AIMBlog_Logo_Resized

Business Confidence Remains Solid to Begin 2020

Posted by Christopher Geehern on Feb 4, 2020 9:07:22 AM

Massachusetts employers began 2020 on an optimistic note as business confidence held steady during the first month of the New Year.

BCI.January.2020The Associated Industries of Massachusetts Business Confidence Index (BCI) remained essentially flat during January, rising 0.1 points to 62.3. That reading was comfortably within optimistic territory and 3.6 points higher than a year ago.

January confidence was buoyed by strong gains in the outlook for employment. The Massachusetts jobless rate dropped to 2.8 percent in December even though the state lost an estimated 5,000 jobs.

Meanwhile, economists at MassBenchmarks reported last week that the Massachusetts economy expanded at a 1.3 percent annualized rate in the fourth quarter of 2019, compared to a 2.1 percent fourth quarter growth rate for the national economy. The US is expected to grow by 2.2 percent during 2020, largely because of continued strength in consumer spending and a rebound in business fixed investment.

“The US and Massachusetts economies continue to expand at a modest and predictable rate while the uncertainties of tariffs and trade conflicts appear to have abated for the moment,” said Raymond G. Torto, professor at the Harvard Graduate School of Design Chair of AIM's Board of Economic Advisors (BEA).

“Those factors should pave the way for solid economic growth and payroll gains in 2020.”

The AIM Index, based on a survey of more than 100 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 Business Confidence Index were mixed during January.

The Massachusetts Index assessing business conditions within the commonwealth rose 1 point to 66.2, leaving it 8.8 points higher than in January 2019. The US Index declined 2 points during January but remained 8.1 points ahead of where it was 12 months ago.

The Future Index, measuring expectations for six months out, gained 1.2 points to 62.8, a year-over-year gain of 5.5 points. The Current Index, which assesses overall business conditions at the time of the survey, fell 0.9 points to 61.9.

The Employment Index was up 3.0 points in January and 1.9 points for the year. The Employment Index has trailed the overall business confidence reading amid a persistent shortage of workers that may become worse as large number of baby boomers retire.

Non-manufacturers (62.7) were slightly more confident than manufacturing companies (62.1). Large companies (65.7) were more optimistic than small (63.0) or medium-sized (60.4) companies. Companies in western Massachusetts (62.7) were more optimistic than those in the east (62.0).

Northeastern University Professor Alan Clayton-Matthews, a BEA member, said increased employer confidence about hiring is a good sign, but employers will continue to be challenged finding qualified employees as large numbers of people retire and leave the work force.

“Massachusetts has an older population than the nation as a whole and the aging of the workforce will inevitably exert a drag on growth. Those factors underscore the importance of providing education and skills to the broadest possible population of our citizens,” Clayton-Matthews said.

Economic Competitiveness

AIM President and CEO John R. Regan, also BEA member, said employers report an uptick in solicitations from states such as Tennessee, Texas and North Carolina to move operations out of Massachusetts. The commonwealth cannot lose sight of economic competitiveness, Regan said, as lawmakers contemplate significant transportation, housing, taxes and other issues.

“The combined effect of the new paid family and medical leave law, escalating health-insurance rates, the potential costs of a transportation initiative and the specter of a graduated income tax on the state ballot add up to a significant threat for the ability of Massachusetts to maintain its economic vibrancy,” Regan said.

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

What is the Economic Outlook for Massachusetts in 2020?

Posted by Christopher Geehern on Feb 3, 2020 8:00:00 AM

Four distinguished experts rolled up their sleeves and looked at the outlook for the state and national economies January 24 during the 2020 AIM Economic Outlook Forum.  The group included moderator Donna Latson Gittens, founder of MORE Advertising in Watertown; Sara Johnson, Executive Director of Global Economics at IHS Markit in Boston; Steve Grande, Owner of Meridian Industrial Systems in Holyoke; and Emily Reichert, CEO of Greentown Labs in Somerville.

