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Employer Confidence Strengthens, Despite Market Volatility

Posted by Christopher Geehern on Mar 6, 2018 7:40:45 AM

Massachusetts employer confidence strengthened during February as optimism about long-term economic growth outweighed a volatile month in the financial markets.

BCI.February.2018.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose 0.4 points to 64.5, setting another 17-year high. The BCI has gained 2.4 points during the past 12 months as confidence levels have remained comfortably within the optimistic range.

Enthusiasm about the U.S. and Massachusetts economies, along with a bullish outlook on the part of manufacturers, fueled the February increase.

At the same time, hiring remained a red flag as the BCI Employment Index fell 4 points between February 2017 and February 2018. Almost 90 percent of employers who responded to the February confidence survey indicated that the inability to find skilled employees is either a modest, large or huge problem.

“Fourteen percent of respondents said finding employees represents a huge problem that is hampering their company’s growth. One-third of employers see employee recruitment as a big problem, while 29 percent see it as a modest issue,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“For the short-term, however, the state and national economies remain strong and the recent announcement by Amazon of a major expansion in Boston indicates that the trend should continue.”

The survey was taken before President Donald Trump roiled the financial markets last week by pledging to impose stiff tariffs on steel and aluminum imports.

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 February.

The most significant gains came in the Manufacturing Index, which surged 3.9 points to 66.2, and the US Index, which rose 2.1 points for the month to 66.9 and 8.0 points for the year. The Massachusetts Index fell 0.4 points to 68.5, but was up 5.3 points for the year and still higher than the national outlook for the 96th consecutive month.

The Current Index, which assesses overall business conditions at the time of the survey, rose 2.4 points to 64.1.

The Future Index, measuring expectations for six months out, declined 1.6 points to 65. The Current Index has risen 4.2 points and the Future Index 0.6 points during the past 12 months.
Operational Views

The Company Index, reflecting employer views of their own operations and prospects, was essentially flat, gaining 0.1 points to 62.4. The Employment Index also rose 0.1 points, to 56.4, versus 60.4 in February 2017.

Manufacturing companies (66.2) were more optimistic than non-manufacturers (61.9). Large employers (69.8) were more bullish than medium-sized (62.0) or small businesses (62.7).

“The special February BCI question about the ability of employers to find and hire skilled employees confirms our concerns about the long-term changes now facing the Massachusetts labor market,” said Alan Clayton-Matthews, Ph.D., School of Public Policy & Urban Affairs, Northeastern University, and a BEA member.

“Since the end of the Great Recession, total employment has grown by 355,600, the working age population has increased by 326,700, and the labor force has grown by 208,100. In other words, employment in Massachusetts has grown considerably faster than the working age population, and almost twice as fast as the labor force.” 

AIM President and CEO Richard C. Lord, also BEA member, said member employers expressed broad optimism about the national economy in the wake of tax reform, but remain uncertain about Massachusetts given the prospect of ballot questions that would impose an income tax surcharge, mandate paid family leave and increase the minimum wage to $15 per hour.

“Massachusetts employers have been more bullish about the state economy than the national economy for 96 consecutive months, but the numbers are now very close – 68.5 for Massachusetts and 66.9 for the nation,” Lord said.

“Economic competitiveness is a constant struggle. AIM looks forward to working with the Legislature and Governor Baker during the next several months to ensure that Massachusetts companies are able to grow and prosper here.”

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

Employers Begin 2018 on Confident Note

Posted by Christopher Geehern on Feb 6, 2018 8:06:35 AM

Massachusetts employers began 2018 much the way they ended 2017 – with growing confidence in the economy and optimism about their own business prospects.

BCI.January.2018.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose half a point to 64.1 during January, setting another 17-year high. The BCI has gained 2.7 points during the past 12 months as employer confidence levels have remained comfortably within the optimistic range.

Growing enthusiasm about the Massachusetts economy and a brightening outlook on economic conditions six months from now fueled the January confidence increase. At the same time, the hiring outlook remained muted as low unemployment and demographic shifts continued to impede the ability of employers to find the workers they need.

The survey was taken prior to major declines in global financial markets during the past several days.

