Massachusetts employers have finally regained the confidence they had prior to the Great Recession, a grueling 73-month process that underscores the depth of the financial downturn in 2008 and 2009.
Associated Industries of Massachusetts announced this morning that its Business Confidence Index (BCI) reached 60 on its 100-point scale in March for the first time in more than 10 years, edging up four-tenths of a point to 60.2 – the same reading as in February 2005. The milestone capped a steady, yearlong 10-point advance that has seen employers shake off persistent post-recession caution and a more recent national hiring slowdown.
Even more significant was the fact that employer confidence in the Massachusetts economy reach its highest level since December 2000.
“We have been preparing the Index for almost 24 years, including three periods of economic recession,” said Richard C. Lord, President and Chief Executive Officer of AIM.
“From a low point of 41.5 in December 1991, the Index took 29 months to get up to 60. In November 2001, the Index bottomed out at 43.0, and it finally regained the 60 level 30 months later. This time, from its all-time low of 33.3 in February 2009, the rise back to 60 has taken 73 months.”
AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009.
“Last March, the Index began a sustained rise, ending more than a year of small fluctuations around neutral,” said Raymond G. Torto, Chair of the Board of Economic Advisors and Lecturer, Harvard Graduate School of Design.
What matters most about the Index reaching 60, Torto noted, is steady, sustainable pace. “The first-quarter average reading was 59.4, up from 56.3 in the prior quarter and 50.6 in the same period a year ago,” he said. “This is the Index’s best quarterly average since the fourth quarter of 2006, back before signs of impending recession became evident.”
Much of the surge in employer confidence comes with improved results from their own operations.
The Company Index of the, which assesses the situations of their own operations, rose three-tenths of a point to 61.6; the Sales Index gained eight-tenths to 62.5; and the Employment Index added 1.2 points to 57.8.
“Each sub-index is ahead by about eight points compared to last March,” noted Elliot Winer, Chief Economist, Northeast Economic Analysis Group LLC, a BEA member.
“Recent state employment reports have suggested that job creation may be slowing, so the rise of the Employment Index is particularly positive. Over the past six months, respondents reporting adding new staff have outnumbered those reporting layoffs 34 percent to 18 percent, while expectations for the next six months are much stronger with 36 percent reporting plans to hire and 9 percent expecting staffing reductions.”