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Employers Remain Ambivalent about Economic Recovery

Posted by Andre Mayer on May 7, 2013 10:42:00 AM

"The economy as a whole, and business confidence in Massachusetts along with it, is basically treading water."

BCI.April.2013Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA) was talking about the latest Associated Industries of Massachusetts Business Confidence Index, which edged up four-tenths of a point in April to 50.5, but remained 6.6 points below its level of last April.

Employer confidence, according to Torto, reflects an economy doing well on measures of resilience and stability but struggling in dynamic areas such as consumer spending, job creation and exports. He notes that while economic growth was apparently greater in the first quarter of 2013 than in the prior quarter both nationally (2.5 percent annualized) and in Massachusetts (3.9 percent), its strong start has been fading.

"We're not going under, but we're not making much forward progress either.” Torto said.

Ambivalence is the watchword throughout the April Business Confidence Index, as employers remain mildly optimistic about the economy, but far less so than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, rose by a modest six-tenths to 49.2, and the Future Index, measuring expectations for six months out, crept up two-tenths to 51.8. The Company Index, reflecting survey respondents' assessments of conditions for their own operations, was unchanged in April at 54.2, and the Sales Index held steady at 55.3.

"The Employment Index did see a small gain, adding eight-tenths to 52.1," said BEA member Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight, "but employers are not planning much hiring at this point. For the past six months 30 percent of respondents have reported adding staff while 22 percent reduced, and for the next period 20 percent plan to add personnel and 15 percent foresee reductions, with 64 percent expecting to stand pat."

Richard C. Lord, President and Chief Executive Officer of AIM, said the employment number remain a matter of concern.

"The hiring numbers are positive, but less than robust," he said, "and the same can be said of recent state employment reports. Massachusetts is adding jobs, and employers tell us they are again raising wages above inflation, but unemployment remains unacceptably high, with particularly adverse effects on less skilled and less experienced jobseekers."

"There is no magic here. We need better business conditions that bring sustained growth, workers with the skills to be productive in our 21st-century economy, and firm steps to resolve deterrents to hiring such as the uncertain cost impacts of implementing the Affordable Care Act.”

The AIM Index, which has appeared since July 1991, is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. 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.

Topics: AIM Business Confidence Index, Massachusetts economy, Jobs

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