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Employer Confidence Hits Another Summer Slump

Posted by Andre Mayer on Jul 2, 2013 9:14:00 AM

Here we go again.

AIM Business Confidence IndexConfidence among Massachusetts employers declined during June for the fourth consecutive year, dropping 3.2 points on the monthly Associated Industries of Massachusetts (AIM) Business Confidence Index. Slumping business confidence has apparently become as much a part of summer landscape in New England as beach days and the Red Sox.

The AIM Index declined to 48.9, moving below neutral on its 100-point scale and below its first-half average of 50.2. The only encouraging news is that the decline was far less severe than the 8.5-point drop in June, 2012.

Economists say it’s hard to identify a single explanation for this year’s summer slump.

"The recent downward revision of growth estimates for the earlier part of 2013 align with our survey's finding that many Massachusetts employers experienced a slowdown in the first half – 32 percent of respondents reported sales declines, compared to 29 percent with gains," said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA). 

"Weak conditions in Europe and political deadlock in Washington continue to be concerns, and there has been disturbing news from China, a major engine of global growth.  These, together with signals that the Federal Reserve may taper off its quantitative easing stimulus, cast a shadow over AIM's members and their outlook."    

Richard C. Lord, President and Chief Executive Officer of AIM, suggested that employers may be suffering from “recovery fatigue.”

“We keep hearing that the economy is on the mend, and we believe it, but for too many companies the recovery never seems to reach the point where it allows them to regain their own firm footing and move forward. Until they feel robust growth, employers will not commit themselves to the job creation necessary to put the Great Recession behind us," Lord said.

The loss of confidence during June was pervasive - all of the individual confidence readings that make up the overall BCI were off from May, though most were at or above their levels of a year before.  The smallest monthly loss (-0.8) and largest yearly gain (+3.0) belonged to the U.S. Index of national business conditions, at 43.6.

The Current Index, which assesses overall business conditions at the time of the survey, lost 2.3 points in June to 48.3, and the Future Index, measuring expectations for six months out, fell 4.1 to 49.5. The Company Index, reflecting survey respondents' assessments of conditions for their own operations, was down 4.2 points in June at 51.1, and the Sales Index lost 4.6 to 50.0.  

"The Employment Index held up better, shedding 1.2 points to 50.7, and unlike the other company-specific sub-indices it is up (+1.4) from last June," said BEA member Elliot Winer, Chief Economist, Northeast Economic Analysis Group LLC.

Over the past six months, 27 percent of respondents reported adding staff while 20 percent cut back, and for the period ahead 21 percent plan to add personnel and 15 percent foresee reductions.

"Employers remain very reluctant to add personnel," Winer noted. "To the degree that there has been employment growth in Massachusetts, it has been concentrated in the professional and business services sector where it is difficult to do more business without adding staff." 

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

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