available resources and benefits Massachusetts veterans and their families have earned and help get our veterans back to work.
President Barack Obama unveiled his $447 billion jobs bill last night hoping to restore some of the economic confidence employers need to accelerate hiring. The president’s speech to a joint session of Congress came a week after the AIM Business Confidence Index slipped into negative territory for the first time in a year.
So, does the plan make you more confident? Will it influence your hiring plans? Please let us know in the comments section below.
Here are some of the key elements of the American Jobs Act, compiled by Reuters:
- Employee Tax Holiday – A $175 billion, one-year extension and expansion of the employee payroll tax holiday that would halve the tax rate to 3.1 percent in 2012.
- Employer Payroll Tax Holiday - Sixty-five billion dollars to encourage small businesses to hire more workers. The initiative includes halving employer payroll taxes to 3.1 percent for the first $5 million of a company's wage bill in 2012, a change the administration says will reach 98 percent of small businesses. Also includes a complete payroll tax holiday for increasing the size of the payroll by up to $50 million above the prior year, either by hiring new workers or raising the salaries of the existing labor force.
- Extend 100 percent company expensing into 2012 - At a cost of $5 billion, the president wants to extend a 100 percent expensing tax break for companies, allowing them to immediately take a tax deduction for investment in new plant and equipment.
- Housing - Broaden homeowner access to mortgage refinancing and help the battered housing market by allowing households to take advantage of low borrowing costs that would help them put their finances on a sound footing.
- Eighty-Five Billion Dollar for State and Local Governments - Includes $35 billion to keep teachers, firefighters and police officers in their jobs, of which $30 billion would go to schools and $5 billion to police and firefighters; $30 billion to modernize schools and community colleges; $15 billion to rehabilitate and refurbish vacant and foreclosed homes; and $5 billion to help low-income youths and adult workers, supporting summer and year-round jobs for young people and support subsidized work for unemployed low-income workers.
- Road, Rail and Aviation Infrastructure Spending - Includes $50 billion to invest in highways, transit, rail and aviation, including upgrading U.S. airports and supporting Nextgen Air Traffic modernization.
- Infrastructure Bank - A $10 billion proposals to capitalize an infrastructure bank to leverage private and public infrastructure investment "without earmarks or traditional influence," the White House says.
- Extend Unemployment Insurance, Bridge to Work – Forty-nine billion dollars for a one-year extension of long-term unemployment benefits that would otherwise expire, an action the White House says would prevent 6 million jobless Americans from losing benefits. It includes reforms to the jobless aid system and a "bridge to work" program to help get unemployed people back to work. Also, $8 billion for tax credits for hiring the long-term unemployed.