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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, Tariff, Massachusetts economy

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

Business Confidence Flat During July

Posted by Christopher Geehern on Aug 7, 2018 9:07:47 AM

Confidence levels among Massachusetts employers were virtually unchanged during July as strong economic growth balanced persistent concerns about tariffs and escalating international trade tensions.

BCI.July.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) dropped 0.1 point to 61.2 last month after tumbling more than five points in June. The drop left the BCI three-tenths of a point lower than a year ago, though still comfortably within optimistic territory.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said employers grew justifiably bullish about the state and national economies during July while expressing uncertainty about their own prospects.

“The Manufacturing Index has dropped more than eight points during the past two months, pretty much concurrent with the escalation of trade tensions that are increasing prices, disrupting global supply chains and putting some companies in the crosshairs of retaliatory tariffs,” Torto said.

One BCI survey participant in the construction industry wrote: “The tariffs are escalating building costs. We get several price increases per week. It’s harder for most people to have the means to spend on up-keep, much less renovation or new construction.”

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 July.

The Massachusetts Index assessing business conditions within the commonwealth gained 2.3 points to 65.1, leaving it 1.9 points ahead of July 2017.

The U.S. Index ended the month at 61.9, rising 1.9 points after sliding 9.3 points the previous month. The US Index was 4 points better than a year ago.

July marked the 101st 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, rose 0.1 point to 63.6. The

Future Index, measuring expectations for six months out, fell 0.4 point. The Current Index gained 2.4 points during the year while the Future Index lost 3.1 points.

Operational Views

Employer views of their own companies weakened.

The Company Index declined 1.5 points to 59.7, down 2.5 points for 12 months. The Employment Index ended the month at 54.5, a 0.5-point decrease for the month and 1.2 points lower than a year ago. The Sales Index lost 0.6 point for the month and 2.3 points for the year.

Non-manufacturing companies (63.0) were more optimistic than manufacturers (58.6). Companies in the eastern part of Massachusetts (63.6) were more bullish than those in the west (57.6).

“The Massachusetts economy itself remains strong and it accelerated sharply in the second quarter, bucking the expectation of slower growth due to low unemployment and demographic constraints,” said Elmore Alexander, Dean of the Ricciardi College of Business, Bridgewater State University.

“The recent surge in state economic growth reflects strong gains in employment, earnings, and consumer and business spending.”

New Laws in Massachusetts

AIM President and CEO Richard C. Lord, also BEA member, said employers spent much of July digesting a raft of new public policies passed by the Massachusetts Legislature as it wrapped up the formal portion of its 2017-2018 session.

“Employers face new restrictions on the use of non-compete agreements, imposition of paid family leave, an increased minimum wage and a wholesale shift in the generation of the energy they use,” Lord said.

“And that’s on top of the $200 million annual assessment on employers to close a budget gap in the MassHealth program. Employers clearly have a lot to think about.”

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

Employer Confidence Weakens in June

Posted by Christopher Geehern on Jul 3, 2018 9:21:05 AM

Confidence among Massachusetts employers weakened considerably during June as tariffs, rising raw-material costs and approval of paid family and medical leave in the Bay State raised concerns about business growth.

BCI.June.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) dropped 5.3 points to 61.3 last month, its lowest level since August 2017. Confidence remains well within the optimistic range, but the June decline left the BCI slightly below its level of a year ago.

Though analysts say the volatility in business confidence during May and June may reflect some statistical anomalies, the comments provided by employers on the monthly AIM survey suggest that companies are becoming increasingly concerned about a perfect storm of issues on the federal and state levels.

“EMAC (employer MassHealth assessment) and paid sick time are going to put me out of business if something doesn’t change quickly,” wrote one employer.

Another wrote: “A trade war with China is going to cost jobs, not add them.”

“It is certainly significant that the AIM Business Confidence Index is lower than it was in June 2017. It is also significant that many of the individual indicators that make up the overall index - ranging from employer hiring plans to their views of the Massachusetts economy – are also lower than they were a year ago,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design. “It will be interesting to see how confidence changes during the summer as Massachusetts continues to operate at virtually full capacity.”

