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Employers Remain Optimistic, Despite Market Volatility

Posted by Christopher Geehern on Feb 2, 2016 9:38:18 AM

Confidence among Massachusetts employers remained steady during January as optimism about the state economy offset uncertainty about China and turbulent financial markets.

BCI.January.2016.jpgThe Associated Industries of Massachusetts (AIM) Business Confidence Index rose 0.5 points to 55.8 last month, starting 2016 well above the 50 mark that denotes a positive economic outlook. The increase was driven by a 1.8-point surge in the index measuring employer attitudes about Massachusetts.

Confidence remained lower than it was in January 2015.

“The fact that employer confidence remained solid during a month in which the Standard & Poor’s 500 Index was at one point off 9 percent and oil dropped below $27 a barrel points to the fundamental, underlying strength of the Massachusetts economy,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The Massachusetts Index has been above its national counterpart for 80 consecutive months, and that perception was bolstered by the decision in January by General Electric to locate its corporate headquarters in Boston. GE’s decision was important, not only for the 800 jobs it will bring, but because the company cited Massachusetts’ leadership in knowledge industries as its reason for coming.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

The index ended 2015 down for the year, but remained consistently in optimistic territory for the first 12-month period since the Great Recession.

State Indicator Leads National Counterpart

Most of the sub-indices based on selected questions or categories of employer rose a point or two in January, though all remained down year-over-year.

The Massachusetts Index, assessing business conditions within the commonwealth, jumped 1.8 points to 58.1, starting the year more than a point lower than last January. The U.S. Index of national business conditions slipped to 49.9 on the month, leaving it more than four points lower than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, increased slightly to 54.6, while the Future Index, measuring expectations for six months out, rose almost a full point to 57.0.

“Employers clearly do not believe that the correction in financial markets signals an overall economic slowdown,” said Alan Clayton-Matthews, Associated Professor of Economics and Public Policy at Northeastern University and a BEA member.

“Massachusetts employers foresee positive business conditions through at least the first half of 2016, and that comports with economic forecasts that Massachusetts will reach full employment during the year.”

Employment Strengthening in 2016

The three sub-indices bearing on survey respondents’ own operations were mixed in January.

The Company Index, reflecting overall business conditions, was up 0.3 points at 57.0; the Sales Index shed 1.1 points to 57.1; and the Employment Index rose 1.3 points to 55.1.

“The increase in the Employment Index is good news for Massachusetts. Our survey found that 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment,” said Katherine A. Kiel, Professor of Economics, College of the Holy Cross, another BEA member.

“Expectations for the next six months were even stronger – 37 percent hiring and only 10 percent downsizing.”

Confidence levels in December were similar outside Greater Boston (56.3, +0.3) and within the metropolitan region (56.6, +1.4). Employers in the manufacturing sector continued to be less positive (53.8, -0.3) than other employers (58.4, +1.2).

“Manufacturing is the sector where uncertainty about China and other foreign markets becomes most apparent, though manufacturers remain generally sanguine about the next six months,” Kiel said.

Employers of all sizes recorded positive confidence levels, with the mid-size group lagging behind both larger and smaller companies.

AIM’s President and CEO Richard C. Lord, a BEA member, said the positive economic climate that persuaded General Electric to locate in Massachusetts must be preserved going forward.

“GE’s decision to leave Connecticut underscored the fact that taxes and the business environment matter a great deal to companies in their location decisions,” said Lord, who once worked for GE.

“We look forward to working with the Legislature to ensure that employers all over the commonwealth are able to do what they do best during 2016 – invest, grow and create opportunity for the people of Massachusetts.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Employers Maintain Mixed Feelings About Economy

Posted by Andre Mayer on Jan 5, 2016 8:04:12 AM

Massachusetts employers regard the economy with the same mix of emotions that many Patriots fans felt after Sunday’s game in Miami – trending in the wrong direction but still in an enviable place overall.

BCI.December2015.jpgThroughout 2015, every reading of the Associated Industries of Massachusetts Business Confidence Index was above 55, making this the first time since the Great Recession that the Index remained above a neutral reading of 50 for a full calendar year.

