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Employer Confidence Falls in May

Posted by Christopher Geehern on Jun 4, 2019 8:30:00 AM

Employer confidence weakened in Massachusetts during May amid renewed trade tensions and concerns among companies about increased operating costs from paid family leave and other government mandates.

BCI.May.2019The outlook among business leaders has moved in a narrow, overall optimistic, range for much of 2019.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 3.2 points last month to 57.1, its lowest level since October 2016. The Index has declined 9.5 points since May 2018.

All of the constituent indicators that make up the BCI weakened during May with the largest drop coming in employer views of conditions six months from now.

The erosion of confidence during the past 12 months has been driven largely by caution about the national economy and concern among manufacturing companies.

“The Business Confidence Index continues to reflect the Goldilocks economy in which we find ourselves – US GDP growth is expected to remain at a modest level of 2 to 3 percent and there is not much inflation or deflation. There are both encouraging signs and red flags,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

Several employers participating in the survey said regulatory costs have become a significant concern.

“The cost to operate has increased dramatically - higher wages, benefit costs, supply costs and cost of compliance with all the new regulations coming out of State House,” one employer wrote.

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.

Constituent Indicators

The constituent indicators showed a broad-based retrenchment during May.

The Massachusetts Index assessing business conditions within the commonwealth fell 2.3 points to 60.9, while the US Index shed 3.3 points to 55.0. The Massachusetts reading has declined 9.1 points during the past 12 months and the US reading has dropped 14.3 points during the same period.

The Future Index, measuring expectations for six months out, tumbled 4.5 points to 56.0. The Current Index, which assesses overall business conditions at the time of the survey, lost 1.8 points to 58.2, 8.4 points lower than a year ago.

The Employment Index declined 1.2 points for the month and 5.1 percent for 12 months. Analysts say employers continue to struggle to find qualified workers in a state economy with a 2.9 percent jobless rate.

Non-manufacturers (60.0) were more confident than manufacturers (54.7). Small companies (58.4) were more bullish than large (55.0) or medium-sized companies (57.6), a reversal of the usual pattern. Companies in Eastern Massachusetts (59.3) continued to be far more optimistic than those in the west (54.0).

Elmore Alexander, Retired Dean of the Ricciardi College of Business at Bridgewater State University and a BEA member, said Massachusetts employers are reflecting general concerns about tepid national economic growth, renewed geopolitical tensions and slowing corporate spending.

“Few see an imminent recession, but most experts believe US economic growth will slow from 3 percent last year to 2.1 percent this year to 1.9 percent in 2020,” Alexander said.

Rising Costs

AIM President and CEO John R. Regan, also BEA member, said the national economic uncertainty comes at a time when Massachusetts employers are struggling with a series of expensive new employment law mandates such as the state’s $1 billion paid family and medical leave program.

“AIM has joined Raise Up Massachusetts and other groups in asking the Baker Administration to delay the scheduled July 1 start of paid leave by three months to provide employers time to consider how much of the cost they will share with workers and whether they wish to opt out of the state system. The delay is necessary to ensure a smooth rollout of this new entitlement,” Regan said.

Regan joined the BEA after being named President and Chief Executive Officer of AIM.

Topics: International Trade, AIM Business Confidence Index, Massachusetts economy

Employer Confidence Rises in April

Posted by Christopher Geehern on May 8, 2019 8:55:23 AM

Massachusetts employers grew more confident during April as the state and national economies regained their footing.

BCI.April.2019The 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.

Constituent Indicators

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.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Employer Confidence Slips in March

Posted by Christopher Geehern on Apr 2, 2019 8:30:59 AM

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.

BCI.March.2019The 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.

Constituent Indicators

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.”

Mixed Signals

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.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Business Confidence Rebounds in February

Posted by Christopher Geehern on Mar 5, 2019 8:30:00 AM

Business confidence rebounded modestly during February as optimism about the state and national economies outweighed a darkening outlook among Massachusetts manufacturers.

BCI.February.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 0.5 points to 58.2 after dropping in January to its lowest level since October 2016. Confidence remains within optimistic territory but has lost 6.8 points during the past 12 months.

