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Employer Confidence Stabilizes in June

Posted by Christopher Geehern on Jul 9, 2019 8:46:46 AM

Employer confidence stabilized in Massachusetts during June despite a continued swirl of conflicting economic and political signals around the globe.

BCI.June.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 0.5 points to 57.6 last month, rebounding from a May drop that left it at its lowest level since October 2016.

The Index has declined 3.7 points since June 2018 but remains within optimistic territory. And though confidence levels are virtually unchanged since January, the AIM Index reflects constantly changing headlines about international trade, economic growth and the direction of interest rates.

“We’re seeing confidence go up one month and down the next in the same way that financial markets have been whipsawed by almost daily changes in the economic outlook,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employers remain concerned about the prospect of an economic slowdown but were encouraged at the end of June by larger-than-expected job growth numbers, signs of a thaw in the US/China trade battle and signals that the Federal Reserve might ease interest rates.”

Tariffs continue to influence employer confidence.

“Have seen cost increases for construction materials due to the effect of tariffs. This is creating some uncertainty in the pricing of new construction projects,” one member wrote.

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 AIM BCI were mixed during June.

The Massachusetts Index assessing business conditions within the commonwealth rose 0.3 points to 61.2 while the US Index rose a full 3 points to 58.0. The Massachusetts reading has declined 1.6 points during the past 12 months and the US reading has dropped 2.0 points during the same period.

The Future Index, measuring expectations for six months out, rose slightly, 0.2 points to 56.2. The Current Index, which assesses overall business conditions at the time of the survey, gained 0.8 points to 59.0, 4.5 points lower than a year ago.

The Employment Index declined 0.4 points for the month and 2.2 percent for 12 months. Analysts say employers continue to struggle to find qualified workers in a state economy with a 2.9 percent jobless rate.

Non-manufacturers (60.1) were more confident than manufacturers (54.4), who have seen their confidence levels drop 8.1 percent since June 2018. Large companies (59.0) were more confident than small companies (58.4) or medium-sized companies (55.6). Companies in Eastern Massachusetts (58.5) continued to be more optimistic than those in the west (56.3).

Elliot Winer, Chief Economist, Winer Economic Consulting, LLC, and a BEA member, said continuing weakness in the Company Index, Manufacturing Index and Employment Index underscores some of the long-term challenges facing Massachusetts employers beyond the day-to-day headlines.

“Hiring and retaining skilled employees is becoming a barrier to expansion for some companies. The short-term issues affecting confidence will eventually be overshadowed by the long-term demographics of having large numbers of baby boomers leave the work force,” Winer said.

State Policy Gains

AIM President and CEO John R. Regan, also BEA member, said that Governor Charlie Baker and the Massachusetts Legislature have made several decisions recently that boosted employer confidence. Those decisions included postponing the start of contributions for paid family leave and allowing the MassHealth assessment to lapse as scheduled in December.

“Employer have been encouraged by the willingness of state policymakers to meet businesses halfway on some of these complex issues,” Regan said.

“Our hope is that lawmakers will continue this mindful approach to the economy.”

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

Meet 2019 AIM Vision Honoree Wayfair Inc.

Posted by Christopher Geehern on May 22, 2019 2:47:54 PM

Associated Industries of Massachusetts last week presented its 2019 Vision Award to Wayfair Inc., a Massachusetts-born technology company that has redefined how people shop for their homes. Wayfair has more than 5,500 full-time employees in the commonwealth and continues to grow its presence in Boston and beyond. Here is the company's story.

Topics: AIM Annual Meeting, Massachusetts employers, AIM Vision Award

Employer Confidence Rises in April

Posted by Christopher Geehern on May 8, 2019 8:55:23 AM

Massachusetts employers grew more confident during April as the state and national economies regained their footing.

BCI.April.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 2.4 points to 60.3 last month. Confidence remains well within optimistic territory, though still 3.9 points below its strong reading of April 2018.

The April 2019 increase reflected growing employer optimism about economic prospects for the next six months and about the future of their own companies.

All of the constituent indicators that make up the BCI rose during April with one notable exception. The Employment Index fell 1.5 points to 54.4, suggesting that employer sentiment continues to be tempered by a persistent shortage of qualified workers.

