Business Confidence Grows, But Employers Remain Cautious

Posted by Andre Mayer on Feb 7, 2012 9:16:00 AM

Massachusetts employers began 2012 with increased confidence, but that confidence remains more muted than it was a year ago when the economy last appeared to be moving toward recovery.

Business ConfidenceThe AIM Business Confidence Index released this morning shows that employer confidence rose for a third consecutive month during January to 52.8, slightly above the 50-point level that denotes a positive outlook. Confidence has risen 6.4 points in the past three months as employment and other leading economic indicators have begun to move higher.

But confidence remains weaker than it was a year ago before the U.S. deficit deadlock and the European debt crisis sent the economy reeling. The AIM index posted a reading of 55.2 in January 2011 as employers looked optimistically to a recovery they believed would gain momentum as the year went on.

Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group and the chair of AIM’s Board of Economic Advisors (BEA) said that Massachusetts is “right back in the range of late 2010 and early 2011.”

“Massachusetts employers are telling us that this continues to be a slow and halting recovery,” Torto said. “Comparing the new results with those of January 2011, we find the indicators for current conditions, Massachusetts conditions, and employment within a point, but the Future Index of six-month expectations off 4.4.

The Business Confidence Index survey found that 42 percent of Massachusetts employers expect the economy to improve in 2012, though only five percent anticipate that conditions will be “much better.” Twelve percent of employers fear that the economy will deteriorate.

Almost all the component readings of the overall Business Confidence Index reflected the same pattern of monthly increase and year-over-year decrease.  Confidence in the national economy rose to 44.1 in January and confidence in the Massachusetts economy increased to 51.3. Both readings were below those from January 2011.

“Employers’ confidence in the national economy took a big hit in the June-October period, with fiscal squabbles in Washington a major negative factor, and is now rebuilding, though it is still off three points from last January,” said BEA member Michael Goodman, chair of the Department of Public Policy at the University of Massachusetts Dartmouth.

The Current Index, tracking employers’ assessment of existing business conditions, gained 2.8 points in January, its best level since April though off seven-tenths from last January. The Future Index, measuring expectations for the next six months, added nine-tenths to 53.9 – also the highest reading since April, but well down from the 58.3 of last January.

The January Business Confidence Index was compiled before last week’s announcement by the government that a better-than-expected increase of 243,000 jobs during January reduced the U.S. unemployment rate to 8.3 percent. Unemployment in Massachusetts has remained lower than the rest of the nation throughout the recession and currently stands at 6.8 percent.

Topics: AIM Business Confidence Index, Economy

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