“Rising confidence is not surprising in a state with 3.5 percent unemployment and an economy that grew at a 3.3 percent annual rate during the fourth quarter,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Economic output, job growth and spending all rose at a healthy clip in Massachusetts during the final three months of the year and economists expect modest growth to continue during the first half of 2018.”

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 most significant gain came in the Massachusetts Index assessing business conditions within the commonwealth, which rose 1.3 points to 68.9. The Massachusetts Index has gained 3.7 points in the past two months, 5.5 points year over year and now stands at its highest level since November 2000.

The U.S. Index of national business conditions also continued a yearlong rally by gaining 0.6 points to 64.8. January marked the 95th 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, decreased a point to 61.7 while the Future Index, measuring expectations for six months out, surged 2.1 points to 66.6. The Current Index has risen 2.1 points and the Future Index 3.3 points during the past 12 months.

Operational Views

The Company Index, reflecting employer views of their own operations and prospects, rose slightly, gaining 0.2 points to 62.3. The Employment Index was essentially flat, leaving it 2.1 points below its level of January 2017.

Non-manufacturing companies (66.6) were more optimistic than manufacturers (62.3). Large employers (67.2) were more bullish than medium-sized (62.7) or small businesses (63.5).

“The strong Future Index readings signal that employers anticipate steady growth during the first two quarters of 2018. The only fly in ointment remains the prospect that labor shortages may constrict the ability of companies to grow and expand,” said Paul Bolger, President, Massachusetts Capital Resource Company and a BEA member.

Political Risks

AIM President and CEO Richard C. Lord, also BEA member, said 2018 brings with it significant risk for employers as progressive groups push ballot questions that could create a $1 billion paid family and medical leave program, impose a punitive tax on many small businesses and raise the state minimum wage to $15 per hour.

“The Massachusetts Supreme Judicial Court will today hear arguments in a challenge that I and four other business leaders filed to the constitutionality of the income surtax question. Meanwhile, the business community is seeking common ground on a compromise paid-leave proposal that will not harm the economy,” Lord said.

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

Employer Confidence Closes 2017 at 18-Year High

Posted by Christopher Geehern on Jan 9, 2018 8:51:27 AM

Surging optimism about the state and national economies left Massachusetts employers with their highest level of confidence in 18 years as 2017 drew to a close.

BCI.December.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose one point to 63.6 during December, its highest level since November 2000. The BCI gained 3.2 points during a year in which employer confidence levels remained comfortably within the optimistic range.

Every element of the overall index increased during 2017 except for the Employment Index, which dropped half a point. Analysts believe low unemployment and demographic shifts are impeding the ability of employers to find the workers they need.

“Massachusetts employers maintained a uniformly positive outlook throughout 2017 and passage of the federal tax bill only added to that optimism,” 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 12-month decline in the Employment Index reminds us that the persistent shortage of skilled workers has reached an inflection point for the Massachusetts economy. Massachusetts companies have postponed expansions, declined to bid for contracts or outsourced work because they simply can’t find people.”

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 December.

The Massachusetts Index, assessing business conditions within the commonwealth, surged 2.4 points to 67.6, leaving it 5.8 points better than a year earlier.

The U.S. Index of national business conditions continued a yearlong rally by gaining 2 points to 64.2. December marked the 94th 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, decreased 0.7 points to 62.7 while the Future Index, measuring expectations for six months out, rose 2.7 points to 64.5. The Current Index gained 3.6 points and the Future Index 2.8 points during 2017.

Operational Views

The Company Index, reflecting employer views of their own operations and prospects, declined 0.2 points to 62.1.

The Employment Index rose slightly to 56.7, but still ended the year 0.5 points below the 57.2 posted in December 2016.

Manufacturing companies (64.3) continued to be more optimistic than non-manufacturers (62.6). Another unusual result was that employers in western Massachusetts (64.6) posted higher confidence readings than those in the eastern portion of the commonwealth (62.7).

“Employer attitudes largely reflect a national economy that grew at its fastest pace in three years during the third quarter on the strength of business spending on equipment. The headline is that unemployment is down and the financial markets are up,” said Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management, and a BEA member.

AIM President and CEO Richard C. Lord, also BEA member, said employers received an early Christmas present from a federal tax bill that reduced corporate rates from 35 percent to 21 percent and reduced rates for pass-through entities such as subchapter S corporations as well.

