Massachusetts employer confidence inched higher during March amid a swirl of contradictory economic and political signals.
The Associated Industries of Massachusetts Business Confidence Index (BCI) increased 0.3 points to 62.4 last month, 5.9 points higher than its level of a year earlier and the highest reading since August 2004. The seventh consecutive monthly improvement reflected an increase in the U.S. Index of national business conditions, which has risen 9.1 points during the previous year, and a bullish overall view of current conditions.
The results came as the government announced that the U.S. economy grew in the fourth quarter at a faster pace than previously reported on higher consumer spending. At the same time, the Massachusetts unemployment rate rose to 3.4 percent as employers created jobs at an annual pace of 57,700.
“Massachusetts employers remain broadly confident about both the state and national economies,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer at the Harvard Graduate School of Design.
“Slight declines in the Employment Index, the Manufacturing Index and projections about the economy six months from now perhaps reflect some of the uncertainty about the direction of economic policy in Washington.”
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 index has remained above 50 since October 2013.
The sub-indices based on selected questions or categories of employer were mixed during March.
The Massachusetts Index, assessing business conditions within the commonwealth, rose 0.5 points to 63.7, leaving it 6.2 points higher than in March 2016.
The U.S. Index of national business conditions gained ground for the sixth consecutive month. Views of the national economy rose one point to 59.9. Still, February marked the 83rd consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.
The Current Index, which assesses overall business conditions at the time of the survey, surged 1.9 points to 61.8 while the Future Index, measuring expectations for six months out, lost 1.4 points to 63.0. The future outlook was 4.9 points higher than a year ago.
The sub-indices bearing on survey respondents’ own operations were also ambiguous.
The Company Index, reflecting overall business conditions, remained unchanged from February at 62.8. The Employment Index fell 1.4 points to 60.4, but the Sales Index gained 1.1 points to 62.6.
The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months were stable – 37 percent hiring and only 10 percent downsizing.
One of the most unusual results of the March survey was that Western Massachusetts companies were more confident (63.6) than those in the eastern portion of the commonwealth (62.2). Confidence outside of the white-hot Boston economy has been increasing steadily for months, but experts say it is too soon to say whether the geographic shift represents a long-term trend or a statistical anomaly.
Paul Bolger, President, Massachusetts Capital Resource Company, and a BEA member, noted that the March confidence survey was taken just as Republican efforts to repeal federal health reform fell apart.
“Employers have anticipated that a Republican Congress and a Republican president would deliver traditional pro-growth measures such as tax reform and infrastructure improvements. The failure of those parties to pass health-reform legislation seems to have created uncertainty about other legislative priorities that matter to employers,” Bolger said.
AIM President and CEO Richard C. Lord, also a BEA member, echoed the sense of uncertainty that hangs over Massachusetts as federal policymakers in Washington struggle to establish a direction.
“Many growth industries in Massachusetts such as health care, higher education, research and defense, depend upon federal funding and are vulnerable to potential budget reductions,” Lord said.
“Discussion of transitioning Medicaid, the health-insurance program for low-income Americans, to block grants also has significant implications to the health care system that is already straining employers.”