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Natural-Gas Constraints Bad for Business, Bad for Environment

Posted by Bob Rio on May 8, 2018 11:41:13 AM

A shortage of natural-gas capacity during the December/January cold snap added $1.7 billion to the electric bills of business and residential customers in New England while erasing all the environmental benefits from solar energy in Massachusetts during 2017.

coal_power_plantNow you know why Massachusetts employers support the idea of expanding natural-gas infrastructure in the region.

New data released yesterday by the Massachusetts Coalition for Sustainable Energy (MCSE) and compiled by Concentric Energy Advisors underscores the economic and environmental damage wrought by our energy status quo. AIM is a member of the Coalition, along with scores of other business associations and labor unions.

Natural gas supplies in the region are tight during the winter. Despite abundant supplies just a few states away, pipeline infrastructure to get it here is inadequate and efforts to address this issue have been stymied by those who believe upgrading our natural gas infrastructure will stall progress on transitioning to clean energy. 

Electricity generators simply don’t have enough natural gas to operate during the bitter cold because most of the available gas is used to serve businesses and homeowners.

To satisfy the increased demand for electricity, power plants burn stored back-up oil and coal. The lights stay on, but greenhouse gas emissions increase exponentially since oil and coal emit more carbon than natural gas. The cold-weather shortage of natural gas has become so common in recent winters that power generators are paid to store oil, whether or not it is needed, as sort of an insurance policy funded by ratepayers through higher electric rates.

According to the Concentric report, the amount of coal and oil burned during just a two-week period generated 1.3 million tons of extra greenhouse gas emissions over what would have been emitted if gas had been available. The ratepayer cost was $1.7 billion higher than the previous winter – most of which will show up in next winter’s energy bills. 

In fact, Eversource yesterday sought a 15 percent increase in electric rates for customers in western Massachusetts for the period July through December.

How much is 1.3 million tons? The extra greenhouse gases negated all the greenhouse gas saving from all the solar energy produced in Massachusetts throughout 2017. It’s a problem that cannot be solved by adding more solar capacity since the highest need for natural gas is in the winter, when solar output is at its lowest.

Had the cold period continued (or if another came later in the year), brownouts would likely had occurred. ISO-NE, the regional power grid operator, reports that the system was about three days away from crashing as some plants were already running out of oil and had to curtail their output.       

This dangerous mix of rising costs, rising emissions and brownouts comes at a time when other states are dangling low energy costs in front of Massachusetts employers to persuade those companies to expand elsewhere. It’s not a tough sell – our energy costs are nearly double those of states in other regions of the country.

AIM, along with other members of the Coalition for Sustainable Energy, support a balanced approach to address the region’s energy problems. That approach embraces renewables - AIM has supported the development of both hydro power and offshore wind – while at the same time acknowledging the stresses on our current system and the economic and environmental damage that is occurring.

Read the Concentric Report

Please contact me at rrio@aimnet.org for more information.

 

Topics: Massachusetts economy, Environment, Energy

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

Looking for Employees? Evacuees from Puerto Rico are Looking for Work

Posted by John Regan on May 3, 2018 8:30:00 AM

AIM is working with the Baker Administration to assist the thousands of people who fled hurricane-ravaged Puerto Rico to live in Massachusetts - people who are ready to go to work for Bay State employers who have struggled to find workers in a full-employment economy.

HurricaneMariaMore than 140 people who left Puerto Rico after Hurricane Maria destroyed the island in September have already been hired by Massachusetts companies, including several AIM members. Many of the evacuees have work experience in office and administration, sales and related fields, food preparation and serving, transportation and moving materials, education/library, landscaping, production, management, and health-care related occupations.

The largest group of evacuees is found in Springfield, Holyoke and rest of Hampden County. Other significant populations have settled in Great New Bedford, central Massachusetts and the Merrimack Valley.