“The Business Confidence Index continues to show a conflict between short-term economic optimism and long-term concern about the prospect of finding enough appropriately skilled workers to run Massachusetts businesses,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“The immediate news for employers is positive as economic growth in Massachusetts surged to an annual rate of 4.6 percent during the first quarter of 2019 and US growth came in at 3.2 percent.”

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

The Index has remained above 50 since October 2013.

Constituent Indicators

The constituent indicators showed a broad-based strengthening of confidence during April.

The Massachusetts Index assessing business conditions within the commonwealth rose 1.5 points to 63.2, while the US Index gained 2.8 points to 58.3. The Massachusetts reading has declined 0.9 points during the past 12 months and the US reading has dropped 5.6 points during the same period.

The Future Index, measuring expectations for six months out, surged 3.1 points to 60.5. The Current Index, which assesses overall business conditions at the time of the survey, rose 1.7 points to 60.0, still 5.1 points lower than a year ago.

The decline in the Employment Index left that measure 5.4 points lower than in April 2018. One good sign for job seekers is that the Sales Index, a key predictor of future business activity, rose 3.9 points during the month.

Non-manufacturers (64.1) were more confident than manufacturers (57.3). Large companies (60.7), medium-sized companies (60.5) and small companies (59.7) all had similar confidence outlooks. Companies in Eastern Massachusetts (64.5) continued to be far more bullish than those in the west (55.5).

Edward H. Pendergast, Managing Director of Dunn Rush & Co. and a BEA member, said employer confidence reflects first-quarter economic growth that was stronger than most experts anticipated. That growth sent US stocks to record highs in April before this week’s selloff.

“The consensus on Wall Street is for slowing growth as the year progresses, but the economy is setting a solid and predictable pace that reassures employers that there is little immediate threat of recession,” Pendergast said.

Training and Education

AIM President and CEO Richard C. Lord, also BEA member, said the sluggish Employment Index underscores the urgency for business and government to collaborate on ways to train and educate the workers who will drive the economy in the future.

“The persistent shortage of workers will become more severe as large numbers of baby boomers continue to leave the work force. It is imperative that we address the next generation of workers, so we can extend opportunity broadly to the people of Massachusetts.”

Lord’s commentary is his final one before retiring as President of AIM next week.

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

Employer Confidence Slips in March

Posted by Christopher Geehern on Apr 2, 2019 8:30:59 AM

Business confidence weakened slightly in March amid signs of both a cyclical global slowdown and persistent demographic factors limiting the growth of the labor force in Massachusetts.

BCI.March.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.3 points to 57.9 during March. Confidence remains within optimistic territory but has lost 5.6 points during the past 12 months.

The decrease reflected employer concerns about economic prospects for the next six months. Those concerns outweighed growing optimism among manufacturing companies and rising confidence in the Massachusetts economy.

The March Business Confidence survey took place as the government announced that Massachusetts created only 20,000 jobs during 2018 instead of the 65,500 previously estimated. The US Bureau of Labor Statistics reports that average payroll job growth in Massachusetts fell from 1.3 percent in 2017 to 0.9 percent last year.

“Massachusetts employers continue to struggle with the challenges of a full-employment economy complicated by demographic issues such as the retirement of large numbers of baby boomers,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“U.S. economic growth appears to be slowing, as well as world economic growth, but recession fears are still low.”

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 moved in a narrow range during March.

The Massachusetts Index assessing business conditions within the commonwealth gained 0.9 points to 61.7. Confidence in the Massachusetts economy has declined 6.1 points since March 2018.

The U.S. Index measuring employer sentiment about the national economy slipped 0.5 points to 55.5, leaving it 9.7 points less than a year ago.

Employers were slightly more optimistic about current conditions than about the future. The Current Index, which assesses overall business conditions at the time of the survey, rose 0.6 points to 58.3 while the Future Index, measuring expectations for six months out, fell 1.3 points to 57.4. The Future Index has fallen 7.0 points during the past 12 months.

The Employment Index, measuring employer optimism about hiring, rose 1.2 points to 55.9.

Non-manufacturers (60.6) were more confident than manufacturers (55.4). Small companies (60.8) were more optimistic than large companies (55.2) or medium-sized companies (57.5). Companies in Eastern Massachusetts (60.0) continued to be more bullish than those in the west (55.0).

