Employer Confidence Grows, But Few Think Recession is Over

Posted by Andre Mayer on May 3, 2011 10:11:00 AM

Confidence among Massachusetts employers surged to its highest level in almost four years during April, even though only 10 percent of those employers believe that the recession is over.

Business Confidence INdexThe Associated Industries of Massachusetts Business Confidence Index (BCI) gained 2.1 points in April to 56.1, its best reading since August 2007. The Index is up 8.6 for the year and 20.7 over two years, leaving it well above the 50 level that indicates a predominantly optimistic outlook.

The increase came despite the fact that employers remain unconvinced by the strength of the economic recovery.  About 10 percent of employers responding to the BCI survey said they believe the recession is over, up from October 2009 but about the same as last June. Another 30 percent said ‘maybe’ – up from 16 percent 10 months ago – and 48 percent chose ‘not yet, although conditions seem to be improving.’ Twelve percent gave a flat ‘no,’ a bit more than in June.

“What we see is a less than robust economy that poses severe difficulties for some employers, while others have been more successful in responding to its challenges,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc., and Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index has appeared monthly since July 1991. It 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 of the component sub-indices were up in April along with the main Index. One exception was the Current Index, assessing overall conditions at the time of the survey, which dropped 3.7 points to 53.9 following a 10-point rise in March.

“The fact that this indicator held on to most of March’s large gain, for its second-best reading since November 2007, is actually a good sign,” remarked BEA member Fred Breimyer, Regional Economist for the Federal Deposit Insurance Corporation. “The Future Index of prospects for six months ahead was up two points to 58.2, reflecting expectations for further moderate improvement,” he added.

But, Breimyer pointed out, employers’ optimism focused on their own operations more than on the general business climate.

“The U.S. Index of national conditions edged up four-tenths in April to 45.9, and the Massachusetts Index of conditions within the Commonwealth was flat at 49.7,” he said. “Each is up only about five points over the year, and still below 50. Almost two years after the ‘official’ end of the recession, the economy is still moving forward by fits and starts, failing to generate sustained momentum.”

There were no clear differences in April between confidence levels among employers in Greater Boston (56.6, +3.4) and those elsewhere in the state (55.5, +0.5). Manufacturers (57.8, +1.9) were more confident than other employers (53.2, +1.4) about their own operations, but not about the general economy

“The growing confidence among Massachusetts employers that they can survive, thrive, and create jobs without waiting for boom times that may not be coming is a good thing,” commented Richard C. Lord, President and CEO of AIM and a BEA member. But, he added, “If this is the ‘new normal,’ there are important public policy implications both for the public sector and for the private economy.” Government, Lord said, “has lagged behind business in adjusting its expectations and improving its efficiency and productivity, but we are now seeing some tough-minded decisions such as the recent Massachusetts House action on municipal health insurance.”


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

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