The state’s network of one-stop career centers is coordinating efforts to secure employment and housing for people relocated from Puerto Rico. The career centers are also working with the evacuees on issues such as work readiness, English-language skills and conversion of specific licenses for professional occupations such as nursing, social work and cosmetology.

The list of AIM-member employers who have already hired Puerto Rican evacuees include DeMoulas Market Basket, MassMutual, Packaging Corporation of America, Staples and Walmart.

Category 4 Hurricane Maria caused an estimated $94 billion in damage when it struck Puerto Rico on September 20. The storm left more than one million people without power and prompted more than 250,000 island residents to relocate to the continental United States.

Employers interested in hiring evacuees may contact Massachusetts Undersecretary for Workforce Development, Jennifer James, at 617.626.7124.

Topics: Skills Gap, Associated Industries of Massachusetts, Massachusetts economy

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: International Trade, AIM Business Confidence Index, Massachusetts economy

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: Skills Gap, AIM Business Confidence Index, Massachusetts economy

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 economy, Massachusetts employers

AIM President: Technology Key to Solving Worker Shortage

Posted by Christopher Geehern on Jan 26, 2018 1:14:00 PM

Robotics, artificial intelligence and automation hold the unique promise of resolving the shortage of skilled workers that threatens the economic future of Massachusetts, AIM President and Chief Executive Officer Richard C. Lord said this morning.

Lord.Speaking.jpgDelivering the fourth annual State of Massachusetts Business address before 300 senior business executives, Lord acknowledged that automation suffers from a grim image problem in the larger society where people fear that robots will take their jobs. But he said Massachusetts employers starved for qualified employees are using robots in collaboration with people to extend the reach of their work forces.

“In a state where employers created 70,000 jobs last year and unemployment stands at 3.6 percent, the structural shortage of skilled workers stands as the primary impediment to sustained economic growth,” Lord told the 2018 AIM Economic Outlook Forum.

“Massachusetts companies across industries ranging from software to manufacturing to hospitality have postponed expansions, declined to bid for contracts or outsourced work because they simply can’t find people with the training needed to compete in a complex world. The only way out of this economic dead end for Massachusetts is to rely upon productivity improvements fueled by intelligent technology to extend the reach of the talented people we employ.”

Lord highlighted the example of Barrett Distribution of Franklin, which is using robots to improve productivity and reduce the amount of time its 500 employees spend moving throughout large warehouses to provide orders for retailers and e-commerce customers. Established as a single warehouse in 1941, Barrett now operates more than 2.1 million square feet of state-of-the-art warehouse space across the country.

“The industry is changing very fast, the robots will get smaller, more adaptive, (and) a little bit cheaper, so I think you’ll see the adoption rate go up very high across the industry. And certainly for us, we’re going to be on the leading edge of this technology,” Scott Hothem, Senior Vice President of Customer Solutions at Barrett, said in a video shown the audience.

Lord said the good news is that Massachusetts is a global center of robotics, AI and automation. Driven by academic research institutions like MIT, Harvard, UMass and BU, Massachusetts occupies a unique position as the crucible of intelligent industries ranging from driverless vehicles to Patriot missiles to Roomba vacuum cleaners.

It’s also worth noting, according to Lord, that there is plenty of room for improvement on the productivity front. The United States posted an historically low annual labor productivity growth rate of 1.1 percent between the great Recession and 2016. The McKinsey Global Institute estimates that automation could raise productivity growth globally by 0.8 to 1.4 percent each year.

A panel of experts largely agreed with the idea that automation will enhance, rather than replace, most human labor.

David Askey, founder of Ascend Robotics in Cambridge, said the manufacturing companies that use his technology have realized productivity increases approaching 40 percent that have also raised the compensation and value of workers.

“Most of our calls come from customers who are not able to find enough skilled workers or want to expand,” Askey said.

Martha Sullivan, President and CEO of Sensata Technologies of Attleboro, said that while the technology for mass use of autonomous vehicles remains several years away, it is a technology that could change the entire business model of the auto industry from one that sells vehicles to consumers to one that helps companies manage fleets.