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 all lost ground during June.

The Massachusetts Index assessing business conditions within the commonwealth fell 7.2 points to 62.8, leaving it 1.4 points lower than in June 2017.

The U.S. Index ended the month at 60.0, down 9.3 points for the month but 2.6 points better than a year ago.
June marked the 100th 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, declined 2.6 points to 63.5. The Future Index, measuring expectations for six months out, fell 7.5 points to 59.1. The Current Index gained 1.6 points during the year while the Future Index lost 2.6 points.

Employer views of their own companies also weakened.

The Company Index declined 3.3 points to 61.2, down 1.2 points for 12 months. The Employment Index ended the month at 55.0, a 3.3-point decrease for the month and 3.1 points lower than a year ago. The Sales Index lost 2.9 points for the month and 0.2 points for the year.

Manufacturing companies (62.5) were slightly more optimistic than non-manufacturers (60.2). Companies in the eastern part of Massachusetts (63.3) were more bullish than those in the west (58.7).

“It’s interesting to note that medium and small companies remain significantly more optimistic than larger companies, reversing the typical pattern,” said Edward H. Pendergast, Managing Director, Dunn Rush & Co. “Entrepreneurial companies continue to drive growth here in Massachusetts.”

The BCI decrease came a month after the Mass Insight index of consumer confidence in Massachusetts suffered its biggest quarterly decline in years, from 134 in February to 121 in May. The index remined in optimistic territory, but fell below a comparable index for national consumer confidence for the first time since 2014.

Mixed Signals

AIM President and CEO Richard C. Lord, also BEA member, said employers are feeling threats from all directions.

“Member employers are deeply concerned about a potential trade war with China and with key US trading partners such as Canada, Mexico and the European Union,” Lord said.

“At the same time, the Legislature last week passed a ‘grand bargain’ that will create a family- and medical-leave requirement and increase the state minimum wage from $11 per hour to $15 per hour. Those requirements, on top of the MassHealth assessment and other elements, continue to challenge employers.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Employer Confidence Surges during May

Posted by Christopher Geehern on Jun 5, 2018 9:28:26 AM

Business confidence surged during May to its highest level since the summer of 2000, driven by improving employer outlooks about the state and national economies.

BCI.May.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 2.4 points to 66.6 last month after increasing modestly during April. The BCI has risen in five of the last six months and now stands 5.8 points higher than its level of a year ago.

Confidence remains well within the optimistic range. The only whiff of concern came in the index that measures hiring, which dropped 1.5 points for the month and 0.2 points during the year.

Economists believe the weakness in the AIM Employment Index reflects the persistent shortage of workers in Massachusetts that has forced some employers to postpone expansions or to decline new business opportunities.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, cautioned that major month-to-month movements in the Index like those in May sometimes reflect statistical or sampling anomalies. He noted, however, that the numbers are consistent with a general sense that the US and state economies are picking up steam in the second quarter after a slow start to 2018.

“There are signs GDP growth gathered momentum early in the second quarter, with solid consumer spending, business investment on equipment and industrial production,” Torto said.

The nation’s economy grew at a 2.2 percent rate during the first quarter. Hiring across the US remains strong, with the government reporting on Friday that employers added 223,000 jobs during May.

“And the Massachusetts economy continues to operate at virtually full capacity, creating significant constraints on the availability of labor,” said Torto.

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 in May.
The Massachusetts Index assessing business conditions within the commonwealth surged 5.9 points to 70.0, leaving it 7.9 points higher than in May 2017.

The U.S. Index ended the month at 69.3, up 5.4 points for the month and 14.4 points for the year.
May marked the 99th 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, gained 1.5 points to 66.6. The Future Index, measuring expectations for six months out, increased 3.3 points to the same 66.6 level. The Current Index has risen 6.2 points and the Future Index 5.3 points since May 2017.

Employer views of their own companies were mixed.

The Company Index increased slightly to 64.5, up 2.1 points for 12 months. The Employment Index ended the month at 58.3, a 1.5-point decrease for the month and 0.2 points lower than a year ago. The Sales Index rose 1.7 points for the month and 3.3 points for the year.

