Employer Confidence Remains Subdued at Year End 2011

Posted by Andre Mayer on Jan 10, 2012 9:46:00 AM

Massachusetts employers ended 2011 with lingering ambivalence about an economy that seems unable to generate sustained momentum toward recovery.

BCI.December.2011The AIM Business Confidence Index (BCI) rose nine-tenths of a point during December to close the year at 51, just above the 50-point mark that designates a predominantly positive outlook on the economy. The average confidence reading for all of 2011 rose slightly over that for 2010, but the year-end number was lower than the 52.4 posted in December of last year.

An overwhelming majority of employers, meanwhile, believes that the ongoing political gridlock in Washington is harming the economy.  Asked in December by the Business Confidence Index what they thought about the failure of the Congressional “super-committee” to reach a deficit-reduction agreement, eighty-seven percent of survey participants responded “discouraging but not surprising.”

“This is progress, but very slow progress. We are not building momentum; on a quarterly basis the Index declined through 2011, from an average 53.5 in the first quarter to 52.6, 49.4, and 49.2 in the fourth quarter. We have a long way to go in this recovery,” said Fred Breimyer, Regional Economist for the Federal Deposit Insurance Corporation and a member of AIM's Board of Economic Advisors (BEA)

The good news is that employers continue to be more bullish about the future than the present. The BCI Future Index, which measures employer sentiment about the economy six months from now, rose to 53 in December after a see-saw ride throughout 2011.

“That reading points to modest but real gains in the two quarters ahead,” said Katherine A. Kiel, Professor of Economics at the College of the Holy Cross, a BEA member.

Massachusetts business people also feel better about their own companies and about the Bay State economy than about the national outlook. Confidence readings for Massachusetts business conditions strengthened to 48 in December, versus 39.3 for the national economy, while employers’ views of their own companies added eight-tenths of a point to 55.9.

Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts, said employer response to the failure of Congress to solve the deficit underscores the degree to which government action n fiscal issues will affect the pace of the recovery.

“That goes some way toward explaining why business confidence is not stronger,” Lord said.

Three prominent economists - Raymond Torto, Carol McMullen and Alan Clayton-Matthews - will gather at the AIM Economic Forum this Friday for an in-depth look at the global economy and what it means for Massachusetts employers.

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Topics: AIM Business Confidence Index, Massachusetts economy

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