 

Topics: Massachusetts economy, Economy, AIM Executive Forum

AIM CEO Outlines Expansive Role for Business

Posted by Christopher Geehern on Jan 24, 2020 11:40:15 AM

The chief executive of Associated Industries of Massachusetts today outlined an expansive vision for the role of business in society, asserting that employers must be a positive force for change in creating a better, more prosperous world.

Regan.Annual.2019“Employers are bound to the economic hopes and dreams of the communities in which they operate. Our challenge is to integrate the economic needs of employers with the welfare of the society in which employers play a central role,” AIM President John Regan told an audience of 350 business leaders during his State of Massachusetts Business address.

“That means ensuring that business remains an economic engine of progress that expands prosperity for everyone.”

Regan noted that Massachusetts calls itself a commonwealth, a term deliberately chosen by John Adams when he drafted the state constitution in the fall of 1779.  The world's oldest functioning written constitution, Regan said, thus enshrined the idea that “we are all in this together.”

“We need to acknowledge economic inequalities and address them by creating real pathways for achieving economic security.  Failure will drive our public discussions and our politics down an ever more resentful and unconstructive path,” he said. 

READ THE FULL STATE OF MASSACHUSETTS BUSINESS ADDRESS

 “We must have our gaze firmly fixed on the future. We need to advocate boldly for our members and for the importance of thriving businesses.”

 Regan offered several prescriptions to ensure that the interests of business and the larger society are aligned:

  • Massachusetts and the business community must set the standard for diversity and inclusion in all aspects of its operations, from talent acquisition and management to supply chain development and participation.
  • Business must lead the way in developing and keeping a highly qualified workforce. Regan’s speech featured a video highlighting two apprenticeships developed by Interstate Electrical Services of North Billerica.
  • Ensure that Massachusetts remains fertile ground for launching new businesses and growing existing ones.

“Economic growth and business ownership and success are the only effective methods of achieving the social equity necessary to a sustainable commonwealth,” Regan said.

In his first State of Massachusetts Business Address since taking over as CEO last year, Regan warned that as the nation embarks upon a presidential election year, the debate over the role of business has unmistakable political implications.  Where once those on both sides of the aisle could reach compromise on issues like tax rates, interest levels and government spending, the 2020 campaign has shifted largely to the margins on either side.  

The good news, according to Regan, is that AIM, the business community and the political establishment in Massachusetts enjoy a uniquely collaborative relationship that has allowed the commonwealth to find reasonable solutions to seemingly intractable problems.

He urged employers to involve themselves in key upcoming debates on issues such as transportation funding, climate change and health-care reform.

Regan’s remarks were followed by a discussion among business and economic leaders who were generally optimistic about prospects for the Massachusetts and US economies.

Sara Johnson, Executive Director of Global Economics for IHS Markit, predicted that global economic growth will remain steady at 2.5 percent during 2020. The US economy, she said, should feel the positive effects of the preliminary trade agreement signed recently between the US and Canada.

“I think the outlook for the US economy is favorable, but the global outlook is a mixed picture,” said Johnson, who serves as vice chair of the AIM Board of Economic Advisors.

Steve Grande, owner of Meridian Industrial Group in Holyoke, said manufacturing companies have the potential to once again anchor the economies of Gateway cities as long as business and government address issues such as transportation and boosting labor-force participation.

“I’m really encouraged by where Massachusetts economy and the national economy are,” Grande said

Emily Reichert, CEO of the clean technology incubator Greentown Labs in Somerville, said recent proposals by Governor Charlie Baker and the Massachusetts Senate to make the commonwealth net carbon neutral by 2050 will attract additional environmental start-ups.

“It tells entrepreneurs around the world that Massachusetts is a place where you can build a company to address one of the great challenges of our time,” Reichert said.

Panel members and moderator Donna Latson Gittens also discussed the opportunity to address some of the growth challenges in eastern Massachusetts by promoting economic expansion in the western portion of the state.

Topics: Massachusetts economy, AIM Executive Forum, John Regan

Employers Ring Out 2019 on Confident Note

Posted by Christopher Geehern on Jan 14, 2020 8:00:00 AM

Massachusetts employers rang out 2019 on an optimistic note as business confidence rose to its highest level in 15 months.