At the same time, the AIM Index shed 1.6 points in December to 55.3 to close 2015 down two points from its level at the end of 2014.

“We had not had a year with readings steadily above 55 since 2004. From that perspective, 2015 was a year of progress for our economy and for the state’s employer community,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

 “We can also look back on 2015 as ‘tilting down year’ in business confidence,“ Torto went on, “because following first-quarter gains the Index saw declines in seven of the last nine months, and ended up in December at its lowest level of 2015. This pattern reflects increasing concern about a myriad of global economic issues including economic stability, especially around China, as well as the impact of weaker export markets combined with a strong dollar.” 

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

Most components of the Business Confidence Index were down a point or two in December and most were down year-over-year.

The Massachusetts Index, assessing business conditions within the commonwealth, lost two points to 56.3, ending the year up two-tenths from last December. The U.S. Index of national business conditions, at 50.0, was off 1.2 on the month and one-tenth on the year.

The Company Index, reflecting overall business conditions, was down 1.6 points at 56.7; the Sales Index shed a point to 58.2; and the Employment Index lost 1.3 to 53.6.

“Our survey found the employment trend weakening in the second half of 2015 as 28 percent of respondents reported adding staff while 21 percent reduced employment,” said Paul Bolger, President, Massachusetts Capital Resource Company, a BEA member.

“Expectations for the next six months were somewhat stronger – 26 percent hiring and only 13 percent downsizing. On a special question about capital investment, 42 percent of respondents expected an increase in 2016 compared to 2015, and 46 percent expected about the same level of expenditure.”  

Topics: AIM Business Confidence Index, Massachusetts economy

Confidence Up, Despite Manufacturing Headwinds

Posted by Andre Mayer on Dec 1, 2015 9:53:12 AM

Confidence among Massachusetts employers improved slightly during November, despite growing concerns among employers about the global economy.

BCI.November.2015The Associated Industries of Massachusetts Business Confidence Index rose 1.3 points in November to 56.9, almost exactly where it stood a year before (56.8).

"The ‘hidden trend’ behind that pattern is a divergence in confidence levels between manufacturers and other employers,”  said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.   

“Our state’s manufacturing sector, which relies heavily upon International demand for its world-class products, is up against a strong dollar and weak conditions in all its major export markets – China, Japan, Canada, and Western Europe,” Torto went on.

“Domestic demand is down as well because of global conditions and large inventories. In March, manufacturers were almost as confident as other employers, but the confidence gap has grown significantly since then.” Torto noted that the manufacturing sector is over-represented in AIM’s survey, but that it plays a vital part in the Massachusetts economy. “If the sector continues to struggle in 2016, other sectors will feel the repercussions,” he said, “especially in regions of the state with concentrations of manufacturing industries.”    

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009. 

Massachusetts Conditions Seen Positive, U.S. Not So Much

The sub-indices based on selected questions or respondent characteristics were mostly up from October to November, but mixed compared to November 2014. The biggest gainer was the Massachusetts Index,

assessing business conditions within the Commonwealth, which added 4.2 points on the month to 58.3. The U.S. Index of national conditions, meanwhile, edged up three-tenths to 51.2.

"The state indicator has nearly recovered to its early 2015 readings, which were the best since 2004," said BEA member Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management. "What's more, the state indicator has led its national counterpart consistently since the recovery began in 2009, and the gap is widening. Today, the national indicator has fallen to near neutral, even as GDP growth has begun to re-accelerate."   

The Current Index, tracking employers’ assessment of existing business conditions, was up nine-tenths to 55.8, while the Future Index, measuring expectations for the next six months, rose 1.8 to 58.0. “The Current Index is up fractionally compared to last November, while the Future Index is fractionally lower,” Tyler remarked. “Employers, including manufacturers, do however expect business conditions to improve modestly over the next six months.”

Manufacturers Continue to Face Challenges

The three sub-indices related to survey respondents’ own companies were mixed in November.

The Company Index, which assesses the overall situations of their operations, added seven-tenths to 58.3 and the Sales Index gained a point to 59.27, but the Employment Index was off three-tenths to 54.9.