“The tax bill produced short-term benefits, ranging from companies like Comcast and Citizens Financial providing bonuses to employees to the utility Eversource reducing electric rates in Massachusetts,” Lord said.

“At the same time, employers are cautious about the effect that other provisions – including limitations on the deduction for state and local taxes – will have on the overall Massachusetts economy.”

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

Employer Confidence Flat; Labor Shortage Remains a Concern

Posted by Christopher Geehern on Dec 5, 2017 9:20:02 AM

Employer confidence in Massachusetts remained essentially unchanged during November as companies apparently began to bump up against a persistent shortage of qualified workers.

BCI.November.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.1 points off its 2017 high to 62.6, still 4.5 points better than in November 2016. The slight decline reflected a drop in confidence among non-manufacturing companies and a year-over-year decline in the index that measures employer hiring plans.

Analysts on the AIM Board of Economic Advisors (BEA) believe that Massachusetts may be suffering from too much of a good thing – a 3.7 percent unemployment rate that threatens to derail the ability of employers to find the workers they need to grow at a time when large number of baby boomers prepare to leave the work force.

“The concern is that Massachusetts could become a victim of its own success,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employers feel optimistic about the state economy, the national economy and their own growth prospects, but they worry where the computer programmers, machinists and accountants needed to fuel that growth are going to come from and where they are going to live.”

Wage growth, however, remains muted. The AIM HR Practices Survey released yesterday shows that Massachusetts employers project average wage increases of 2.66 percent for 2018, down from 2.75 percent this year.

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, gained 0.1 points to 65.2, leaving it 5.4 points better than a year earlier.

The U.S. Index of national business conditions lost 0.3 points to 62.2, pausing after a yearlong rally. October marked the 92nd 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, decreased 0.2 points to 63.4 while the Future Index, measuring expectations for six months out, edged down 0.1 points. The Current Index has risen 6.5 points and the Future Index 2.6 points during the past year.
Operational Views

The Company Index, reflecting overall business conditions, rose 0.3 points to 62.3. The most significant operational result, however, came in the Employment Index, which lost 1.2 points and ended the month 0.8 points below its level of a year ago. Another unusual result was that manufacturing companies were more optimistic than non-manufacturing companies.

“The movement of the overall Business Confidence Index was small as the economy continued to grow and add jobs at a healthy pace. But the weakness in the Employment Index suggests that the expansion may finally be bumping into a pervasive shortage of skilled workers across multiple industries,” said Katherine A. Kiel, Ph.D., Professor of Economics, College of the Holy Cross, and a BEA member.

Political Fireworks

AIM President and CEO Richard C. Lord, also BEA member, said employers remain upbeat despite uncertainty surrounding the federal and state political landscape.

“The tax bill passed last week by the US Senate contains a significant reduction in both corporate rates and rates for pass-through businesses, two provisions that are widely popular among employers. At the same time, employers are concerned about provisions that could become problematic for Massachusetts, including limits on the deductibility of state and local taxes, and loss of the federal research-and-development credit,” Lord said.

“All this is taking place as activists continue to work to place three questions on the 2018 Massachusetts election ballot that would together impede economic growth for a generation: a surtax on incomes of more than $1 million, an expansive and bureaucratic paid family leave program and an increase in the minimum wage.”

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

Business Confidence Hits Another High for 2017

Posted by Christopher Geehern on Nov 7, 2017 8:27:44 AM

Employer confidence in Massachusetts hit another high for 2017 during October as economic growth accelerated and companies remained optimistic about the national outlook.

BCI.October.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) edged up 0.3 points to 62.7, leaving it 6.5 points better than in October 2016. The uptick was driven by a brightening view of employment growth and firming confidence among manufacturers.

The reading came as MassBenchmarks reported that the Massachusetts economy grew at 5.9 percent during the third quarter, almost double the rate of the national economy. Payroll employment grew at a 2.1 percent annual rate in Massachusetts in the third quarter as compared to 1.2 percent nationally.

“The acceleration of the Massachusetts economy in the third quarter provided additional fuel to an already solid sense of confidence among employers as we head for 2018,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“At the same time, optimism about the national economy suggests that employers believe growth rates throughout the US will increase even more if Congress follows through on its proposal to lower the corporate tax rate from 35 percent to 20 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 that make up the overall Business Confidence Index pointed mostly higher during October.

