Massachusetts Employer Confidence Slips into Neutral

Posted by Andre Mayer on Jul 5, 2011 9:26:00 AM

Confidence among Massachusetts employers slipped into neutral last month, reflecting a national economy that likewise appears to have taken its foot off the accelerator.

Business confidenceThe Associated Industries of Massachusetts Business Confidence Index dropped 1.7 points in June to a nine-month low that left it at a neutral 50-point reading on a 100-point scale. It marked the third consecutive monthly decline as business confidence ended the first half of 2011 almost four points lower than it was a year ago.

“Declining business confidence in May and now June continues to reflect direct perceptions of a slowing economy coupled with uncertainties about national and global developments, reminiscent of the drop a year ago” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA).

“But two consecutive declines, for the first time since last summer, indicate another setback for an economic recovery that has struggled to gather momentum.”

The AIM index has appeared monthly since July 1991. The June results mark the completion of 20 years. 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.

Weakness in the national economy appears to be driving down business confidence more than employer views of their own operations or the state economy. The AIM survey’s U.S. Index of national conditions was off 5.4 points in June and 5.9 for the year to 38.9, while the Massachusetts Index lost only 1.6 points to 46.6, down 1.2 from last June.

“This is exactly the (U.S. Index) reading we saw at the end of 2009,” pointed out BEA member Fred Breimyer, Regional Economist for the Federal Deposit Insurance Corporation. “Although the economy is in many respects stronger now than it was then, hopes for positive policy intervention from Washington are much lower.”
The only upward movement in the June survey results came when respondents assessed the positions of their own operations. The Company Index, gained three-tenths of a point to 55.0, and the Employment Index added 1.3 points to 53.2, while the Sales Index slipped six-tenths to 53.5.

“For the business community, as well as for job-seekers, the most serious economic problem is high unemployment,” commented Richard C. Lord, President and CEO of AIM and a BEA member.

“It depresses consumer confidence and consumer demand, holding back the robust growth we need to get our whole economy – not just a few sectors – back to full health. Our members, responding to special questions about employment, increasing link together three impediments to hiring: uncertain economic prospects, high non-wage employment costs, and difficulty finding people with the skills they need. Because uncertainty is beyond our control, controlling costs and promoting skills development emerge as the policy keys to job creation."

Topics: AIM Business Confidence Index, Massachusetts economy, Richard Lord

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