“The survey results on employment were solidly positive overall, but the divergence among respondentsis striking,” noted Sara L. Johnson, Senior Research Director of Global Economics at IHS Global, a BEA member. “Among manufacturers, and outside Greater Boston where manufacturing is a dominant sector, responses on employment barely tilted positive, whereas employers in other sectors and the Boston area as a whole were much more optimistic about job creation.”    

In November, Johnson said, overall confidence was higher among employers within Greater Boston (58.2, +2.6) than among those outside the metropolitan area (54.6, -1.4); and manufacturers continued to be much less confident (52.0, +0.1) than other employers (61.3, +1.6). “While ‘traditional’ manufacturers continue to confront the greatest challenges, technology companies are by no means immune to current adverse conditions affecting the sector,” she pointed out. By employer size, those with 25 or fewer employees were only slightly less confident than larger companies.     

 

Topics: AIM Business Confidence Index

Confidence Remains Steady Despite Political Uncertainty

Posted by Andre Mayer on Nov 3, 2015 9:38:37 AM

The Associated Industries of Massachusetts Business Confidence edged off three-tenths of a point in October to 55.6 as employers across the commonwealth balanced weaker current conditions against expectations of improvement in the first half of 2016.

BCI.October.2015“This was the Index’s third consecutive monthly decline, but the big story here is what didn’t happen.   What didn’t happen is a sharp drop in business confidence due to political deadlock in Washington,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Nearly all our survey responses were in before the latest federal debt ceiling ‘crisis’ and the House speakership election were resolved, but these threats did not have the same impact as in the past. In the October 2013 debt ceiling standoff, for example, the Index fell 5.8 points to 46.7.”

Torto noted that U.S. economic growth slowed to 1.5 percent in the third quarter and the Massachusetts rate to 2.0 percent, both well down from the second quarter.

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

Current Conditions Weaker, but Future Brighter   

The sub-indices based on selected questions or categories of respondent were mixed in October, with most moving only fractionally from September, while most were up year-over-year.

The Massachusetts Index, assessing business conditions within the commonwealth, lost six-tenths to 54.1, but was up eight-tenths from last October. The U.S. Index of national business conditions, at 50.9, was up three-tenths on both the month and the year.

“The fact that the national indicator actually rose in October is further evidence that the debt ceiling deadlock had little or no effect on confidence,” said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University, a BEA member.

“Meanwhile, Massachusetts continues to out-perform the nation as a whole economically, which is reflected in persistently higher readings for the Massachusetts Index compared to the U.S. Index.  Our local economy is of course affected by national and global conditions, but its underlying strengths are keeping us competitive through ups and downs.” 

The Current Index, which assesses overall business conditions at the time of the survey, was off 1.8 points on the month at 54.9, while the Future Index, measuring expectations for six months out, added 1.2 to 56.2.

“Even as current conditions are seen to be weakening, with five declines in six months, employers expect modest improvement over the coming period,” Clayton-Matthews pointed out. “Again, it appears that neither negative current trends nor domestic and global uncertainties are undermining the foundations of business confidence.”  

Employment Poised for Upswing?

The three sub-indices bearing on survey respondents’ own operations were mixed but basically steady in October.

The Company Index, reflecting overall business conditions, was off a half-point at 57.6, the Sales Index edged up a half-point to 58.2; and the Employment Index also added a half to 55.2.

“Like our Current and Future indices, the employment responses reveal optimism,” said BEA member Fred Breimyer, regional economist at the FDIC. “Whereas 27 percent of respondents reported adding staff in the previous six months while 18 percent reduced employment, expectations for the next six months were much stronger – 32 percent hiring and only 7 percent downsizing.”

 

Topics: AIM Business Confidence Index, Massachusetts economy, Jobs

Employers Remain Confident, But Wary

Posted by Andre Mayer on Oct 6, 2015 9:39:32 AM

There is no Alan Greenspan-style “irrational exuberance” among Massachusetts employers these days.

BCI.September.2015The people who run businesses throughout the commonwealth remain confident about the overall state of the economy, but a global growth slowdown and domestic political uncertainty are leaving them more circumspect than in the spring.

