AIMBlog_Logo_Resized

Employer Confidence Weakens in June

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

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

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

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

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

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

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

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The Index has remained above 50 since October 2013.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index all lost ground during June.

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

The U.S. Index ended the month at 60.0, down 9.3 points for the month but 2.6 points better than a year ago.
June marked the 100th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, declined 2.6 points to 63.5. The Future Index, measuring expectations for six months out, fell 7.5 points to 59.1. The Current Index gained 1.6 points during the year while the Future Index lost 2.6 points.

Employer views of their own companies also weakened.

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

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

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

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

Mixed Signals

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

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

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

Topics: AIM Business Confidence Index, Massachusetts economy, Economy

Employer Confidence Surges during May

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

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

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

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

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

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

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

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

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

The AIM Index, based on a survey of Massachusetts employers, has appeared monthly since July 1991. It is calculated on a 100-point scale, with 50 as neutral; a reading above 50 is positive, while below 50 is negative. The Index reached its historic high of 68.5 on two occasions in 1997-98, and its all-time low of 33.3 in February 2009.

The Index has remained above 50 since October 2013.

Constituent Indicators

The constituent indicators that make up the overall Business Confidence Index were largely higher in May.
The Massachusetts Index assessing business conditions within the commonwealth surged 5.9 points to 70.0, leaving it 7.9 points higher than in May 2017.

The U.S. Index ended the month at 69.3, up 5.4 points for the month and 14.4 points for the year.
May marked the 99th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.

The Current Index, which assesses overall business conditions at the time of the survey, gained 1.5 points to 66.6. The Future Index, measuring expectations for six months out, increased 3.3 points to the same 66.6 level. The Current Index has risen 6.2 points and the Future Index 5.3 points since May 2017.

Employer views of their own companies were mixed.

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

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

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

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

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

Mixed Signals

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

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

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

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

Video Blog | Lt. Governor Karyn Polito Discusses Economic Growth

Posted by Christopher Geehern on May 31, 2018 9:28:46 AM

Lt. Governor Karyn Polito, dubbed the “road warrior” because of a travel schedule that has taken her to every city and town in Massachusetts, told AIM members recently that the measure of economic growth is the degree to which prosperity is shared throughout the commonwealth.

The lieutenant governor spoke to more than 850 business leaders gathered for the AIM Annual Meeting.

Here is her entire speech:

Topics: AIM Annual Meeting, Massachusetts economy, Lt. Governor Karyn Polito

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

Subscribe to our blog

Posts by popularity

Browse by Tag