The Massachusetts Index, assessing business conditions within the commonwealth, slipped 0.3 points to 65.1, still 4.1 points more than a year earlier. October marked the 91st consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The U.S. Index of national business conditions rose 2.7 points to 62.5, continuing a 13.3-point surge for the 12-month period. 

The Current Index, which assesses overall business conditions at the time of the survey, increased 0.7 points to 63.6 while the Future Index, measuring expectations for six months out, remained even at 61.9 points. The Current Index has risen 7.6 points and the Future Index 5.6 points during the past year.

Operational Views

The Company Index, reflecting overall business conditions, lost 0.3 points to 62.0. There was better news in the Employment Index, a key predictor of economic health, which rose 2.0 points to 57.8.

“The Massachusetts economy continues to grow at a robust pace and to add jobs in a broad array of sectors despite tightening regional labor markets. With the statewide unemployment rate now below four percent, it is not clear the commonwealth’s economic expansion is sustainable at its current pace,” noted Professor Michael D. Goodman, Executive Director of the Public Policy Center (PPC) at UMass Dartmouth and a BEA member.
Massachusetts Concerns

AIM President and CEO Richard C. Lord, a BEA member, said employer optimism continues to be tempered by the prospect of three potentially destructive ballot questions appearing on the 2018 state election ballot.

“Massachusetts employers face an unprecedented public-policy crisis as activists seek to place three questions on the 2018 Massachusetts election ballot that would together impede economic growth for a generation: a surtax on incomes of more than $1 million, an expansive and bureaucratic paid family leave program and an increase in the minimum wage,” Lord said.

“Having just honored 16 Massachusetts employers for creating jobs and economic opportunity for the people of Massachusetts, AIM remains concerned about ballot questions that are clearly intended to be punitive toward employers.”

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

Employer Confidence Rebounds

Posted by Christopher Geehern on Oct 3, 2017 9:05:54 AM

Massachusetts employers are as optimistic as they have been all year about the overall economy and prospects for their own businesses.

BCI.September.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) broke a two-month slide in September, rising 1.2 points to 62.4. The reading equaled its high for 2017 and was 6.5 points better than a year ago.

Employer confidence has moved in a narrow range so far in 2017 as employers appear bullish about the growth prospects of their companies. The September uptick was driven in part by a 5.7-point surge in the sales index, which is often a leading indicator of increased business activity.

“The Index was also taken prior to the announcement of an effort by Congressional Republicans and the White House to significantly reduce corporate taxes, a move that enjoys broad support among employers,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The prospect of tax reform and tax simplification is likely to buoy employer sentiment through the end of the year.”

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 were generally higher during September.

The Massachusetts Index, assessing business conditions within the commonwealth, rose 2.2 points to 65.4, a reading that was 8.4 points higher than in September 2016.

The U.S. Index of national business conditions dropped 0.4 points to 59.8 after surging more than 10 points during the previous 12 months. September marked the 90th 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, increased 1.6 points to 62.9 while the Future Index, measuring expectations for six months out, rose 0.7 points to 61.29 The Future Index ended the month 5.9 points higher than a year ago.

The Company Index, reflecting overall business conditions, gained 1.4 points to 62.3. The employment Index fell 2.2 points to 55.8, continuing an up-and-down pattern within the mid-50s on the 100-point scale.

“The Massachusetts economy continues to maintain a steady recovery, with employers adding 10,800 jobs during August and the state jobless rate declining to 4.2 percent,” said Elmore Alexander, Dean, Ricciardi College of Business, Bridgewater State University, and a BEA member.

“The surge in the AIM Sales and Future indices suggests that business activity may actually accelerate in coming months, so the primary challenge for employers will remain hiring and retaining skilled workers in a tight labor market.”

AIM President and CEO Richard C. Lord, a BEA member, said employers generally support federal initiatives to reduce business taxes, but also remain concerned about the potential effect those reductions might have on the federal deficit.

It is ironic, Lord said, that the proposed Republican tax plan would lower levies for subchapter S corporations and other small pass-through businesses, while Massachusetts voters may be voting on a surtax next year on those same companies.