The Associated Industries of Massachusetts Business Confidence Index shed 1.2 points in September to 55.9, leaving it a point and a half above its reading of last September (54.4). The average confidence reading during the third quarter of 2015 was 57.4, barely below the second quarter (57.6) and higher than the fourth (56.3) and third (54.9) quarters of 2014.

“Although this is the Index’s fifth decline in six months, the trend is more sideways than downward,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“While the economy has been chugging along at present, business confidence appears to have suffered as a result of concerns about future uncertainties…Internationally, the slowdown in China sidelines one of the principal engines of global growth, while our other major export markets – Western Europe, Canada, Japan – are all weak.”

Release of the Business Confidence Index comes five days after the government announced dismal employment numbers for September and two weeks after the Federal Reserve decided that the economy remains too fragile to raise interest rates from their near-zero level.

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009. 

The sub-indices based on selected questions or respondent characteristics were mostly down from August to September, but mostly up compared to September 2014. The U.S. Index assessing national business conditions edged off a tenth to 50.6, while Massachusetts Index of conditions within the Commonwealth lost two points to 54.7.

“The commonwealth’s economy is currently performing very well, with strong job creation and solid GDP growth,” said BEA member Michael D. Goodman, Executive Director of the Public Policy Center at UMass Dartmouth. “Despite some significant sectoral and regional imbalances, Massachusetts has consistently outpaced the national economy throughout the recovery and expansion periods, and the state’s industry mix is helping to buffer it from the full impact of a slowing global economy.”  

The Company Index, which assesses the overall situations of their operations, was off 1.3 points at 58.1; the Sales Index lost 2.9 to 57.7; and the Employment Index was down half a point at 54.7.

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Business Confidence Wanes Amid Global Uncertainty

Posted by Andre Mayer on Sep 1, 2015 2:31:47 PM

The Associated Industries of Massachusetts Business Confidence declined 2.1 points in August to 57.1 as negative news on the global economy culminated in financial turmoil in China and worldwide.

BCI.August.2015“While the U.S. economy is chugging along, Europe, Canada, and Japan are slumping, and China’s slowing growth was dragging down the world economy even before the crisis in its financial markets,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“In fact, tracking the responses to our survey, those at the end of the month, when stock markets were sliding internationally, were no more negative than earlier returns.”

Torto noted that the Index at 57.1 remained solidly positive and above its level of a year before (54.2).

“We do see weakening from last August on specific questions,” he went on, “including those about conditions beyond the state and about future trends. We also see less confidence among manufacturers. All of these point to concerns about global economic conditions and their potential impact on the domestic economy, even as current business conditions register as favorable.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

The Massachusetts Index, assessing business conditions within the Commonwealth, lost eight-tenths to 56.7, but was up nine-tenths from last August. The U.S. Index of national business conditions, at 50.7, was down 2.6 from July and 1.2 from a year before.

The three sub-indices bearing on survey respondents’ own operations all fell in August.  The Company Index, reflecting overall business conditions, lost 2.3 points to 59.4; the Sales Index was off 2.6 to 60.6; and the Employment Index was down 2.0 to 55.2.

“The numbers are still strong, but there is some erosion due to concerns about the future,” said BEA member Paul Bolger, President, Massachusetts Capital Resource Company.

 “For example, whereas 41 percent of respondents reported adding staff in the previous six months while 18 percent reduced employment, expectations for the next six months ran 27 percent adding and 15 percent cutting – positive but slower job creation.”

Confidence levels in August were slightly higher outside Greater Boston (57.5, +1.7) than within it (57.0, -4.3. Employers in the manufacturing sector were less positive (52.4, -3.3) than other employers (61.8, -1.1).

“Our August Business Confidence Survey reveals something significant about how global uncertainties are felt among employers,” said Richard C. Lord, President and CEO of AIM and a BEA member.

“Larger employers, who might be thought to be most exposed, remain very confident. The smallest firms, though less positive about general conditions, rate their own positions very favorably.