The February increase was driven by a 3.4-point jump in employer views of the state economy and a 3.3-point rise for the national economy. The government announced last week that the US economy grew at a 2.9 percent rate in 2018, matching 2015 as the biggest increase since the end of the 2007-2009 Great Recession.

“Employers remain generally optimistic about a state economy that continues to run at full-employment levels and a US economy that is projected to grow by 2.2 percent this year” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“At the same time, the erosion of confidence among Massachusetts manufacturers during the past 12 months raises some concern about the long-term sustainability of the recovery.”

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.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were mostly higher during February.

The 3.4-point increase in the Massachusetts Index assessing business conditions within the commonwealth left that indicator at 60.8. Confidence in the Massachusetts economy has declined 7.7 points since February 2018.

The U.S. Index measuring employer sentiment about the national economy rose to 56.0, its highest level since November. The reading was still 10.9 points less than a year ago.

Employer views about the future were more optimistic than the present for the first time in 11 months. The Current Index, which assesses overall business conditions at the time of the survey, fell 0.5 points to 57.7 while he Future Index, measuring expectations for six months out, increased 1.5 points to 58.7.

Non-manufacturers (61.7) were significantly more confident than manufacturers (53.3). Large companies (62.3) were more optimistic than either medium-sized companies (57.1) or small companies (55.2). Companies in Eastern Massachusetts (59.6) continued to be more bullish than those in the west (56.3).

“Employers last month welcomed several developments, including the end of the government shutdown and the Federal Reserve’s decision to pause increases in interest rates,” said Sara L. Johnson, Executive Director, Global Economics, IHS Markit and Vice Chairwoman of the BEA.

“The overall picture of business confidence reflects the economy itself – slowing a bit but still strong overall.”

Mixed Signals

AIM President and CEO Richard C. Lord, also BEA member, said the comments provided by employers on the February AIM Business Confidence Index Survey show that many companies remain bullish about 2019, while others remain concerned about issues ranging from gridlock in Washington to the persistent shortage of skilled employees.

“There are plenty of mixed signals 10 years into the economic recovery,” Lord said.

“Massachusetts employers face rising wage costs, rising raw-material costs and the challenge of integrating new public-policy mandates such as an increased minimum wage and paid family and medical leave. It’s the right time in the business cycle for state and federal government to follow the lead of the Federal Reserve and pause the imposition of expensive new initiatives.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Business Confidence Slides Again in January

Posted by Christopher Geehern on Feb 12, 2019 8:30:00 AM

Stabilizing financial markets and continued strong employment were not enough to brighten the outlook of Massachusetts employers during January as business confidence fell for the fifth time in seven months.

BCI.January.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.9 points to 57.7, its lowest level since October 2016. Confidence has dropped 6.4 points during the past 12 months.

The retreat was led by a 7.3-point drop in employer views of the Massachusetts economy, and a 2.4-point drop in opinions about the national economy.

Overall confidence remains within optimistic territory, but every element of the AIM Index is now lower than it was a year ago.

A separate survey within the January Business Confidence Index found that while 71 percent of Massachusetts employers have seen some effect from the US government’s imposition of tariffs on goods form China and other nations, only 10 percent of companies characterize the effect as “significant” or a threat to the existence of their business.

The most common consequence of the tariffs has been an increase in raw-material prices, followed by changes to the supply chain, supply interruptions, products affected by retaliatory tariffs and loss of overseas customers.

“The Massachusetts economy grew at 2.1 percent during the fourth quarter of 2018 and continues to operate at near full capacity,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“At the same time, employers continue to confront uncertainty surrounding trade policy, demographic constraints on the labor market and the implementation of a sweeping paid family and medical leave program in Massachusetts.”

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.

Constituent Indicators  

The constituent indicators that make up the overall Business Confidence Index were mixed during January.

The 7.3-point drop in the Massachusetts Index assessing business conditions within the commonwealth left that indicator at 57.4. Confidence in the Massachusetts economy has declined 11.5 points since January 2018.

The U.S. Index measuring employer sentiment about the national economy dropped 2.4 points to 52.7, a decline of 12.1 points year-over-year. It marked the lowest reading for the U.S. Index since November 2016.

The Current Index, which assesses overall business conditions at the time of the survey, fell 1.8 points to 58.2. The Future Index, measuring expectations for six months out, remained flat at 57.3 but has declined 9.3 points over 12 months.