Northeastern University professor Alan Clayton-Matthews, a BEA member, said the downward revision of the Massachusetts job-growth numbers was consistent with demographic trends such as the large number of baby boomers retiring from the work force.

“The last New England Economic Project forecast projected a slowdown in payroll job growth from 1.7 percent in 2017 to 1.1 percent in 2018 and 0.6 percent in 2019 and a slowdown in labor-force growth from 1.6 percent in 2017 to 0.6 percent in 2018 and 0.4 percent in 2019. This forecast was largely based on demographic projections assuming a full-employment economy,” said Clayton-Matthews.

“The state economy seems to be running at full capacity, and the basic state indicators don’t suggest a lack of demand, though it’s hard to spot turning points until there is enough hindsight.”

Mixed Signals

AIM President and CEO Richard C. Lord, also BEA member, said employers remain concerned as Beacon Hill lawmakers undertake a broad discussion of how to fund expensive policy priorities such as transportation infrastructure, public education and clean energy. He noted that AIM will be part of a group assembled by the state Senate to look at the Massachusetts tax code.

“AIM undertakes these debates conscious of the oppressive cost burdens already facing Massachusetts employers. Massachusetts must develop a fair strategy to address its spending needs without harming employers who are already struggling to implement a $1 billion paid family and medical leave program along with the rising cost of both health insurance and energy,” Lord said.

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

Maximum Unemployment Duration Drops to 26 Weeks

Posted by John Regan on Mar 26, 2019 6:49:33 PM

An obscure provision of the 2005 Massachusetts Unemployment Insurance Reform Law will next week accomplish what employers have sought for several decades – a reduction in the maximum duration of unemployment benefits from 30 weeks to the 26 weeks common in most states.

The provision mandates that if the unemployment rate drops below 5.1 percent in the 10 labor market regions of the state, then UI benefits are available for 26 instead of 30 weeks.  The Executive Office of Labor and Workforce Development certified today that the jobless rate in all Massachusetts labor markets has dropped to less than 5.1 percent so new UI recipients as of next week will be able to collect for 26 weeks.

The benefit period will return to 30 weeks if during any month of a claimant's 26-week benefit period the 12-month average monthly unemployment rate in any one of the metro areas rises above the 5.1 percent threshold.

Cost savings associated with the 26-week maximum benefit period are $40 million in the first year and $84 million in the second year, state officials said

“I don’t think anyone at the time this provision was negotiated believed it would ever take effect,” said AIM President and Chief Executive Officer Richard C. Lord.

“The change underscores the fact the the duration of Unemployment Insurance remains one of the major competitive disadvantages that affect companies doing business in Massachusetts. We urge the Legislature to move to 26 weeks permanently.”

Topics: Unemployment insurance, Massachusetts employers

Business Confidence Slides Again in January

Posted by Christopher Geehern on Feb 12, 2019 8:30:00 AM

Stabilizing financial markets and continued strong employment were not enough to brighten the outlook of Massachusetts employers during January as business confidence fell for the fifth time in seven months.

BCI.January.2019The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.9 points to 57.7, its lowest level since October 2016. Confidence has dropped 6.4 points during the past 12 months.

The retreat was led by a 7.3-point drop in employer views of the Massachusetts economy, and a 2.4-point drop in opinions about the national economy.

Overall confidence remains within optimistic territory, but every element of the AIM Index is now lower than it was a year ago.

A separate survey within the January Business Confidence Index found that while 71 percent of Massachusetts employers have seen some effect from the US government’s imposition of tariffs on goods form China and other nations, only 10 percent of companies characterize the effect as “significant” or a threat to the existence of their business.

The most common consequence of the tariffs has been an increase in raw-material prices, followed by changes to the supply chain, supply interruptions, products affected by retaliatory tariffs and loss of overseas customers.

“The Massachusetts economy grew at 2.1 percent during the fourth quarter of 2018 and continues to operate at near full capacity,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“At the same time, employers continue to confront uncertainty surrounding trade policy, demographic constraints on the labor market and the implementation of a sweeping paid family and medical leave program in Massachusetts.”

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 7.3-point drop in the Massachusetts Index assessing business conditions within the commonwealth left that indicator at 57.4. Confidence in the Massachusetts economy has declined 11.5 points since January 2018.

