Confidence among Massachusetts employers dipped in November after a record surge the previous month as companies continued to wrestle with what one analyst calls a “fitful” economic recovery.
The Associated Industries of Massachusetts Business Confidence Index lost 3.2 points, but remained in positive territory at 52.1. The Index had posted a record 7.7-point increase in October after slumping throughout the third quarter.
Employers remain more confident about the Massachusetts economy than the national – no surprise since the commonwealth’s unemployment rate rests more than a full percentage point lower than the national rate of 9.8 percent.
“(October and November) together tell a clearer story than they do separately,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA). “The Index has moved back to the positive range, above 50 on its 100-point scale, where it was in late spring before a third-quarter slump. A third straight reading above 50 in December would give us our strongest quarter since the end of 2007, and some further upward movement would be reassuring.”
Employers are frustrated by the slow pace of economic growth.
"The recession may be over according to economists’ definition, but the unemployment rate is lagging way behind other indicators and banks unwillingness to lend is stifling the economy," one employer wrote in response to the survey.
The November retreat left the Business Confidence Index 6.3 points higher than it was at the beginning of 2010. Readings of 50 points and above indicate that employers have a generally optimistic view of the economy, while readings below 50 points indicate a bearish outlook.
All of the specific confidence measures that go into the overall Business Confidence Index declined in November. The Current Index of conditions prevailing at the time of the survey was off 2.6 points at 50.6, while the Future Index of expected conditions six months ahead dropped 3.5 to 53.5.
The Massachusetts Index of business conditions prevailing within the commonwealth fell 2.6 points to 47.5, remaining above the U.S. Index of national conditions, which lost 5.8 (after a 12.3-point gain in October) to 43.0. On the year the state indicator was up 9.0, its national counterpart up 6.3.
Survey respondents have rated the state’s economic climate better than the nation’s through this downturn and recovery and they expect Massachusetts conditions to turn slightly positive before mid-2011, ahead of national conditions.
The Company Index, which measures survey respondents’ overall confidence in the situations of their own operations, was down 2.6 points in November to 56.3. The Sales Index shed 2.4 to 56.5, and the Employment Index was off 1.2 points to 52.5. Confidence was sharply lower in November among manufacturers (-5.7 to 53.2) and in the state outside Greater Boston (-7.3 to 49.4), compared to moderate declines among non-manufacturing employers (-1.7 to 50.7) and within the metropolitan area (-0.2 to 54.2).
“The November results suggest that October’s leap in business confidence, though perhaps exaggerated, was no mere aberration,” said Richard C. Lord, AIM’s President and CEO, a BEA member. “The overall message remains positive, and the continuing favorable assessment of conditions in Massachusetts relative to the nation is very good news, particularly in comparison to our experience coming out of past downturns.”
But in absolute terms the Bay State’s economic picture is far from rosy, Lord noted.
“Only 4 percent of respondents to a special question agreed with economists that the recession is over, and 26 percent said ‘maybe’; while most (55 percent) chose ‘not yet, although conditions seem to be improving’ and 15 percent said ‘recovery is not in sight,’” he said.