Manufacturers (57.8) and non-manufacturers (57.7) were equally confident. There was also little difference in the confidence readings reported by large companies (57.9), medium-sized companies (57.7) and small companies (57.6). Companies in Eastern Massachusetts (59.4) were more bullish than those in the west (55.3).

Economist Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University and a member of the BEA, suggested that employers face two parallel sets of challenges - uncertainty about political issues such as tariffs and a more fundamental uncertainty about the limits of a full-employment state economy. He noted that wage and salary income growth was strong in the fourth quarter, rising 7.2 percent in Massachusetts on an annualized basis.

“A 3.3 percent unemployment rate, combined with an aging population and slow labor force growth will challenge the ability of Massachusetts employers to expand during 2019 and beyond,” Bluestone said.

Piling On Costs

AIM President and CEO Richard C. Lord, also BEA member, said the significant weakening of confidence in the Massachusetts economy also reflects frustration among employers with a cascade of expensive new state mandates, including a two-year MassHealth assessment, an increase in the minimum wage and the impending start of paid family and medical leave.

“We hear frequently from Massachusetts employers who feel under siege from both the sheer expense of these programs and the administrative burden they place on companies, particularly smaller companies,” Lord said.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Employer Confidence Weakens in December

Posted by Christopher Geehern on Jan 14, 2019 8:30:00 AM

Massachusetts employers gave a big “Bah Humbug” to the year-end economy as business confidence withered in the face of a government shutdown and the largest one-month stock market decline since the Great Depression.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost three points to 58.6 during December, its lowest level since December 2016. Confidence readings have dropped five points during the past 12 months.

BCI.December.2018The retreat was led by an 8.6-point drop in employer views of the national economy, and a 4.7-point drop among manufacturing companies.

Overall confidence remains within optimistic territory, but less comfortably so than earlier in 2018.

“The Massachusetts economy remains strong, with a 3.3 percent growth rate and an unemployment rate of 3.4 percent, but employers are increasingly concerned about factors such as financial-market volatility, a dysfunctional national political debate and challenges such as the cost of providing health insurance to employees,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

One employer who participated in the survey summarized the uncertainty: “A tremendous amount of unknowns are ahead.”

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.

Constituent Indicators Lower

The constituent indicators that make up the overall Business Confidence Index were mostly lower during December.

The Massachusetts Index assessing business conditions within the commonwealth lost 2.4 points to 64.7, leaving it 2.9 points lower than in December 2017.

The 8.6-point decline in the U.S. Index to 55.1 left employer sentiment about the national economy 9.1 points lower than a year earlier. It marked the lowest reading for the U.S. Index since May 2017.

The Company Index measuring employer assessments of their own operations dropped 1.4 points to 57.8, down 4.3 points year-to-year. The Employment Index gained 1.2 points to 54.4 during the month, leaving it down a modest 2.3 points for the year, while the Sales Index declined 1.6 points in December.

Employers don’t expect to change their outlook anytime soon.

The Current Index, which assesses overall business conditions at the time of the survey, fell 2.6 points last month to 60.0. But the Future Index, measuring expectations for six months out, dropped 3.4 points for the month and 7.2 points for the year.

Non-Manufacturers (59.4) were slightly more optimistic than manufacturing companies (57.7), re-establishing a trend that existed for most of 2018. Large companies (60.5) registered higher confidence readings than medium-sized companies (57.3) and small companies (57.7). Companies in Eastern Massachusetts (59.8) were more bullish than those in the west (57.0).

Paul Bolger, President of Massachusetts Capital Resource Company and a member of the BEA, suggested that uncertainty about economic factors such as slowing corporate profits, rising interest rates, and trade are overshadowing employer confidence in what remains a fundamentally strong growth pattern.

“Employers are cautiously watching earnings warnings from Apple and other major brands, while hoping that negotiations between the US and China are able to ratchet down the trade war,” Bolger said.

Eye on Health Costs

AIM President and CEO Richard C. Lord, also BEA member, said moderating the cost of providing health insurance to employees remains the biggest concern for employers who participated in AIM’s biennial Issues Survey in the fall.