Manufacturing companies (66.8) and non-manufacturers (66.3) were equally optimistic about the economy. Companies in the eastern part of Massachusetts (67.9) were more bullish than those in the west (64.6).

“Massachusetts employers remain confident, but economic growth in the commonwealth is increasingly bumping up against the structural shortage of skilled workers,” said Alan Clayton-Matthews, a BEA member and professor in the School of Public Policy & Urban Affairs, Northeastern University.

Clayton-Matthews told MassBenchmarks earlier this year: “Retiring baby boomers will continue to dampen labor force growth this year and throughout the next decade unless the commonwealth is able to attract young workers from across the country and the world.”

The BCI increase came as the Mass Insight index of consumer confidence in Massachusetts suffered its biggest quarterly decline in years, from 134 in February to 121 in May. The index remined in optimistic territory, but fell below a comparable index for national consumer confidence for the first time since 2014.

Mixed Signals

AIM President and CEO Richard C. Lord, also BEA member, said the increase in business confidence underscores the underlying strength of the economy at a time when employers are receiving mixed signals from government.

“On the one hand, employers are seeing benefits from federal tax reform. On the other hand, they are struggling to process the new Massachusetts health-care surcharge and looking ahead warily to the possibility that Massachusetts voters may approve a graduated income tax that could harm small businesses,” Lord said.

“AIM and the employer community are seeking to negotiate reasonable compromises on issues such as paid family/medical leave and a $15 per hour minimum wage, compromises that would allow employers to continue creating jobs for Massachusetts residents.”

Topics: AIM Business Confidence Index, Massachusetts economy, Skills Gap

Employer Confidence Up Slightly in April

Posted by Christopher Geehern on May 8, 2018 8:48:02 AM

Business confidence strengthened during April as growing optimism among employers about the prospects of their own companies outweighed a more cautious outlook about the state and national economies.

BCI.April.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 0.7 points to 64.2 last month after falling a full point in March. The BCI has gained four points during the past 12 months and remains well within the optimistic range.

The April increase was driven by 2.6-point surge in the index measuring employer confidence in their own companies, along with a 2.5 percent jump in the Employment Index.

Those increases offset slippage in employer views of both the Massachusetts and US economies. The trend appears to be tied to specific issues such as imposition of the employer health-care surcharge in Massachusetts and commodity price increases stemming from the Trump administration’s tariffs on steel and aluminum.

“While business is good, I am not confident in the general direction and tax policies of the federal government. My impression is that short term gains will come at the expense of future economic, social, and environmental stability,” wrote one employer.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the confidence numbers reflect a solid economy that is growing modestly – 1.6 percent annually on the state level and 2.3 percent annually for the United States.

“The Massachusetts economy is operating at virtually full capacity, but growth is slowing due to constraints on labor,” said Torto.

“Employers are certainly concerned about public policy issues, but those concerns for the moment are minimized by the underlying strength of their businesses.”

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 provided a study in contrasts during April.

The Massachusetts Index assessing business conditions within the commonwealth declined 2.8 points to 64.1, leaving it 0.8 points higher than in April 2017.

The U.S. Index ended the month at 63.9, down 1.3 points after rising 6.7 points during the previous 12 months. April marked the 98th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy, though the gap has recently narrowed.

The Current Index, which assesses overall business conditions at the time of the survey, gained 2.5 points to 65.1. The Future Index, measuring expectations for six months out, declined 1.1 points to 63.3. The Current Index has risen 5.2 points and the Future Index 2.8 points since April 2017.

Operational Views

Employer views of their own companies were far brighter.

The Company Index increased to 64.3, up 4.1 points for 12 months. The Employment Index ended the month at 59.8, a 3.6-point increase for the year.

Manufacturing companies (65.3) remained more optimistic than non-manufacturers (61.1). Large employers (66.1) were more bullish than medium-sized (63.4) or small businesses (63.4).