BCI.December.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 1.6 points to 62.2 last month, leaving it comfortably within optimistic territory 3.6 points higher than a year ago.

The strong year-end results were driven by brightening views of the US economy and an increasingly bullish outlook among Bay State manufacturers.

The results came during a month when the US economy created 145,000 jobs to cap a decade of steady payroll gains that marked the longest growth period in 80 years of record-keeping. December also saw an easing of the international trade tensions that disquieted employers for much of 2019.

“Business confidence remained steady and strong throughout 2019 as employers saw underlying strength in the economy through sometimes distracting political uncertainties,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index, based on a survey of more than 100 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 Business Confidence Index moved mostly higher in December.
The US Index assessing business conditions nationally surged 3.6 points during the month and 7.7 points for the year to 62.8. The Massachusetts Index lost 1.8 points in December but remained higher than the national reading at 65.2

The Future Index, measuring expectations for six months out, gained 2.1 points to 61.6, leaving it 4.3 points higher than a year ago. The Current Index, which assesses overall business conditions at the time of the survey, rose 1.1 points to 62.8, an increase of 2.8 points over 12 months.

The Employment Index was up 0.9 points in December and 1.0 points for all of 2019 amid a persistent shortage of workers that may become worse as large number of baby boomers retire.

Non-manufacturers (63.2) were slightly more confident than manufacturing companies (61.4). Large companies (65.2) were more optimistic than small (61.7) or medium-sized (60.5) companies. Companies in Eastern Massachusetts (62.7) remained more optimistic than those in the west (61.6).

Sara L. Johnson, Executive Director of Global Economics at IHS Markit and a BEA member, said global economic growth appears to be stabilizing, supported by fiscal and monetary stimulus in the United States, China, Western Europe, and Japan.

“After slowing from 3.2 percent in 2018 to 2.6 percent in 2019, global real GDP growth is projected to hold steady in 2020. The ratcheting down of trade tensions, progress on the US-Mexico-Canada Agreement, favorable financial market conditions, and resilient consumer spending contributed to a sense of stability at the close of 2019,” Johnson said.

Pending Issues

AIM President and CEO John R. Regan, also BEA member, said employers face an eventful 2020 as state policymakers wrestle with major issues such as transportation financing, health reform and the implementation of paid family and medical leave.

“The Baker administration and the Massachusetts Legislature have done a commendable job managing the state budget while maintaining an environment of economic growth. The decision to allow the MassHealth employer assessment to sunset indicates that lawmakers understand that overburdening business will ultimately constrict economic opportunity,” Regan said.

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

Wage Increases in Massachusetts Lag National Pace

Posted by Gretchen Harrison on Jan 13, 2020 8:00:00 AM

Massachusetts employers project lower wage and salary increases, a consistent level of recruitment activity, and moderating health-insurance premium increases for 2020 after navigating a solid but volatile economy during 2019.

HR.Practices2The 2020 AIM HR Practices Report published today shows that companies project a 2.77 percent salary increase budget for 2020, consistent with the 2.71 percent actual increase reported for 2019 but down from 2.86 reported in the 2018 HR Practices survey.

Meanwhile, national salary increase projections for 2020 have increased slightly from the prior year to 3.3 percent. Salary increase trends in Massachusetts have tended to lag national numbers in recent years and the gap has begun to widen.

How does a state with a 2.9 percent unemployment rate, a persistent shortage of skilled workers and an impending demographic cliff show slower wage growth than the rest of the nation?

Survey data suggest:

  • Escalating regulatory costs (minimum wage) and non-wage compensation costs (paid family and medical leave; health insurance) are making employers cautious about increasing pay. Companies generally have a set compensation budget, so increases in these ancillary costs may put downward pressure on wages.
  • The Massachusetts Equal Pay Act may be limiting the degree to which employers are able to offer compensation incentives to “superstar” job candidates.