That’s one reason, Lord said, that AIM has called upon the Legislature and Governor Charlie Baker to end immediately the two-year assessment imposed on employers last year to close a financial gap at the state’s MassHealth insurance program for low-income residents.

“The assessment is no longer necessary because employers last year paid tens of millions of dollars more than anticipated under the levy. Businesses are on track to contribute some $519 million by the time the assessment sunsets at the end of this year instead of the $400 million envisioned under the 2017 legislation,” Lord said.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Business Confidence Recovers in November

Posted by Christopher Geehern on Dec 11, 2018 7:47:22 AM

Business confidence in Massachusetts recovered slightly during November amid a swirl of contradictory economic indicators ranging from agitated financial markets to international trade tensions to steady but slowing growth in the Bay State.

BCI.November.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 0.6 points to 61.6 in November, ending a three-month slide that brought confidence to its lowest level in more than a year.

The November reading was one point lower than in November 2017 and 2.5 points lower than at the beginning of the year.

Increased optimism about the state and national economies balanced employer concerns about their own operations and hiring plans during November. The reading remained well within optimistic territory, but employers are clearly also seeing risk on the horizon.

“The survey reflects the uncertainty facing employers amid a still-strong state and national economy,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employers are increasingly confident in the economy but less so in the prospects for their own companies and in their own hiring plans. Economic growth remained at a solid 3.3 percent in Massachusetts for the third quarter, but that was a slowdown from earlier in the year. Payroll employment was up for the quarter but weakened in August and September.”

One employer who participated in the survey summarized the uncertainty:

“We are up double digits, but tariffs are negatively impacting our … prices and lead times. Looking forward to more stable times.”

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.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were mixed during November. 

The Massachusetts Index assessing business conditions within the commonwealth rose 2.4 points to 67.1, leaving it 1.9 points higher than in November 2017.

The U.S. Index gained 2.1 points to 63.7, up 1.5 points from a year earlier.

The Company Index measuring employer assessments of their own operations dropped 0.4 points to 59.2, down 3.1 points year-to-year. The Employment Index slid 3.8 points for the month while the Sales Index was up 2.3 points.

The Current Index, which assesses overall business conditions at the time of the survey, fell 0.7 points last month to 62.6 and 0.8 points for the year. The Future Index, measuring expectations for six months out, gained 2.1 points for the month and lost 1.1 points for the year.

Manufacturers (62.4) were slightly more optimistic than non-manufacturing companies (60.8), reversing a trend that has existed for most of 2018. Companies in the eastern part of Massachusetts (64.0) were significantly more bullish than those in the west (58.5).

Large companies (62.3) and medium-sized companies (62.4) registered higher confidence readings than small companies (59.7).

Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management and a member of the BEA, suggested that the wide swings in employer views of the overall economy and their own prospects may reflect growing discomfort with some emerging trends.

“Employers remain generally optimistic about a Massachusetts economy running at 3.5 percent unemployment and a growth rate of more than 3 percent. At the same time, the slowing housing market, rising interest rates, and continued uncertainty about trade are clearly causing concern,” Tyler said.

Post-Election Economy

AIM President and CEO Richard C. Lord, also BEA member, said employers at least have a clearer view of the political landscape now that the 2018 mid-term elections are completed.

“The prospect of divided government in which Democrats will control the US House of Representatives and Republicans the Senate and the White House provides some assurance to employers who do not relish policy lurches to the left or right,” Lord said.

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Business Confidence Drops to 17-Month Low

Posted by Christopher Geehern on Nov 6, 2018 8:04:29 AM

Business confidence in Massachusetts declined to its lowest level in 17 months during October as the uncertainties that roiled global financial markets seeped into employer outlooks.

BCI.October.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 1.6 points to 61.0 last month, the fourth decline in the last five months.

The reading remains well within optimistic territory, but the BCI now sits 1.7 points lower than its level of a year ago and at its lowest point since May 2017.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the October decline is noteworthy because of large declines in employer confidence in their own operations, and among manufacturers.

“Fears about slowing growth, trade wars and rising interest rates buffeted financial markets this month, and some of those same fears, combined with an increasingly acrimonious mid-term election, affected employers as well,” Torto said

“The good news is that the fundamentals of the economy remain strong. MassBenchmarks reports that the Massachusetts economy grew at a 3.3 percent annual rate during the third quarter and the national economy added 250,000 jobs last month.”

