Massachusetts employers grew more confident during April as the state and national economies regained their footing.
The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 2.4 points to 60.3 last month. Confidence remains well within optimistic territory, though still 3.9 points below its strong reading of April 2018.
The April 2019 increase reflected growing employer optimism about economic prospects for the next six months and about the future of their own companies.
All of the constituent indicators that make up the BCI rose during April with one notable exception. The Employment Index fell 1.5 points to 54.4, suggesting that employer sentiment continues to be tempered by a persistent shortage of qualified workers.
“The Business Confidence Index continues to show a conflict between short-term economic optimism and long-term concern about the prospect of finding enough appropriately skilled workers to run Massachusetts businesses,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.
“The immediate news for employers is positive as economic growth in Massachusetts surged to an annual rate of 4.6 percent during the first quarter of 2019 and US growth came in at 3.2 percent.”
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 constituent indicators showed a broad-based strengthening of confidence during April.
The Massachusetts Index assessing business conditions within the commonwealth rose 1.5 points to 63.2, while the US Index gained 2.8 points to 58.3. The Massachusetts reading has declined 0.9 points during the past 12 months and the US reading has dropped 5.6 points during the same period.
The Future Index, measuring expectations for six months out, surged 3.1 points to 60.5. The Current Index, which assesses overall business conditions at the time of the survey, rose 1.7 points to 60.0, still 5.1 points lower than a year ago.
The decline in the Employment Index left that measure 5.4 points lower than in April 2018. One good sign for job seekers is that the Sales Index, a key predictor of future business activity, rose 3.9 points during the month.
Non-manufacturers (64.1) were more confident than manufacturers (57.3). Large companies (60.7), medium-sized companies (60.5) and small companies (59.7) all had similar confidence outlooks. Companies in Eastern Massachusetts (64.5) continued to be far more bullish than those in the west (55.5).
Edward H. Pendergast, Managing Director of Dunn Rush & Co. and a BEA member, said employer confidence reflects first-quarter economic growth that was stronger than most experts anticipated. That growth sent US stocks to record highs in April before this week’s selloff.
“The consensus on Wall Street is for slowing growth as the year progresses, but the economy is setting a solid and predictable pace that reassures employers that there is little immediate threat of recession,” Pendergast said.
Training and Education
AIM President and CEO Richard C. Lord, also BEA member, said the sluggish Employment Index underscores the urgency for business and government to collaborate on ways to train and educate the workers who will drive the economy in the future.
“The persistent shortage of workers will become more severe as large numbers of baby boomers continue to leave the work force. It is imperative that we address the next generation of workers, so we can extend opportunity broadly to the people of Massachusetts.”
Lord’s commentary is his final one before retiring as President of AIM next week.