The U.S. Index measuring employer sentiment about the national economy dropped 2.4 points to 52.7, a decline of 12.1 points year-over-year. It marked the lowest reading for the U.S. Index since November 2016.

The Current Index, which assesses overall business conditions at the time of the survey, fell 1.8 points to 58.2. The Future Index, measuring expectations for six months out, remained flat at 57.3 but has declined 9.3 points over 12 months.

Manufacturers (57.8) and non-manufacturers (57.7) were equally confident. There was also little difference in the confidence readings reported by large companies (57.9), medium-sized companies (57.7) and small companies (57.6). Companies in Eastern Massachusetts (59.4) were more bullish than those in the west (55.3).

Economist Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University and a member of the BEA, suggested that employers face two parallel sets of challenges - uncertainty about political issues such as tariffs and a more fundamental uncertainty about the limits of a full-employment state economy. He noted that wage and salary income growth was strong in the fourth quarter, rising 7.2 percent in Massachusetts on an annualized basis.

“A 3.3 percent unemployment rate, combined with an aging population and slow labor force growth will challenge the ability of Massachusetts employers to expand during 2019 and beyond,” Bluestone said.

Piling On Costs

AIM President and CEO Richard C. Lord, also BEA member, said the significant weakening of confidence in the Massachusetts economy also reflects frustration among employers with a cascade of expensive new state mandates, including a two-year MassHealth assessment, an increase in the minimum wage and the impending start of paid family and medical leave.

“We hear frequently from Massachusetts employers who feel under siege from both the sheer expense of these programs and the administrative burden they place on companies, particularly smaller companies,” Lord said.

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

10 Things Employers Need to Know about Paid Family/Medical Leave

Posted by Brad MacDougall on Jan 31, 2019 10:42:45 AM

The Baker Administration last week published draft regulations for implementation of paid family and medical leave in Massachusetts.

Pregnant2-1Paid family and medical leave were approved by the Legislature and signed by Governor Charlie Baker last year as part of the so-called Grand Bargain between the advocacy group Raise Up Massachusetts and the business community. The newly published regulations represent the “rules of the road” that employers and workers will follow as the law takes effect beginning in July.

AIM has been working for months with the Executive Office of Workforce Development to address employer concerns about what will be a major new benefit program. More than 700 AIM members with an interest in paid family and medical leave are currently reviewing the draft regulations and formulating comments.

The state is conducting seven listening sessions though February 19 to provide employers and others an opportunity to comment on the draft regulations.

In the meantime, here are 10 facts that employers need to know about paid family and medical leave as outlined in the draft regulations:

  1. When it begins

    On July 1, employers and/or their workers must begin to pay 0.63 percent of all wages or other qualifying earnings or payments into the Family and Employment Security Trust Fund. Employees may take family or medical leave beginning January 1, 2021.

  2. Who pays?

    The employer is required to pay at least 60 percent of the medical leave contribution required for each employee. The employer is required to pay none of the contribution for family leave. Employers may, of course, pay a higher percentage for each category of leave or elect to pay the entire contribution for each employee. The employer may deduct the medical leave and family leave contributions directly from wages or other qualifying payments made to the employee or individual. Companies employing an average of fewer than 25 employees in Massachusetts will not be required to pay the employer portion of premiums for either family or medical leave.

  3. Surprise contribution for employees?

    Employers who elect to pay less than the entire family and medical leave contribution will need to communicate to employees the news that an additional several hundred dollars will be deducted from their paychecks each year. Few employees realize they may be required to pay into the family and medical leave system.

  4. How much leave?

    Beginning January 1, 2021, covered individuals are eligible for up to 26 total weeks, in the aggregate, of family and medical leave in a benefit year.

    Beginning January 1, 2021, covered individuals are eligible for up to 12 weeks of family leave in a benefit year for the birth, adoption, or foster care placement of a child, or because of a qualifying exigency arising out of the fact that a family member is on active duty or has been notified of an impending call to active duty in the Armed Forces.

    Beginning January 1, 2021, covered individuals are eligible for up to 26 weeks of family leave in a benefit year to care for a family member who is a covered service member.