“Subchapter s corporations and other companies that pay taxes on the individual level are generally small to medium-sized enterprises that form the heart of the Massachusetts economy. What a shame it would be if the federal government were to help these companies while Massachusetts penalizes them,” he said.

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

Employer Confidence Dips; Overall View Remains Optimistic

Posted by Christopher Geehern on Sep 5, 2017 7:30:00 AM

Massachusetts employer confidence edged lower for the second consecutive month during August, but remained comfortably in optimistic territory.

BCI.August.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) shed 0.3 points to 61.2 last month, leaving it 7.1 points higher than a year ago. The Index has been essentially flat since April and now stands 0.2 points lower than at the beginning of 2017.

Last month’s slip reflected offsetting trends in employer attitudes about conditions inside and outside their walls. Employers grew less bullish about their own companies during the month, but showed growing optimism about the national economy and about prospects for manufacturers.

“Employer confidence continues to move in a narrow range defined by broad optimism about both the state and national economies,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The steady level of confidence readings above the 60 mark reflect a state economy that grew at a 4 percent annual rate during the second quarter while maintaining a steady level of employment growth.”

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 were mixed during August.

The Massachusetts Index, assessing business conditions within the commonwealth, remained unchanged at 63.2, still 6.3 points higher than in August 2016.

The U.S. Index of national business conditions rose 2.3 points to 60.2 amid strong signs of job expansion nationally. The US Index has risen 10.6 points during the past year, more than any other element of the overall Business Confidence Index.

Still, August marked the 89th 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, edged up 0.1 points points to 61.3 while the Future Index, measuring expectations for six months out, dropped 0.6 points to 61.2. The Future Index ended the month 6.3 points higher than a year ago.

The Company Index, reflecting overall business conditions, lost 1.3 points to 60.9. The employment Index surged 2.3 points to 58.0 after losing ground during July.

Executives at manufacturing companies and those at non-manufacturing enterprises maintained almost identical confidence readings – 61.1 for manufacturers, 61.3 for non-manufacturers. The AIM Manufacturing Index has surged 9.9 points during the past year.

“Manufacturers in Massachusetts remain optimistic even though national economic signals for that sector remain mixed. The Institute for Supply Management manufacturing index was strong August, but the IHS Markit US Manufacturing PMI showed manufacturing expanding at its slowest pace since June 2016,” said Edward H. Pendergast, Managing Director of Dunn Rush & Co. in Boston and a BEA member.

Confidence was also remarkably consistent across all geographic regions of the commonwealth. Eastern Massachusetts companies posted a 61.3 reading during August versus 61.1 for companies in western Massachusetts.

AIM President and CEO Richard C. Lord, a BEA member, noted that a significant number of employers who responded to the August survey expressed frustration with the new $200 million health-insurance surcharge and the proliferation of complex and expensive employment laws.

“Amid a generally strong economy, employers feel under siege from a government and an electorate that seem willing to impose crushing financial burdens on job creators in the name of social progress,” Lord said.

“Employers are telling us that additional measures that may be headed to the statewide ballot – paid family leave, a $15 minimum wage and a punitive surtax on incomes of more than $1 million – may force them to relocate.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Business Confidence Weakens Slightly in July

Posted by Christopher Geehern on Aug 1, 2017 9:19:07 AM

Massachusetts employer confidence meandered through the first full month of the summer, edging down during July but remaining well within optimistic territory.

BCI.July.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) shed 0.3 points to 61.5 last month, leaving it 6.4 points higher than a year ago. The Index has gained ground in five of seven months so far in 2017.

The July slip was led by the Employment Index, which dropped 2.4 points from June. Experts on the AIM Board of Economic Advisors believe the slide reflects employers’ inability to hire skilled workers amid a tight labor market rather than a hiring slowdown caused by economic factors.

“Confidence levels at or above 60 signal continued strong confidence among employers in the direction of the state and national economies,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The labor shortage is a serious issue. We hear anecdotes from companies in multiple industries that are turning away business or postponing expansions because they can’t find tech specialists, manufacturing workers or electricians to take the new jobs.”

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, lost a point to 63.2, still six points higher than in July 2016.