“Will you have private ownership anymore? Will you need private automobile insurance? … It becomes an asset- management question,” she said.

Lord said employers acknowledge the need to engage in debate about the hard issues raised by the technological revolution: Does automation ultimately create or cost jobs? Do Amazon and similarly disruptive companies ultimately help or harm the economy? And are technology driven productivity increases to blame for the slow rate of wage growth eight years into an economic recovery?

“But the ultimate truth is this – technology and innovation are here to stay; they do not regress, they do not go away and they do not waiver from the relentless pursuit of removing inefficiencies from the business economy.,” Lord said.

“If large numbers of workers are not going to walk through the doors of our companies to write code or make jet engine parts, employers will have to find ways to do more with less.”

Topics: Massachusetts economy, AIM Executive Forum

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 economy, Massachusetts employers

The Top 10 Massachusetts Business Stories of 2017

Posted by Christopher Geehern on Dec 27, 2017 11:13:10 AM

A generational reset of the nation’s tax code, a controversial employer assessment to fund health insurance for poor people, and upheaval surrounding workplace sexual misconduct head the list of the top business stories in Massachusetts for 2017.

Tax.jpgIt was a year in which forces originating outside the borders of the commonwealth heavily influenced the fortunes of employers and political leaders here. Issues ranging from the political maelstrom in Washington, DC, and a strengthening economy to the #metoo movement and Amazon’s search for a second corporate headquarters all filtered into a complex mix that formed the Massachusetts business climate.

The tax law passed by Congress and signed by President Trump just before Christmas reduced the corporate excise tax from 35 to 21 percent and also dropped rates for pass-through businesses that pay at the personal level. Still, Bay State employers worried about adding $1.5 trillion to the federal deficit and new limitations on deductions for state and local taxes that will primarily affect high-cost states like Massachusetts.

Taxes in Massachusetts could be going in the opposite direction next year as advocates spent 2017 pushing a constitutional amendment that would increase the tax from 5 to 9 percent on income more than $1 million. AIM President and Chief Executive Officer Richard C. Lord joined four other prominent business leaders during October in filing a lawsuit challenging the validity of the proposed amendment.

“The proposal would lead to a radical decentralization of fiscal policy away from the Legislature and set the stage for future initiatives from a range of interest groups proposing constitutional amendments segregating funds for their preferred causes, or raising tax rates on some groups and lowering taxes on others," Lord said.

Here are the top 10 Massachusetts business stories for 2017:

  1. President Donald Trump signs a tax bill that reduces levies on corporations and pass-through businesses but increases the federal debt and trims popular deductions.

    In addition to lowering the corporate tax to 21 percent, the law will cut the burden on owners, partners and shareholders of S-corporations, LLCs and partnerships through a 20 percent deduction. On the personal side, it lowers many individual income tax rates, doubles the standard deduction, eliminates personal exemptions, narrows the alternative minimum tax, lowers the cap on mortgage interest deductions and caps deductions for state and local taxes at $10,000.

  2. Massachusetts lawmakers impose a $200 million assessment on employers to close a funding gap in the MassHealth insurance program for low-income people.

    The Baker Administration initially proposed a $2,000-per-worker fee for businesses that did not cover at least 80 percent of their workers and share at least 60 percent of the premium cost. The governor and business community eventually negotiated a compromise that placed the heaviest assessments on companies with workers that use Mass Health insurance while outlining structural changes to the Mass Health program. The Legislature approved the assessment without the structural changes, but included rate relief on unemployment insurance premiums.

  3. Employers grapple with the implications of the #metoo movement highlighting sexual harassment and sexual assault in workplaces ranging from film studios to television networks to restaurants and hotels.