Members of the AIM Board of Economic Advisers offer additional explanations:

  • Wages are already much higher than the national average in Massachusetts, meaning that increases represent a smaller percentage of total wages.
  • Massachusetts is aging fast. Older workers are at a steadier place in their careers and see slower wage growth. As they retire, they are replaced by less expensive younger workers. This is a natural drag on overall wage growth.
  • The higher-skill workers who dominate the Massachusetts economy get a significant portion of their compensation in non-wage forms like bonuses, commissions and stock options. Projected recruitment activity for 2020 is expected to be comparable with actual recruitment experienced in 2019, which saw a significant increase over 2018 volumes.

The wage and salary increase projections come as unemployment in Massachusetts remains at record low levels. And while the state economy contracted by 0.2 percent during the third quarter, analysts say the downturn does not appear to indicate the beginning of a recession, but rather the capacity limits against which the state is bumping.

These include the barriers to labor force growth presented by an aging population as the departure of baby boomers from the regional workforce continues.

Download the HR Practices Report

Topics: Massachusetts economy, Human Resources, wages

Business Confidence Steady as Economy Remains Solid

Posted by Christopher Geehern on Dec 10, 2019 7:38:12 AM

The Thanksgiving holiday left Massachusetts employers in a good but cautious mood as business confidence remained steady during November.

BCI.November.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.3 points to 60.6 last month, leaving it one point lower than its level of a year ago but three points higher than in January.

The results came during a month when the Massachusetts unemployment rate remained at an historic low of 2.9 percent and employers nationally created a stronger-than-expected 266,000 new jobs. Employers also spent the month trying to make sense of the on-again, off-again trade war with China.

The US economy grew at a deliberate 1.9 percent pace during the third quarter, while the Massachusetts economy contracted by 0.2 percent as employers began to bump up against labor-force constraints.

“The AIM Business Confidence Index has drifted up and down amid a swirl of economic and political uncertainties during 2019, but employers have remained consistently optimistic about their overall prospects,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index, based on a survey of more than 100 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 Business Confidence Index all moved in a narrow range during November.

The Massachusetts Index assessing business conditions within the commonwealth lost 0.8 points to 67.0 while the US Index declined 0.4 points to 59.2. The Massachusetts Index is virtually even with its level of a year ago; the US index has dropped 4.5 points during the past 12 months.

The Future Index, measuring expectations for six months out, gained 0.9 points to 59.5 after surging during October. The Current Index, which assesses overall business conditions at the time of the survey, fell 1.6 points to 61.7, almost a point lower than a year ago.

The Employment Index remained even for the month, leaving it 1.3 points higher for the year, underscoring the capacity issues faced by employers struggling to find qualified workers in a full-employment state economy.

Non-manufacturers (62.2) were slightly more confident than manufacturing companies (59.3), which have been most directly affected by uncertainty surrounding trade policy. Medium-sized companies (61.2) were more optimistic than large companies (60.8) or small companies (59.2). Companies in Eastern Massachusetts (61.2) remained more optimistic than those in the west (59.8).

Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University and a BEA member, said Massachusetts policymakers appear ready to address issues such as housing and transportation that will affect the ability of the commonwealth to attract and retain skilled workers.

“The economic future of Massachusetts rests with highly educated and highly skilled people who will maintain the commonwealth’s status as a global center of economic growth and innovation. But those people will not put down roots here if they can’t afford housing or navigate their way to work,” Bluestone said.

The Moderate Middle

AIM President and CEO John R. Regan, also BEA member, said political leaders in Massachusetts continue to show a willingness to collaborate on critical economic problems. He noted that the Baker Administration and the Legislature worked together in November to pass a landmark $1.5 billion public-school funding reform that contained accountability measures sought by business.

“The partisan polarization that characterizes much of our political debate misses the fact that there is a moderate middle in America seeking action on important issues. A study from New Center shows that 43 percent of Americans classify themselves in the political center, compared with 34 percent for the right and 23 percent for the left,” Regan said.

“The results make us optimistic that bipartisan cooperation will continue in Massachusetts on issues such as transportation, health costs and taxation.”
.