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.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were almost all lower during October.

The one exception was the Massachusetts Index assessing business conditions within the commonwealth, which rose 0.2 points to 64.7. Confidence in the state economy has declined 0.4 points since October 2017.

The U.S. Index lost 2.0 points to 61.6, leaving it 0.9 points lower than a year ago.

The Company Index measuring employer assessments of their own operations dropped 2.0 points to 59.6, down 2.4 points year-to-year. The Employment Index lost 0.3 points during October while the Sales Index tumbled 3.1 points to 57.4.

The Current Index, which assesses overall business conditions at the time of the survey, fell 1.0 point last month to 63.3 and 0.3 points for the year. The Future Index, measuring expectations for six months out, lost 2.1 points for the month and 3.2 points for the year.

Non-manufacturers (61.7) were slightly more optimistic that manufacturing companies (60.3). Companies in the eastern part of Massachusetts (61.7) were more bullish than those in the west (60.3).

Medium-sized companies (62.1) registered higher confidence readings than either large companies (59.5) or small companies (60.6), an unusual result since large companies typically show the most optimism on the BCI.

Katherine A. Kiel, Professor of Economics at The College of the Holy Cross in Worcester and a member of the BEA, suggested that large companies may be particularly concerned about the ratcheting up of trade tensions between the United States, China and other trading partners.

“Employers responding to the survey are expressing fears about the potential effects of rising tariffs both on the price of raw materials and their ability to expand overseas markets,” Kiel said.
Intersection of Politics, Economy

AIM President and CEO Richard C. Lord, also BEA member, agreed that international trade friction and uncertainty about the duration and scope of new tariffs are clouding employer views of an otherwise solid economy.

“Concerns about trade and tariffs are likely to influence employer decisions as we move toward the end of 2018 and into the New Year. Hopefully, the results of the mid-term elections today will shed some light on the direction of trade policy moving forward.”

Topics: AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Confidence Slips, But Overall Outlook Remains Positive

Posted by Christopher Geehern on Oct 2, 2018 8:00:00 AM

Business confidence in Massachusetts declined slightly during September as employers balanced optimism about economic fundamentals with concerns about tariffs and new state regulations.

BCI.September.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.6 points to 62.6 last month, leaving it almost even with its level of year ago. The BCI has been moving for most of 2018 within a narrow range that is well within optimistic territory.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the steady business confidence readings may reflect the lack of any significant economic or political changes that threaten the nine-year-old recovery.

“The underlying direction of the state and national economies remains positive. The Massachusetts economy grew at a staggering 7.3 percent annual rate during the second quarter and unemployment remains near historic lows at 3.6 percent,” Torto said.

“At the same time, employers remain wary of raw-material price increases brought about by new tariffs. The September survey was taken prior to the announcement Sunday of a new trade agreement between the United States, Mexico and Canada, so it will be interesting to learn whether that deal affects employer attitudes moving forward.”

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.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were mostly lower during September.

The Massachusetts Index assessing business conditions within the commonwealth ended the month at 64.5, falling 0.2 points for the month and 0.9 points for the year.

The U.S. Index lost 1.1 points to 63.6, still 3.8 points higher than in September 2017.

The Company Index measuring employer assessments of their own operations declined half a point to 61.6, down 0.7 points from September 2017. The Employment Index gained 0.3 points during September while the Sales Index lost 0.5 points to 60.5.

The Current Index, which assesses overall business conditions at the time of the survey, fell 1.8 points last month to 64.3. The Future Index, measuring expectations for six months out, gained 0.6 points. The Current Index rose 1.4 points during the year while the Future Index lost 1.1 points.

Manufacturing companies (63.3) were more optimistic than non-manufacturers (61.8), reversing a long-term trend in the confidence survey. Companies in the eastern part of Massachusetts (64.4) were more bullish than those in the west (60.2).

Michael D. Goodman, Executive Director of the Public Policy Center (PPC) at UMass Dartmouth and a BEA member, noted that the persistent shortage of skilled workers in key occupations and the tightening labor market at long last appear to be exerting upward pressure on wages, even if the benefits of rising incomes remain concentrated in the Greater Boston region and among the state’s highest earning households.

