Business confidence weakened slightly in March amid signs of both a cyclical global slowdown and persistent demographic factors limiting the growth of the labor force in Massachusetts.
The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.3 points to 57.9 during March. Confidence remains within optimistic territory but has lost 5.6 points during the past 12 months.
The decrease reflected employer concerns about economic prospects for the next six months. Those concerns outweighed growing optimism among manufacturing companies and rising confidence in the Massachusetts economy.
The March Business Confidence survey took place as the government announced that Massachusetts created only 20,000 jobs during 2018 instead of the 65,500 previously estimated. The US Bureau of Labor Statistics reports that average payroll job growth in Massachusetts fell from 1.3 percent in 2017 to 0.9 percent last year.
“Massachusetts employers continue to struggle with the challenges of a full-employment economy complicated by demographic issues such as the retirement of large numbers of baby boomers,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.
“U.S. economic growth appears to be slowing, as well as world economic growth, but recession fears are still low.”
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 that make up the overall Business Confidence Index moved in a narrow range during March.
The Massachusetts Index assessing business conditions within the commonwealth gained 0.9 points to 61.7. Confidence in the Massachusetts economy has declined 6.1 points since March 2018.
The U.S. Index measuring employer sentiment about the national economy slipped 0.5 points to 55.5, leaving it 9.7 points less than a year ago.
Employers were slightly more optimistic about current conditions than about the future. The Current Index, which assesses overall business conditions at the time of the survey, rose 0.6 points to 58.3 while the Future Index, measuring expectations for six months out, fell 1.3 points to 57.4. The Future Index has fallen 7.0 points during the past 12 months.
The Employment Index, measuring employer optimism about hiring, rose 1.2 points to 55.9.
Non-manufacturers (60.6) were more confident than manufacturers (55.4). Small companies (60.8) were more optimistic than large companies (55.2) or medium-sized companies (57.5). Companies in Eastern Massachusetts (60.0) continued to be more bullish than those in the west (55.0).
Northeastern University professor Alan Clayton-Matthews, a BEA member, said the downward revision of the Massachusetts job-growth numbers was consistent with demographic trends such as the large number of baby boomers retiring from the work force.
“The last New England Economic Project forecast projected a slowdown in payroll job growth from 1.7 percent in 2017 to 1.1 percent in 2018 and 0.6 percent in 2019 and a slowdown in labor-force growth from 1.6 percent in 2017 to 0.6 percent in 2018 and 0.4 percent in 2019. This forecast was largely based on demographic projections assuming a full-employment economy,” said Clayton-Matthews.
“The state economy seems to be running at full capacity, and the basic state indicators don’t suggest a lack of demand, though it’s hard to spot turning points until there is enough hindsight.”
AIM President and CEO Richard C. Lord, also BEA member, said employers remain concerned as Beacon Hill lawmakers undertake a broad discussion of how to fund expensive policy priorities such as transportation infrastructure, public education and clean energy. He noted that AIM will be part of a group assembled by the state Senate to look at the Massachusetts tax code.
“AIM undertakes these debates conscious of the oppressive cost burdens already facing Massachusetts employers. Massachusetts must develop a fair strategy to address its spending needs without harming employers who are already struggling to implement a $1 billion paid family and medical leave program along with the rising cost of both health insurance and energy,” Lord said.