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AIM Index Marks Two Decades of Tracking Employer Confidence

Posted by Andre Mayer on Aug 19, 2011 8:44:00 AM

The AIM Business Confidence Index celebrated its 20th anniversary last month in much the same way it marked its debut in July 1991 – charting an uncertain economy seeking to recover from recession.

Business Confidence IndexBut behind the similarities, the primary gauge of employer confidence in Massachusetts has chronicled a staggering shift in employer sentiment over two decades about the relative strength of the Bay State and national economies.  The BCI of 1991, in which employers had twice as much confidence in the national economy as that in Massachusetts, has given way to the BCI of 2011 that shows the Massachusetts index almost nine points higher than the national.

AIM’s monthly BCI has charted the ups and downs of the Massachusetts economy based on a survey of AIM members across the commonwealth. The BCI uses a 100-point scale – readings above 50 indicate a predominantly positive view of business conditions among Massachusetts employers, while readings below 50 reflect a generally negative assessment.

The Index’s historical high was 68.5, attained in 1997 and 1998; its all-time low was 33.3 in February 2009. A number of sub-indices are calculated from responses to selected questions or from types of employers.  

The BCI completed its second decade and moved into its third almost exactly in the middle of its 100-point scale, and of its 35-point range over the period.  At 50.5 in July 2011, it is five points above its debut level of 45.5, which came as Massachusetts was fighting its way out of a recession that was, for us, much more severe than the one we have just passed through.

The striking difference from 20 years ago is that in July 1991 the Massachusetts Index was at 25.8 and the U.S. Index at 51.2, compared to 46.5 and 37.8, respectively, in July 2011. Twenty years ago Massachusetts employers saw conditions in our state much worse than those prevailing nationally; now, they rate them significantly better – and objective economic data bear out that perception

Much of the difference, of course, is that the earlier recession, like the subsequent “dot-com bust,” hit Massachusetts industries especially hard, and the most recent downturn did not. But, insists AIM President and CEO Richard C. Lord, more than luck was involved.

“We have made some real progress on the policy side,” he pointed out, “notably in rolling back workers compensation costs. That was the number-one employer issue in 1991, and a judicious reform program reduced rates by almost two-thirds. Also, state government, the administration and the Legislature, has handled this fiscal crisis effectively, in marked contrast to Washington.

“Even more important, however, have been the efforts of the state’s employers to improve their competitiveness through efficiency, productivity, and world-class offerings. They have retooled existing industries, and created new ones. We have a more diverse economy than we did 20 years ago, selling to a wider range of markets worldwide.”

Lord directed the Index at its inception, and serves as a member of AIM’s Board of Economic Advisors, which oversees its ongoing preparation.
“Our purpose, and I think the real value, in this undertaking has been to encourage the public and policymakers to consider economic issues, and in particular the vital contribution of the employer community to the well-being of our commonwealth,” Lord says.

Topics: Associated Industries of Massachusetts, AIM Business Confidence Index

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