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Employer Confidence Rises, But Doubts Remain among Small Firms

Posted by Andre Mayer on May 1, 2012 9:43:00 AM

Confidence among Massachusetts employers rose in April to its highest level since before the recession, but an undercurrent of concern appears to be separating the fortunes of larger companies from smaller ones.

Business Confidence IndexThe Associated Industries of Massachusetts Business Confidence Index (BCI) resumed its steady rise last month after a pause in March, adding 2.3 points to 57.7. It marked the highest confidence reading since August 2007 and left the Index well above the 50 level on a 100-point scale that denotes an overall positive outlook on the economy.

At the same time, however, employers remain reticent about an economic recovery that has been slow and unsteady. Asked on the April BCI survey whether the recession that “officially” ended in June 2009 is really over, 41 percent responded that “it’s not really over – the conditions and risks underlying the recession remain.” Thirty-two percent agreed with the statement “It is over – this pattern of slow, uneven growth is the new normal,” and 22 percent said “We are still working our way through a recovery that will eventually lead to stronger growth and job creation.”

The responses differed significantly by size of company. Five of eight large employers believe that the recession has ended and this is the “new normal,”  while 58 percent of small employers believe the economy remains in a downturn.

“In view of the vital role of small businesses in job creation, that is a very telling finding,” said Richard C. Lord, President and Chief Executive Officer of AIM.

Added Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA):

“Massachusetts employers are somewhat more positive about general business conditions than they were last April – and a bit less positive about conditions for their own operations. A slow-growth economy, beset by uncertainties, is challenging for many companies; larger employers may be able to accept this ‘new normal,’ while smaller firms continue to hope for a more robust recovery.” 

The AIM Index is up one point over one year, 9.6 over two years, and 21.7 over three years.  Appearing monthly since July 1991, the Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The largest surge in confidence during April came in employer opinions of the Massachusetts economy. The BCI’s Massachusetts Index of conditions within the commonwealth rose 3.9 points at 55.8. The U.S. Index of national conditions increased 1.6 points to 48.5.

“The Massachusetts Index, at its highest level since February 2007, has outgained its national counterpart for the month and the year, and in fact has run higher virtually throughout this cycle,” said BEA member Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University. “Recent revisions to the employment statistics have cast some doubts on the relative performance of our state’s economy, but those doubts are not shared by employers in the economic trenches.”

The company-related sub-indices, in which respondents assess the positions of their own operations, all gained in April. The broad Company Index added 1.9 points to 60.4, the Sales Index was up two points to 59.6, and the Employment Index rose nine-tenths to 56.5.  Each was, however, off about a point from a year before.

“The lack of improvement is disappointing, particularly with regard to employment,” noted BEA member Michael Goodman, chair of the Department of Public Policy at the University of Massachusetts Dartmouth.

“In April, 36 percent of responding employers reported that they had added staff in the previous six months, while 18 percent had shed personnel, roughly the same as last April; but the share of employers reporting plans to hire in the next six months is notably weaker, down 9 percentage points from 40 percent to 31 percent  on a year over year basis.” 

 

Topics: Business Center, AIM Business Confidence Index, Massachusetts economy

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