AIMBlog_Logo_Resized

Economic Growth Takes a Summer Holiday

Posted by Andre Mayer on Sep 5, 2014 9:58:02 AM

Economic growth appears to have taken a summer holiday during August.

BCI.August.2014Two separate economic reports released this morning suggest that steady, upward momentum in national hiring and in Massachusetts business confidence paused last month during the dog days of summer. Economists are disappointed with the numbers, but stress that both the state and national economy remain far stronger than they were at this time last year.

Associated Industries of Massachusetts announced that its Business Confidence Index lost two points in August to 54.2, while remaining well above its level of a year before (48.7).

“As the elections approach, political uncertainty – particularly at the national level – may be contributing to unease in the employer community,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Historically, the Index has declined in August more often than not,” Torto added. “Economic indicators for the month – financial markets, employment, consumer confidence, the ISM manufacturing index – have been generally positive. On the down side is international news, including conflict in the Middle East and Ukraine and economic problems in Europe.”

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It 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.

The business confidence numbers came during a month when U.S. employers hired at a surprising weak pace. The Labor Department reported today that the economy created 142,000 jobs during August, the first time since January that job growth remained below the 200,000 threshold needed to absorb new workers into the labor force.

Economists had been estimating a 225,000 jump in payrolls. The unemployment rate dropped 0.1 percentage point to 6.1 percent last month.

Overall, the economy expanded at a 4.2 percent annual rate in the second quarter, compared with a 2.1 percent contraction in the first three months of 2014. Economists foresee a growth rate of about 3 percent in the second half of this year.

Many observers believe the economy is still finding equilibrium after swinging from first-quarter contraction to a catch-up period during the second quarter as companies restocked inventories and resumed normal activity delayed by bad weather at the beginning of the year.

U.S. employers had been creating an average of 230,000 per month prior to the summer slump.

Massachusetts employers remain more bullish about their own companies than about the economy as a whole.

The Company Index of the AIM confidence report, reflecting survey respondents' assessments of conditions for their own operations, was up 4.1 points on the year to 56.5. The Employment Index was up 5.4 at 54.1; and the Sales Index, the only component to gain from July to August, was up 4.6 points to 58.5.

“We continue to see a moderate upward trend in the employment results,” said BEA member said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University. “The great majority (69%) of employers responding to the survey planned to stand pat on staffing over the next six months, but those expecting to add personnel outnumbered those foreseeing reductions by almost three to one (23%-8%).”

Topics: AIM Business Confidence Index, Jobs, Unemployment

Subscribe to our blog

Posts by popularity

Browse by Tag