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

MassMutual CEO Provides Formula for Growth

Posted by Christopher Geehern on Nov 22, 2019 11:32:27 AM

The chief executive of a company creating thousands of jobs in Massachusetts believes the commonwealth can continue to prosper by addressing key issues such as housing, transportation and education.

Roger W. Crandall, President and Chief Executive Officer of Springfield-based MassMutual, told the AIM Executive Forum this morning that Massachusetts benefits from a bi-partisan and balanced public-policy approach to business.

“Massachusetts has the best of everything. It has an unbelievable history. We've had an unbelievable run over the last 10, 15, 20 years and I think we've got another unbelievable 10, 20, 25 years in front of us,” Crandall told an audience of 250 business leaders.

MassMutual, which oversees more than $500 billion in assets, has embarked upon a major expansion in Massachusetts that includes a new, 17-story tower now under construction on the South Boston Waterfront that will accommodate approximately 1,000 employees. The company is also adding 1,500 jobs to its Springfield headquarters.

Crandall said Massachusetts has generally done a good job providing support and resources for business development while maintaining a good quality of life for its residents. One key element of that quality of life is housing, he said, that that is a challenge moving forward.

Moderately priced housing is essential to retaining the talented employees who graduate from the commonwealth’s renowned colleges and universities, Crandall said. The price of housing in Boston has increased by 61 percent during the past decade and the average monthly rent in the city now stands at $2,500.

MassMutual has supported Governor Charlie Baker’s Housing Choice Bill, along with proposals to create a $10 million down-payment assistance program for first-time home buyers. The company separately contributes to Boston Mayor Marty Walsh’s Way Home Fund to provide homeless people with a safe and stable environment in which to rebuild their lives.

“We are supportive of efforts to create more housing,” Crandall said.

On transportation, Crandall said companies cannot afford to lose employees – or fail to attract new ones – because people are unable to get where they need to go. He urged employers to support investment in the MBTA and made an impassioned plea for the development of high-speed east-west rail to connect Boston and Springfield.

The final major issue on MassMutual’s priority list is education. Crandall said Massachusetts must continue to pay attention to maintaining best-in-the-nation educational institutions at all levels that provide young people with the skills that will be needed to drive the innovation economy. He commended the Massachusetts Legislature for passing an education funding bill with strong accountability provisions.

“The future is a future of human capital,” he said.

MassMutual was founded in 1851 when 31 founders pooled together $100,000 to write insurance policies for friends and neighbors. The company now pays out more than $14 million per day in life-insurance, retirement and other benefits to customers.

 

Topics: Massachusetts economy, Education, AIM Executive Forum, Transportation

Resilient Economy Boosts Business Confidence

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

Business confidence strengthened in Massachusetts last month amid signs that the state and national economies are more resilient than many experts predicted.

BCI.October.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 2 points to 60.9 last month, leaving it virtually even with its level of a year ago.

The October upswing was led by growing employer optimism in the Massachusetts and national economies, as well as brightening prospects for manufacturers.

The survey results came during a month when US employers added a stronger-than-expected 128,000 jobs. And while the Massachusetts economy contracted slightly during the third quarter, experts say the reversal reflects workforce capacity limits rather than an economic downturn.

“U.S. hiring was unexpectedly resilient in October and prior months saw upward revisions. It appears that consumers will extend the record-long expansion despite trade tensions and weak business investment,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index, based on a survey of more than 100 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 Business Confidence Index all moved higher during October.

The Massachusetts Index assessing business conditions within the commonwealth surged 4.5 points to 67.8 while the US Index rose 3.1 points to 59.6. The increase left the Massachusetts reading 3 points higher than a year ago; the US index has dropped by 2 points during the past 12 months.

The Future Index, measuring expectations for six months out, gained 2.2 points to 58.6, virtually even with its reading from October 2018. The Current Index, which assesses overall business conditions at the time of the survey, increased 2.0 points to 63.3, also matching its reading of a year ago.

The Employment Index rose slightly by 0.3 points for the month but remained down 2.5 points for the year, underscoring the capacity issues faced by employers struggling to find qualified workers in a full-employment state economy.