"Companies in the range of 26 to 100 employees, by contrast, are markedly less confident that they control their own fates, because many still find themselves in precarious circumstances after the disruptions of the past eight years, and they are often the most affected by changing regulations and labor standards. The stabilization of these firms, a vital locus of employment growth and of innovation in our state’s economy, remains a work in progress.” 

Topics: AIM Business Confidence Index, Massachusetts employers

Business Confidence Rebounds in July

Posted by Andre Mayer on Aug 4, 2015 11:07:44 AM

The Associated Industries of Massachusetts Business Confidence Index added 2.9 points in July to 59.2, ending a string of three consecutive monthly losses.

BCI.July.2015“Bouncing back from its dip in the second quarter, confidence among Massachusetts employers is fairly strong,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The AIM Index is up three points from last July, and apart from its recent crest in February and March is at its highest level since December 2006.”

Torto noted that the Index’s recent performance extends a pattern that has prevailed for much of the post-Great Recession period. “Like the economy itself, the Index has followed a long-term trend of improvement,” he said, “but the upward course has been longer and bumpier than most past recoveries.”  

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009. 

Best Conditions Since 2006

The sub-indices based on selected questions or respondent characteristics all rose from June to July, and most were up from a year before.

The U.S. Index assessing national business conditions gained 2.5 points to 50.1, and Massachusetts Index of conditions within the commonwealth rose six-tenths to 57.5.

“The domestic economy, after a weak first quarter, is experiencing solid expansion, and Massachusetts continues to perform well in the national context,” remarked BEA member Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight.

“Growth in international trade, however, has been disappointing, as improving conditions in Europe have been more than offset by the slowdown in Asia.”  

The Current Index, tracking employers’ assessment of existing business conditions, was up 3.5 at 59.7, while the Future Index, measuring expectations for the next six months, added 2.2 to 58.6.

“The rating of current conditions is the best we have seen since the same reading in October 2006,” Johnson said. “The slightly lower future expectations probably reflect the Federal Reserve Board’s expressed intent to raise interest rates.” 

Companies’ Situations Seen Favorable

The three sub-indices related to survey respondents’ own companies were all well ahead in July. The Company Index, which assesses the overall situations of their operations, was up 3.7 points at 61.7; the Sales Index rose 5.3 to 63.2; and the Employment Index added 2.5 to 57.2.

“The Company and Sales indicators are at their highest levels since 2006, and the Employment Index is also in its pre-recession range,” noted Elliot Winer, Chief Economist, Northeast Economic Analysis Group LLC, a BEA member.

“These results are consistent with survey respondents’ favorable appraisal of prevailing business conditions and with recent state employment reports.” 

In July, confidence remained higher among employers within Greater Boston (61.3, +3.9) than among those outside the metropolitan area (55.8, +1.1). Manufacturers continued to be less confident (55.7, +3.1) than other employers (62.9, +2.9).

“Massachusetts manufacturers, many of them in the central and western parts of the state, are seeing exports suffer because of the strong dollar and difficult conditions in key markets,” Winer said. “The indicators from the manufacturing sector and for the state outside Greater Boston are the only sub-indices that have lost ground (though less than a point each) over the past year.” There was little variation in confidence between small, medium-size, and larger employers.   

Business Climate Good, but not Uniformly So

Commenting on the July Business Confidence Index survey results, Richard C. Lord, AIM’s President and CEO, a BEA member, stressed the positive assessment of business conditions among respondents.

“Over the previous three months, we saw that confidence can be damaged by uncertainty, even in peripheral areas like the Greek crisis,” he said. “In July, we see that as such concerns fade the underlying strength of the economy, and of confidence among Massachusetts employers, comes to the fore again.”

Lord noted, however, that the results included contrasting views of the state’s business climate.

“There is a ten-point regional gap in how respondents rate Massachusetts conditions – very positive within Greater Boston, barely positive elsewhere,” he said. “This reminds us that good economic analysis and policy must take account of the broad range of industries and communities.”

By employer size, Lord added, the smallest firms, up to 25 employees, rated in-state conditions higher than mid-sized and larger employers.