The U.S. Index of national business conditions rose 0.5 points to 57.9 despite lingering uncertainty about federal health-care and economic policy. July marked the 88th 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 0.7 points to 61.2 while the Future Index, measuring expectations for six months out, edged up 0.1 point to 61.8. The Future Index ended the month seven points higher than a year ago.

Operational Views

The Company Index, reflecting overall business conditions, lost 0.2 points to 62.2, up 6.3 points during the 12-month period. And though the employment Index dropped to 55.7 the Sales index rose for the third consecutive month, gaining 1.5 points to 64.1.

The AIM survey found that 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months are similar – 37 percent hiring and only 10 percent downsizing.

Elliot Winer, Chief Economist, Winer Economic Consulting, said workers with the type of skills needed by employers in growing industries remain in short supply, even though Massachusetts has posted significant increases to its labor force so far in 2017.

“Employers report that it is increasingly hard to fill jobs. Job vacancies now significantly exceed new hiring. And yet, wage growth in the state has been near zero when adjusted for inflation,” Winer said.

Eastern Massachusetts companies were more confident in June than those in the western portion of the commonwealth. Eastern Massachusetts employers posted a 61.5 confidence reading in June versus 60.5 for employers in the west.

Manufacturing companies remained optimistic about the economy with the 59.6 confidence reading, but not as optimistic as employers outside the manufacturing sector, who posted a 63.6 result.

Massachusetts Backlash?

AIM President and CEO Richard C. Lord, also a BEA member, noted that employer confidence in the Massachusetts economy has stalled as the state legislature has taken several troubling votes, including one last week to force employers to close a $200 million gap in MassHealth with no long-term reforms to the program.

“Employers are thus left not only to struggle with the rising cost of providing health insurance to their own employees, but to bail out an unsustainable public insurance program as well,” Lord said.

“There are consequences to raising the cost of doing business and declining confidence is a red flag for what may come next.”

Topics: AIM Business Confidence Index, Massachusetts economy

Employer Confidence Strengthens Again

Posted by Christopher Geehern on Jul 5, 2017 10:08:03 AM

Massachusetts employer confidence rose for the ninth time in 10 months during June amid optimism about an economy that is finally attracting more people into the work force.

BCI.June.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) rose one point to 61.8 last month, leaving it 5.7 points higher than a year ago. The Index has gained ground in each of the past two months after slipping in April.

The results come a month after state officials reported a long-awaited expansion of the Massachusetts labor market – the labor-force participation rate rose to 66.7 percent in May, its highest mark since before the Great Recession.

“Employer confidence in both the state and national economies remains well above the level we saw a year ago, especially among manufacturers,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Key Massachusetts indicators such as total jobs, wages and gross state product far exceed pre-recession levels and that is outweighing concerns about long-term growth.”

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 were mostly positive during June.

The Massachusetts Index, assessing business conditions within the commonwealth, gained 2.1 points to 64.2, leaving it 5.7 points higher than in June 2016.

The U.S. Index of national business conditions rose 2.8 points to 57.4 despite lingering uncertainty about federal economic policy. June marked the 87th 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 1.5 points to 61.9 while the Future Index, measuring expectations for six months out, increased 0.4 points to 61.7. The Future Index was 5.1 points higher than a year ago.

The Company Index, reflecting overall business conditions, was unchanged for the month at 62.4 and up 4.7 points during the 12-month period. The Employment Index fell 0.4 points to 58.1 while the Sales index rose 0.6 points to 62.6.
The AIM survey found that 39 percent of respondents reported adding staff during the past six months while 18 percent reduced employment. Expectations for the next six months are stable – 38 percent hiring and only 10 percent downsizing.

Alan Clayton-Matthews, a professor in the School of Public Policy and Urban Affairs at Northeastern University, said the supply of workers remains one of the most important factors in the ability of Massachusetts to maintain long-term economic growth.

“There is little slack left in the labor market. Unemployment rates are back to pre-recession levels, and employment rates are very close to pre-recession levels. The slack that does remain is largely among young workers, those with less than a high-school education, and part-time workers who have been unable to find full-time work, suggesting that many workers lack the skills that employers are seeking,” Clayton-Matthews said.