    Employers scrambled to review their policies on sexual harassment – and their enforcement of those policies - as millions of women around the world shared stories of sexual harassment and abuse in the wake of accusations against movie mogul Harvey Weinstein. The tidal wave washed over high-profile figures from news hosts Charlie Rose and Matt Lauer to celebrity chefs like Mario Batali to classical music conductors like former Boston Symphony Orchestra Maestro James Levine. AIM urged employers to take seriously all employee claims of sexual misconduct on the job and to investigate those claims scrupulously.

  4. Twenty-six Massachusetts communities and regions submit bids to host the $5 billion “second headquarters” development of e-commerce behemoth Amazon.

    The project offers the promise of some 50,000 jobs in the information technology space that is a strength of the Massachusetts economy. Boston submitted a 218-page proposal to site the campus at the current Suffolk Downs property, while New Hampshire gratuitously threw shade on the city as a traffic choked, overly expensive nightmare. Worcester upped the ante by offering $500 million worth of incentives. Amazon said it received 238 proposals in all from throughout North America. The company is expected to narrow that field in 2018.

  5. Activists begin the process of placing on the 2018 statewide ballot the three potential questions that would represent an unprecedented public-policy crisis for Massachusetts employers.

    The proposals include the income surtax constitutional amendment, a mandate that employers provide 16 weeks of paid family leave and 26 weeks of paid medical leave for employees, and an increase in the state the state minimum wage from $11 per hour to $15 per hour.

  6. Employers and advocates hammer out compromise legislation to extend employment protection to pregnant workers in Massachusetts.

    The Pregnant Workers Fairness Act requires employers to make reasonable workplace accommodations for pregnant employees — more frequent or longer breaks, temporary transfer to a less strenuous or hazardous position, or seating for those whose jobs require extended standing. AIM opposed early versions of the bill during the 2015-2016 legislative session because of concern that the legislation provided an applicant or employee with unlimited power to reject multiple and reasonable offers of accommodation by an employer. The compromise bill addressed that concern and others.

  7. A strong employment market and long-term demographic shifts exacerbate the challenge of finding skilled employees, but wage growth remains muted.

    The good news is that the Massachusetts economy continued in full-employment mode during 2017 and the jobless rate dropped to 3.6 percent in November. But experts warn that those numbers threaten 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. Still, wage growth is expected to remain slow during 2018 – the AIM Human Resource Practices Survey published in December shows that employers plan to provide average wage increases of 2.66 percent during 2018, down from 2.75 percent this year.

  8. Employer confidence reaches a 17-year high and remains strong throughout 2017.

    Massachusetts employers remained optimistic as the national economy surged and manufacturers, in particular, grew bullish about their own business prospects. The AIM Business Confidence Index began 2017 at a healthy 61.4 and moved in a narrow range before hitting a high of 62.7 in October. The AIM Index 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.

  9. The Baker Administration issues new regulations that set specific limits on sources of greenhouse gasses in a move that could increase already high employer electric rates by as much as 2 percent.

    The new rules aim to reduce the state’s carbon emissions 25 percent below 1990 levels by 2020, as required by state law. AIM was extremely disappointed with the regulations. The electric-rate increases generated by the proposed rules, when combined with other pending cost increases, could raise the electric bills of Massachusetts employers some 10 percent in the next year alone. AIM maintains that the regulations are ultimately unnecessary - the administration could have chosen to work with the legislature to change the Global Warming Solutions Act to allow for alternative ways for the electricity sector to meet these obligations.

  10. AIM member CVS Health proposes to acquire insurance company Aetna for $69 billion.

    The merger of one of the nation’s largest retail pharmacy companies with one of its dominant insurers under the shadow of a potential incursion by Amazon underscores the breathtaking changes sweeping through the American health-care and economic systems. With their merged data about people’s health and vast reach, the two companies assert that they can make real change in a health-care landscape that nearly everyone agrees is too convoluted, inefficient and expensive.

 

Topics: Massachusetts Legislature, Massachusetts economy, Taxes

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: Skills Gap, AIM Business Confidence Index, Massachusetts economy

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