“Here we see a significant turnaround compared to the recent past,” he remarked. “Along with a stronger economy, these small employers – who often feel vulnerable to government mandates – are encouraged by a sense that Beacon Hill recognizes their concerns on issues ranging from MBTA reform to smooth implementation of the paid sick leave law.”

Topics: AIM Business Confidence Index, Massachusetts economy

Greek Crisis Dampens Employer Confidence

Posted by Andre Mayer on Jul 7, 2015 9:44:30 AM

Confidence among Massachusetts employers ebbed for a third consecutive month in June as uncertainty in Greece, Europe and China outweighed a strengthening economy at home.

BCI.June.2015The Associated Industries of Massachusetts Business Confidence released this morning declined by one point in June to 56.3, extending its decline from March’s post-recession high of 60.2. Confidence remained well above the 50-point level that signifies optimism, and 2.6 points better than in June 2014.

The Massachusetts Index, assessing business conditions within the Commonwealth, at 56.9, was the biggest gainer on both the month (+1.0) and the year (+6.0). The U.S. Index of national business conditions was up 0.7 from May and 2.6 from last June at 50.8.

“The first quarter of 2015 was a very weak one for the economy, but a strong one for the AIM Index, which gained each month; whereas the second quarter, though much better in terms of economic growth, has seen three monthly losses,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The two indicators of domestic business climate actually rose in June,” he pointed out. “Meanwhile, the sub-indices related to survey respondents’ own operations lost ground, which we interpret as reflective of growing uncertainty. Events overseas, in China and in Greece and the Eurozone, are casting shadows on relatively good conditions at home.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

The bullish view of the Massachusetts economy represents a profound change in employer attitudes over the 24 years that AIM has published the Business Confidence Index, according to association President and Chief Executive Officer Richard C. Lord.

“In July 1991, the Massachusetts Index of in-state conditions was at 25.8, about half the U.S. Index’s 51.2; it took 65 months for the state indicator to surpass its national counterpart, and 78 months to do so two months in a row.  By contrast, the Massachusetts Index has now outpaced the U.S. Index for 73 consecutive months,” Lord said.

“Much of this improvement in employer’ perception of Massachusetts business conditions is due to a positive engagement with employer issues on the part of elected officials of both parties.”

Employer evaluations of their own business prospects weakened last month amid financial concerns on two continents.

The Current Index, which assesses overall business conditions at the time of the survey, was off 1.2 points on the month at 56.2, while the Future Index, measuring expectations for six months out, lost seven-tenths to 56.4. The Company Index, reflecting overall business conditions, lost 2.2 points 58.0; the Sales Index was off 2.1 to 57.9; and the Employment Index was down 3.3 to 54.7.

“These are still positive numbers, revealing wariness rather than fear about the second half of 2015,” said Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management, a BEA member.

“Greece is a small economy and a tiny market for Massachusetts exports; despite talk of contagion to Spain or Italy, the Eurozone isn’t collapsing and there isn't likely to be any meaningful impact in the U.S. or Massachusetts. China’s economic slowdown is a more substantive matter, one that American investors rightly should be watching carefully.”

Topics: AIM Business Confidence Index, Massachusetts economy

Loss of Economic Momentum Gives Employers Pause

Posted by Christopher Geehern on Jun 2, 2015 8:16:00 AM

Two reports issued today by Associated Industries of Massachusetts (AIM) suggest that employers have grown wary of an economic recovery that appears to have lost momentum during the first half of 2015.

BCI.May.2015The big question, according to analysts, is how much has momentum slowed and for how long?

The monthly AIM Business Confidence Index fell for a second consecutive month in May after reaching a 10-year high in March. The Index lost 1.8 points to 57.3 on a 100-point scale, still comfortably in positive territory but showing moderating expectations for growth during the remainder of the year.

Meanwhile, the annual AIM General Wage Survey Report found that for the third consecutive year, a majority of AIM-member companies have targeted merit and general increase spending at 3 percent for 2015. Economists say the modest wage gains reflect the fact that many organizations have decided to keep pace with an expanding economy by boosting productivity and capital investment rather than payrolls.