Overall participation in the labor force nationally has hovered below 63 percent during the recovery, compared with more than 66 percent before the recession.
Eastern Massachusetts companies were more confident in June than those in the western portion of the commonwealth. Eastern Massachusetts employers posted a 61.8 confidence reading in June versus 60.8 for employers in the west.

AIM President and CEO Richard C. Lord, also a BEA member, said employers are increasingly concerned about a passel of potentially expensive and disruptive Beacon Hill proposals, including a surtax on incomes more than $1 million, paid family leave and an employer assessment to close a budget gap in the MassHealth program.

“Massachusetts employers have led what is now one of the longest and most consistent economic recoveries of the past 100 years. Much of that growth reflects the fact that policymakers have refrained from unnecessarily raising business costs and imposing inefficient regulation,” Lord said.

“We look forward to working with the Legislature and the Baker administration to ensure that those policies continue.”

Topics: AIM Business Confidence Index, Employers, Massachusetts economy

Employer Confidence Rebounds in May

Posted by Christopher Geehern on Jun 6, 2017 8:29:22 AM

Massachusetts employer confidence resumed its upward trajectory during May as companies expressed renewed optimism about their own business prospects and hiring plans.

BCI.May.2017.jpgThe Associated Industries of Massachusetts Business Confidence Index (BCI) edged up 0.6 points to 60.8 last month after retreating from a 13-year high in April. The Index has increased in eight of the past nine months and now stands 3.1 points higher than in May 2016.

The May advance was led by strengthening employer confidence in their companies, rather than their overall views of the state and national economies. Manufacturers were particularly bullish, ending May a full 7 points higher than a year earlier.

“We were not surprised to see confidence readings correct slightly in April, and the May results suggest that employers still feel positive about the future,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“In fact, employers seem to have more confidence in their own economic prospects than in the broader economies in which they operate.”

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 were mixed during May.

The Massachusetts Index, assessing business conditions within the commonwealth, lost 1.2 points to 62.1, leaving it a slim 1.8 points higher than in May 2016.

The U.S. Index of national business conditions shed 2.3 points to 57.2, its second consecutive decline. May marked the 86th 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 0.5 points to 60.4 while the Future Index, measuring expectations for six months out, increased 0.8 points to 61.3. The Future Index was 3.2 points higher than a year ago.

The Company Index, reflecting overall business conditions, gained 2.2 points for the month and 3.2 points for the 12-month period to 60.2. The Employment Index rose 2.3 points to 58.5, and the Sales Index was up 1.5 points to 62.

The AIM survey found that nearly 39 percent of respondents reported adding staff during the past six months while 19 percent reduced employment. Expectations for the next six months are more optimistic – 38 percent hiring and only 10 percent downsizing.

Sara L. Johnson, Senior Research Director, Global Economics, IHS Markit, and a BEA member, said it is encouraging that employers are looking at their own balance sheets and feeling confident enough to anticipate stepped-up hiring.

“The overall AIM Index continues to move in a range that suggests solid optimism among employers, both in the current time frame and six months into the future. As optimism turns to hiring, the tight labor market is likely to put upward pressure on wages,” Johnson said.

The changing dynamics of the labor market were underscored last week when the government issued a jobs report that reflected a decline in the share of working-age adults who have a job or are in the market for one. Overall participation in the labor force has hovered below 63 percent during the recovery, compared with more than 66 percent before the recession.

For the second time in three months, Western Massachusetts companies were more confident in May than those in the eastern portion of the commonwealth. Western Massachusetts employers posted a 61.2 confidence reading in May versus 60.9 for employers in the western part of the state.

AIM President and CEO Richard C. Lord, also a BEA member, said employers appear to be drawing encouragement from within rather than looking for clues amid the chaotic and often contradictory signals of the overall economy and political debate.

“Employers, like everyone else, are still trying to digest the economic implications of the United States pulling out of the climate-change accord. They are also trying to balance the promise of meaningful federal tax reform with concern about renegotiated trade agreements and Medicaid changes that could blow a $2 billion hole in the state budget,” Lord aid.

“Amid all those factors, the potential acceleration of hiring speaks to the resiliency of Massachusetts employers and the global pre-eminence of their products and services.”

Topics: AIM Business Confidence Index, Massachusetts economy, Jobs

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