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Massachusetts Employer Confidence Slips Amid International Concerns

Posted by Andre Mayer on Mar 1, 2011 10:29:00 AM

Confidence among Massachusetts employers dropped last month as political uncertainty abroad stoked concerns about rising energy costs and weaker exports.

AIM Business Confidence IndexThe Associated Industries of Massachusetts Business Confidence Index dropped four points in February to 51.2, leaving it up 7.1 points since February 2010 and 17.9 above the all-time low registered in February 2009. On the Index’s 100-point scale, 50 is neutral and a higher reading indicates predominantly positive sentiment among Massachusetts employers.

“February’s results look much like those of last May, with employers a bit less positive about current conditions but more hopeful for the immediate future,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA).

“The lack of sustained progress since then reflects the long, hard work of repairing a badly damaged economy, and without strong forward momentum any unsettling news or signs – such as the recent global turmoil that could affect exports and energy costs - will drive confidence down. That doesn’t mean conditions aren’t improving – we’re in much better shape than we were two years ago, or even a year ago – but this remains a slow recovery at best.”

Torto added that other indicators are also yielding ambiguous results. “We’re getting mixed messages from the housing market; and while the Conference Board and Mass Insight consumer confidence indexes are up, Bloomberg’s down,” he noted.

Every component of the Business Confidence Index fell in February. The Current Index, assessing overall conditions at the time of the survey, was down 4.9 to 47.5, falling below 50 for the first time since September. The Future Index of prospects for six months ahead shed 3.2 points to 55.1.

Employers' confidence in their own operations likewise weakened. The Company Index, was off 4.5 points to 54.6; the Employment Index lost 1.5 to 52.8; and the Sales Index shed 6.8 to 54.3.

“Employers remain very sensitive to uncertainty, so world events only magnify concerns about the unevenness of the domestic recovery,” noted BEA member Sara L. Johnson, Senior Research Director, Global Economics, at IHS Global Insight.

There were no clear differences between confidence levels among manufacturers (51.9, -3.0) and other employers (50.6, -5.0). “Where we do see a difference is by size,” said Johnson.

“Small employers – but not others – were markedly less positive in February about business conditions for their operations, both current (down from 45 percent ‘good’ to 20 percent) and prospective (down from 53 percent ‘good’ to 29 percent). Small companies are of course more likely to be dependent on conditions within Massachusetts, where growth has slowed, and in many cases they may face more difficulty in waiting out a slow recovery.”

“When we hear that the Fortune 500 companies are bringing in record profits, we must bear in mind that Massachusetts is predominantly a small-employer economy,” commented Richard C. Lord, President and CEO of AIM. “Most of our employment is in smaller companies, and they will have to produce most of the new job creation we hope for. That’s why the negative perspectives of small employers, highlighted by these survey results, are of the utmost concern.”

Topics: Associated Industries of Massachusetts, AIM, AIM Business Confidence Index

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