Both reports come four days after the government announced that the US economy contracted 0.7 percent during the first three months of the year. The economic numbers have prompted the Federal Reserve to postpone an interest-rate hike that was widely expected in June.

Raymond G. Torto, Chair of the AIM Board of Economic Advisors (BEA) that produces the Business Confidence Index, said employer optimism is up 2.5 points from last May, “but coming off an upward surge from August through March, business confidence seems to have lost momentum.”

“The Index performed well during the first quarter of this year, but now it is weakening even as growth appears to be picking up,” said Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.   

He noted that economists’ forecasts for expansion in 2015 have moderated. “Our survey does reflect lower expectations for the six months ahead,” he said. “We also see lagging confidence among manufacturers, whose exports are hurt by the strong dollar, and among mid-size companies.” 

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009. 

The May confidence report showed employer assessment of current business conditions down nine-tenths at 57.4, while their expectations for the next six months, lost 2.8 points to 57.1.

One bright spot came in the Employment Index, which reached its highest level since September 2005. Employment expectations for the next six months were particularly strong, with 37 percent of responding employers planning to add staff, while 14 percent expect reductions.

The General Wage Survey report, based on responses from several hundred Massachusetts employers, showed that overall merit increase budgets for 2015 average 2.69 percent when companies planning a zero percent increase are included. That figure is down from the 2.71 percent posted in 2014; higher than the 2.53 percent in 2013, 2.55 percent in 2012 and 2.4 percent in 2011.  The percentage of companies providing no wage increases dropped in half from 14 percent in 2013 to 7 percent this year.

Those numbers are consistent with national compensation surveys that appear to agree that wages generally have not risen as predictably as they have in previous recoveries.

But Andre Mayer, Senior Advisor at AIM, says those aggregate numbers mask growing wage acceleration in many of the technical and managerial fields in which Massachusetts is strong.

“Even as the overall averages show only modest increases in compensation, the competition for experienced incumbent workers with high-demand skills is heating up. Employers are not only becoming more willing to hire, they are becoming more willing to pay a premium for the skills they need,” Mayer said.

Topics: Compensation, AIM Business Confidence Index, Massachusetts economy

Confidence Pulls Back on Manufacturing Concerns

Posted by Andre Mayer on May 5, 2015 10:41:24 AM

Employer confidence paused from an eight-month run-up during April as Massachusetts manufacturing companies grew skittish about weak growth domestically and challenges in global markets due to the stronger dollar.

BCI.April.2015The Associated Industries of Massachusetts Business Confidence Index declined 1.1 points to 59.1 last month, pulling back from a post-recession high reached in March. The measure remains six points above its level of April 2014 despite a weak first quarter of national economic growth.

“The Index’s decline is attributable to lower confidence among the state’s manufacturers…” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

Paul Bolger, President, Massachusetts Capital Resource Company, added that “In addition to weaker-than-expected domestic growth, Massachusetts manufacturers are seeing their exports hit by a strong dollar and by particular weakness in their two major market regions, Western Europe and East Asia.

“Manufacturers and survey respondents outside Greater Boston were markedly less positive than others about in-state business conditions,” he added.

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

The April pullback broke a string of monthly gains in business confidence stretching back to August 2014. Employers continue to have a brighter view of the state economy than of national conditions. Alan Clayton-Matthews of Northeastern University noted that Massachusetts performed better than the country as a whole during the difficult first quarter.

Three sub-indices bearing on survey respondents’ own operations all edged off fractionally in April.  The Company Index, reflecting overall business conditions, lost six-tenths to 61.0; the Sales Index was off eight-tenths to 61.7; and the Employment Index was down half a point to 57.3.

 Richard C. Lord, President and CEO of AIM, said any weakening of confidence among manufacturers has implications for the overall economy.

“Our association was founded in 1915 by Massachusetts manufacturers, and in our centennial year that group remains a core component of our diverse membership,” Lord said.

“Manufacturing is likewise a pillar of our economy, the key sector in many communities and regions of our commonwealth, and an unmatched provider of jobs that support upward mobility. So when manufacturers’ confidence lags, when they are less enthusiastic than other employers about business conditions in Massachusetts, we are concerned.” 

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

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