Non-manufacturers (63.4) were more confident than manufacturers (59.0), despite a strong October gain in optimism among industrial companies. Small companies (63.6) were more optimistic than medium-sized companies (60.6) or large companies (59.6). Companies in Eastern Massachusetts (61.2) remained more optimistic than those in the west (60.4).

Paul Bolger, President, Massachusetts Capital Resource Company and a BEA member, said employers appear to have concluded that the slowing economy remains fundamentally strong enough to make a recession unlikely in the near future.

“Companies are also hoping that a preliminary trade agreement between China and the United States will clear up some of the uncertainty that has been causes by tariffs and an escalating trade battle,” Bolger said.

Business Battens the Hatches

AIM President and CEO John R. Regan, also BEA member, said the persistent shortage of skilled workers constraining the Massachusetts economy underscores the need for the Legislature to pass an education funding bill that establishes accountability for school districts to prepare students for both college and the workforce. 

“The job of sustaining Massachusetts’ global leadership in innovation belongs to everyone, and that requires a thoughtful, long-range plan to maintain our competitive advantage, including our education system. The foundation of such a plan is a set of educational standards that ensure our students’ continued achievement via distinct criteria,” Regan said.

“Whether Massachusetts high school graduates choose a college track or enter the workforce directly upon graduation, we must remain vigilant and insist on relevant, high standards to provide all our students with equal access to the economic advantages that follow educational achievement.”

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

Business Confidence Holds Steady; Manufacturing Outlook Dims

Posted by Christopher Geehern on Oct 8, 2019 8:24:21 AM

Business confidence remained essentially flat in Massachusetts during September despite a darkening outlook among manufacturers.

BCI.September.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 0.2 points to 58.9 last month after retreating in August. The Index has lost 3.7 points since September 2018 but remains within optimistic territory.

The September reading was weighed down by weakening sentiment among Bay State manufacturers. The Index’s manufacturing component dropped 2.4 points in September and 7.9 points for the year.

The results mirrored the national Institute for Supply Management’s manufacturing index, which fell to its lowest level since 2009 last month. A separate report by IHS Markit showed that the manufacturing sector suffered its worst quarter since 2009, though activity increased during September.

“Manufacturers are bearing the brunt of both actual and threatened tariffs against goods imported from China. Many Massachusetts companies have also become caught in retaliatory tariffs and are seeing significant weakening of their overseas business,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA).

The AIM Index, based on a survey of more than 100 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 AIM BCI were mixed during September.

The Massachusetts Index assessing business conditions within the commonwealth fell 0.6 points to 63.3 while the US Index rose to 56.5. The Massachusetts reading has decreased 1.2 points and the US reading 7.1 points during the past 12 months.

The Future Index, measuring expectations for six months out, lost 0.5 points to 56.4, leaving it 4.4 points lower than a year ago. The Current Index, which assesses overall business conditions at the time of the survey, increased 0.8 points to 61.3 – 3.0 points lower than its reading of September 2018.

The Employment Index rose a point for the month but remained down 3.1 points for the year. Employers continue to struggle to find qualified workers in a full-employment state economy.

Non-manufacturers (61.9) were more confident than manufacturers (55.4). Large companies (60.2) were more optimistic than medium-sized companies (59.9) or small companies (55.4), reversing a trend established during the summer. Companies in Eastern Massachusetts (62.6) continued to be more optimistic than those in the west (53.8).

Michael A. Tyler, CFA, Chief Investment Officer at Eastern Bank Wealth Management, and a BEA member, said the gaps in confidence between manufacturing companies and other businesses, and between companies in different regions of the commonwealth, appear to be growing.

“Manufacturing has been hit by the steady increase in tariffs imposed by the United States, China and other nations since 2018. The World Trade Organization estimates that the flow of goods across borders will increase by just 1.2 percent this year and manufacturing companies are feeling that downdraft,” Tyler said.

Business Battens the Hatches

AIM President and CEO John R. Regan, also BEA member, said a separate survey shows that two-thirds of AIM-member employers expect an economic contraction between now and the end of 2020. Companies are preparing for a possible slowdown by hiring fewer people, paying down debt and limiting capital expenditures.