“Massachusetts employers have maintained a positive view of the economy since the fall of 2013. The numbers move up and down in a small range, and there are certainly long-term concerns about labor availability, but business confidence remains comfortably in positive range amid a full-employment economy,” said Sara L. Johnson, Executive Director, Global Economics, IHS Markit and a BEA member.

Competitive Playing Field

AIM President and CEO Richard C. Lord, also BEA member, pointed to the recent announcement by Philips Lighting that it will end manufacturing at its Fall River plant as evidence that Massachusetts must still pay attention to the cost of doing business.

“Many of the employers who responded to the April Business Confidence Index Survey expressed concern about the new $200 million health-care surcharge and its effect on small business,” Lord said.

“The surcharge was levied to close a budget deficit in the MassHealth program for low-income residents. AIM continues to work with the Legislature to institute structural reforms that will put that program on sound financial footing for the long term.” 

Topics: AIM Business Confidence Index, Massachusetts economy, Employer Health Assessment

Tariff Announcements Drive Down Business Confidence

Posted by Christopher Geehern on Apr 3, 2018 8:28:21 AM

Confidence among Massachusetts employers weakened during March amid roiling international trade tensions and volatile financial markets.

BCI.March.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) declined a point to 63.5, retreating from a 17-year high in February. The BCI has gained 1.1 points during the past 12 months and remains comfortably within the optimistic range.

But virtually every element of the March confidence survey lost ground, led by a 1.7-point drop in the US Index of national business conditions. Several employers blamed the Trump Administration’s decision to level tariffs on steel, aluminum and other products for their uncertain outlook.

“Tariffs on stainless steel and aluminum will negatively impact our bottom line in the short run and could prevent our customers from providing new projects due to increased costs,” wrote one employer.

Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design, said the steel and aluminum tariffs raise the prospect of retaliation by other nations against products made by Massachusetts companies.

“Trade wars reduce the competitiveness of Massachusetts companies and increase costs for consumers. Announcement of the tariffs sent financial markets into a tailspin last month and some of that uncertainty rubbed off on employers,” said Torto.

Cranberries, for example, a key Massachusetts agricultural export, were among the products targeted for retaliation by the European Union before the administration exempted that region from the steel and aluminum tariffs. Massachusetts companies exported $27.5 billion worth of products to foreign markets during 2017, with the largest share (13.5 percent) going to Canada.

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 March.
The decline in the US Index was matched by a 1.6-point decline in the Massachusetts Index assessing business conditions within the commonwealth. The Massachusetts Index stood at 66.9, leaving it 3.2 points higher than in March 2017.

The U.S. Index ended the month at 65.2, 5.3 points better than a year ago. March marked the 97th 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, lost 1.5 points to 62.6. The Future Index, measuring expectations for six months out, declined 0.6 points to 64.4. The Current Index has risen 0.8 points and the Future Index 1.4 points during the past 12 months.

Operational Views

The only element to gain ground was the Employment Index, which rose 0.9 points for the month but remained 1.7 points behind its level of a year ago. The Company Index, meanwhile, reflecting employer views of their own operations and prospects, was off 0.7 points to 61.7.

Manufacturing companies (65.4) were more optimistic than non-manufacturers (61.3). Large employers (68.8) were more bullish than medium-sized (60.3) or small businesses (65.2).

“There is no question that the whirlwind of events taking place in Washington, from the tax bill to trade sanctions, are affecting the outlook of Massachusetts employers,” said Barry Bluestone, Professor of Political Economy at Northeastern University, and a BEA member.

“But it’s also worth noting that the only two elements of the BCI that have declined during the past year are the Company Index and the Employment Index, two measures tied to the performance of individual companies. Overall confident remains strong, but those elements will be worth watching.”

Trade Battles

AIM President and CEO Richard C. Lord, also BEA member, said the announcement of tariffs and subsequent modifications of those tariffs by the administration has generated uncertainty among employers.

“Trade barriers are cause for concern in a state that exported more than $27 billion worth of goods in 2017,” Lord said.

“AIM and its member employers continue to believe that free trade and open markets remain the best way to ensure growth in the global economy.”

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

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