“Aggregate wage and salary income as measured by state withholding tax collections in Massachusetts grew at a 19.2 percent annualized rate in the second quarter, while nationally, U.S. workers saw their biggest pay increase in nearly a decade during the 12 months ending in June.” Goodman said.  “While the rising tide is not yet lifting boats in every corner of the Commonwealth, economic conditions in Massachusetts were undeniably very strong in the second quarter.”

AIM President and CEO Richard C. Lord, also BEA member, said the solid level of employer confidence during the past year bodes well for job growth in the months ahead.
“Confident employers hire new workers, invest in capital equipment, develop new markets and expand their plants and offices,” Lord said.

“It’s particularly encouraging to see year-over-year gains in both the Manufacturing Index and the Employment Index. Jobs and economic opportunity are, after all, the ultimate benefits of a strong economy.”

Topics: AIM Business Confidence Index, Massachusetts economy, Tariff

Strong Economy Boosts Business Confidence

Posted by Christopher Geehern on Sep 11, 2018 5:10:00 AM

Massachusetts employers were equally confident about the national and state economies during August, breaking an eight-and-a-half-year run in which they were more bullish about the commonwealth than the nation as a whole.

BCI.August.2018The brightening view of the US economy boosted overall business confidence as employers headed for the end of the third quarter.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 2 points to 63.2 last month after tumbling more than five points during June and July. The gain left the BCI two points higher than a year ago, comfortably within optimistic territory.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the last time employers were more optimistic about the national economy than the state was during the nadir of the Great Recession in May 2009 when the AIM BCI Massachusetts Index was 33.1 and the US Index was 34.4.

“The confluence of opinion reflects gathering optimism about the US economy rather than any weakness in the Massachusetts business climate. The Massachusetts Index rose 1.5 points during the year, but the US Index soared 4.5 points during that same period,” Torto said.

The optimism about national prospects came despite persistent concerns about rising production costs generated by tariffs and other factors.

“Steel tariffs are causing major cost escalation on goods and equipment ordered for installations. Freight costs are also rising rapidly. Many manufacturers of our equipment orders are refusing to quote freight until day of shipment and will not even give estimate of freight costs,” wrote one BCI participant.

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.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were largely higher during August.

The Company Index measuring employer assessments of their own operations rose 2.4 points to 62.1, up 1.2 points from August 2017. The Employment Index gained 2.4 points to end the month at 57.0 while the Sales Index lost 0.8 points to 61.0.

The Current Index, which assesses overall business conditions at the time of the survey, rose 2.5 points to 66.1, leaving it 4.8 points higher than the year earlier. The Future Index, measuring expectations for six months out, rose 1.5 points during August, but remained down 1.0 point for the year.

Non-manufacturing companies (63.6) were slightly more optimistic than manufacturers (62.8). Companies in the eastern part of Massachusetts (65.2) were more bullish than those in the west (60.8).

“All of these numbers are well within optimistic range and reflect the views of employers operating in a state economy that grew at a 7.3 percent annual rate during the second quarter. The acceleration in economic growth underscored strong gains in employment, earnings, and consumer and business spending,” said Elliot Winer, Chief Economist, Winer Economic Consulting, LLC, and a BEA member.

“Underlying economic strength is, for the moment, overshadowing a somewhat unpredictable public policy environment.”

Historically strong economy

AIM President and CEO Richard C. Lord, also BEA member, agreed that employers are driving a Massachusetts economy that remains historically strong.

“The state unemployment rate remains at 3.5 percent, wage and salary income surged 19.2 percent during the second quarter and economic output has accelerated,” Lord said. 

He cautioned, however, that the escalating series of tariffs and retaliatory tariffs among the US and its trading partners are starting to take a toll on Massachusetts employers.

“The thousands of member employers of Associated Industries of Massachusetts (AIM) are increasingly concerned about the negative effect of current and proposed tariffs on Massachusetts companies. Particularly alarming are tariffs on raw materials, components and finished goods coming from China,” Lord said.

“While we concur with the need to address China’s unfair trade practices, we do not believe that tariffs are the best strategy. Tariffs are already hurting our companies here in Massachusetts and additional damage is anticipated, by business owners and leaders.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

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