“A possible take-away from the survey for state policymakers as they begin considering billions of dollars in new spending is this could be a difficult time ahead for the state economy,” Regan said.

“Businesses are assuming a defensive posture and significant tax increases - beyond the $1 billion for the new paid family and medical leave system - even for worthwhile causes, could harm the overall economy, most especially the manufacturing sector.”

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Massachusetts Companies Wary of Economic Downturn

Posted by Christopher Geehern on Oct 7, 2019 8:30:00 AM

Two-thirds of Massachusetts employers surveyed by Associated Industries of Massachusetts anticipate an economic contraction before the end of 2020.

ManufacturingWorkerSmallMany of those companies are taking defensive measures ranging from hiring fewer people to paying down debt to limiting capital expenditures.

The survey results are based on responses from 111 Massachusetts companies representing almost every sector of the state economy. AIM collected the information as part of its monthly Business Confidence Index survey.

The sobering economic news comes as the Massachusetts Legislature debates billions of dollars in new spending on education, transportation and tax measures.

“A possible take-away from the survey for state policymakers as they begin considering billions of dollars in new spending is this could be a difficult time ahead for the state economy,” said John Regan, President and Chief Executive Officer of AIM.

“Businesses are assuming a defensive posture and significant tax increases - beyond the $1 billion for the new paid family and medical leave system - even for worthwhile causes, could harm the overall economy, most especially the manufacturing sector.”

Seventy-five companies that participated in the survey expect a contraction before the end of next year and 36 do not.

The companies that see a recession on the horizon are carefully managing payrolls, reducing expenses and developing relationships with customers insulated against downturns.

Comments include:

  • Scaling back on hiring plans. Slowing down certain capital expense/equipment purchases until we get a clearer picture of what the next six months will bring.
  • We have temporarily eliminated overtime work that was formerly unlimited.
  • Diversifying our service offerings.
  • Being a small manufacturing company, we can react quickly to changes in the business climate. Also, we will only invest in capital projects that significantly improve efficiencies and process with a payback of 18 months or less.
  • Concentrating on expense reduction - evaluating closely the need to replace positions as all employment related costs continue to increase - using methods such as combining roles in the short-term, hiring part-time as a replacement, reducing headcount by attrition or reorganizing an area.
  • Our workforce has already dropped ... Conditions have been very volatile for us, one month were up two or three months were down, next two months are up, two months after that were down considerably, next month moderate.
  • We have hired an outside firm to pursue sales opportunities.
  • We have cut our work force of temps and are currently on work-share. As we supply many markets, the two most impacted are agricultural equipment and trucking. The latter is a canary in the coal mine and has always been ahead of the economy. The agricultural industry is suffering from the cut in exports and the loss of markets due to tariffs. The continued list of tariff exemptions on imports for products we make also has a depressive affect.

Other companies believe they will ride out a downturn.

  • We think we'll be immune from the contraction.
  • Our industry is counter-cyclical. When the economy contracts, our industry usually receives a boost. 

The Massachusetts economy has continued to expand throughout 2019, though at a moderating pace as the year has progressed. Economic growth slowed from 2.7 percent in the first quarter to 1.4 percent in the second, according to MassBenchmarks.

The AIM Business Confidence Index has likewise remained in optimistic territory during the year but has lost 3.7 points during the past 12 months.

Conversely, the Massachusetts unemployment rate remains at 2.9 percent and private employers created 6,700 jobs between August 2018 and August 2019.

"The AIM survey ultimately argues for economic prudence and fiscal caution in the short term to allow the recent legislative and regulatory changes that have occurred over the last two sessions to take effect," said Brooke M. Thomson, Executive  Vice President of Government Affairs at AIM.

“Massachusetts is flourishing in many ways, and in the wake of such recent changes, we need policies and practices that will ensure the economy remains strong and that creates economic stability and regulatory certainty for employers.”

Topics: Associated Industries of Massachusetts, Massachusetts economy, Massachusetts employers

Subscribe to our blog

Posts by popularity

Browse by Tag