    Beginning January 1, 2021, covered individuals are eligible for up to 20 weeks of medical leave in a benefit year if they have a serious health condition that incapacitates them from work.

    Beginning July 1, 2021, covered individuals are eligible for up to 12 weeks of family leave to care for a family member with a serious health condition.
  1. The pay in paid leave

    An individual’s paid family or medical leave weekly benefit amount is calculated as follows: (a) The portion of an individual’s average weekly wage that is equal to, or less than, 50 percent of the state average weekly wage is replaced at a rate of 80 percent; the portion of an individual’s average weekly wage that is more than 50 percent of the state average weekly wage is replaced at a rate of 50 per cent. The initial maximum weekly benefit amount is $850. Thereafter, the maximum weekly benefit amount for any individual will be 64 percent of the state average weekly wage.

  2. We are family

    The regulations define a family member as a spouse, domestic partner, child, parent or parent of a spouse or domestic partner of the covered individual; a person who stood in loco parentis to the covered individual when the covered individual was a minor child; or a grandchild, grandparent or sibling of the covered individual.

  3. Intermittent leave

    An employee may take family or medical leave on an intermittent basis for family leave to bond with a child during the first 12 months after the child’s birth, adoption, or foster care placement, but only if the employer and employee agree to it. Employees may also take intermittent family leave if medically necessary to care for a family member’s serious health condition; to care for a family member who is a covered service member, or for or the employee’s own serious health condition.

  4. Contractors

    An employer with a work force that is more than 50 percent self-employed individuals whose compensation is recorded on Internal Revenue Service form 1099-MISC shall treat those self-employed individuals as employees for the purposes of determining a company’s number of employees under the paid family and medical leave law.
  1. Exemptions

    An employer with an existing, private benefit plan that confers the same rights, protections and benefits provided under the state program make apply for an exemption from the public plan. An employer may apply for exemptions from medical leave coverage, family leave coverage, or both.

  2. Self-employed people

    A self-employed individual may elect coverage and become a covered individual for an initial period of not less than three years. A self-employed individual who elects coverage is responsible for the full contribution amount, based on that individual’s income from self-employment. If a self-employed individual elects coverage and fails to remit contributions owed for at least three years, the self-employed individual will be disqualified from electing coverage thereafter.

Want regular updates on paid family and medical leave in Massachusetts? Please contact Brad MacDougall at bmacdougall@aimnet.org

Topics: Employment Law, Massachusetts employers, Paid Family Leave

Few Employers Change Drug Tests with Legal Marijuana

Posted by Tom Jones on Jan 30, 2019 8:30:00 AM

Drugtest1.2019Only 10 percent of employers plan to change their drug-testing policies now that recreational marijuana is legal in Massachusetts, a new Associated Industries of Massachusetts survey shows.

The member survey, conducted by AIM HR Solutions, found that two-thirds of the 52 Massachusetts employers who participated say they drug-test employees or job candidates. Three quarters of the companies that conduct drug tests do so for marijuana (THC).

Kyle Pardo, Vice President of Consulting Services for AIM HR Solutions, said the limited number of companies planning to change their marijuana testing policies reflects widespread uncertainty among employers as legal cannabis impinges on the idea of a drug-free workplace.

“Testing detects the presence of marijuana long after an employee may have used the drug during non-work hours. But there is no clear test to determine whether or not that employee is impaired and may represent a danger to co-workers or customers,” Pardo said.

Drugtest2.2019“It has created a confusing situation for employers.”

Recreational marijuana became legal in Massachusetts in 2016 and retail pot dispensaries began to open throughout the state at the end of last year.

Massachusetts law does not require any accommodation of on-site medical or recreational use of marijuana in any workplace or permit employees to come to work under any controlled substance. A recent Massachusetts Supreme Judicial decision requires employers to address an employee with a medical marijuana card in the same manner as those using any other lawfully prescribed medication.

Adding to the confusion is that employers in some federally regulated industries such as trucking and transportation, as well as many federal contractors are required to drug-test employees. Marijuana remains illegal under federal law.

Pardo recommends that employers make sure their hiring process and progressive discipline policy contain information on the drug testing policy and that applicants and employees sign for and acknowledge their understanding of such processes and policies.

Topics: Employment Law, Massachusetts employers, Marijuana

Employer Confidence Weakens in December

Posted by Christopher Geehern on Jan 14, 2019 8:30:00 AM

Massachusetts employers gave a big “Bah Humbug” to the year-end economy as business confidence withered in the face of a government shutdown and the largest one-month stock market decline since the Great Depression.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost three points to 58.6 during December, its lowest level since December 2016. Confidence readings have dropped five points during the past 12 months.

BCI.December.2018The retreat was led by an 8.6-point drop in employer views of the national economy, and a 4.7-point drop among manufacturing companies.

Overall confidence remains within optimistic territory, but less comfortably so than earlier in 2018.

“The Massachusetts economy remains strong, with a 3.3 percent growth rate and an unemployment rate of 3.4 percent, but employers are increasingly concerned about factors such as financial-market volatility, a dysfunctional national political debate and challenges such as the cost of providing health insurance to employees,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

One employer who participated in the survey summarized the uncertainty: “A tremendous amount of unknowns are ahead.”

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 Lower

The constituent indicators that make up the overall Business Confidence Index were mostly lower during December.

The Massachusetts Index assessing business conditions within the commonwealth lost 2.4 points to 64.7, leaving it 2.9 points lower than in December 2017.

The 8.6-point decline in the U.S. Index to 55.1 left employer sentiment about the national economy 9.1 points lower than a year earlier. It marked the lowest reading for the U.S. Index since May 2017.

The Company Index measuring employer assessments of their own operations dropped 1.4 points to 57.8, down 4.3 points year-to-year. The Employment Index gained 1.2 points to 54.4 during the month, leaving it down a modest 2.3 points for the year, while the Sales Index declined 1.6 points in December.

Employers don’t expect to change their outlook anytime soon.

The Current Index, which assesses overall business conditions at the time of the survey, fell 2.6 points last month to 60.0. But the Future Index, measuring expectations for six months out, dropped 3.4 points for the month and 7.2 points for the year.

Non-Manufacturers (59.4) were slightly more optimistic than manufacturing companies (57.7), re-establishing a trend that existed for most of 2018. Large companies (60.5) registered higher confidence readings than medium-sized companies (57.3) and small companies (57.7). Companies in Eastern Massachusetts (59.8) were more bullish than those in the west (57.0).

Paul Bolger, President of Massachusetts Capital Resource Company and a member of the BEA, suggested that uncertainty about economic factors such as slowing corporate profits, rising interest rates, and trade are overshadowing employer confidence in what remains a fundamentally strong growth pattern.

“Employers are cautiously watching earnings warnings from Apple and other major brands, while hoping that negotiations between the US and China are able to ratchet down the trade war,” Bolger said.

Eye on Health Costs

AIM President and CEO Richard C. Lord, also BEA member, said moderating the cost of providing health insurance to employees remains the biggest concern for employers who participated in AIM’s biennial Issues Survey in the fall.

That’s one reason, Lord said, that AIM has called upon the Legislature and Governor Charlie Baker to end immediately the two-year assessment imposed on employers last year to close a financial gap at the state’s MassHealth insurance program for low-income residents.

“The assessment is no longer necessary because employers last year paid tens of millions of dollars more than anticipated under the levy. Businesses are on track to contribute some $519 million by the time the assessment sunsets at the end of this year instead of the $400 million envisioned under the 2017 legislation,” Lord said.

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

Business Confidence Recovers in November

Posted by Christopher Geehern on Dec 11, 2018 7:47:22 AM

Business confidence in Massachusetts recovered slightly during November amid a swirl of contradictory economic indicators ranging from agitated financial markets to international trade tensions to steady but slowing growth in the Bay State.

BCI.November.2018The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 0.6 points to 61.6 in November, ending a three-month slide that brought confidence to its lowest level in more than a year.

The November reading was one point lower than in November 2017 and 2.5 points lower than at the beginning of the year.

Increased optimism about the state and national economies balanced employer concerns about their own operations and hiring plans during November. The reading remained well within optimistic territory, but employers are clearly also seeing risk on the horizon.

“The survey reflects the uncertainty facing employers amid a still-strong state and national economy,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Employers are increasingly confident in the economy but less so in the prospects for their own companies and in their own hiring plans. Economic growth remained at a solid 3.3 percent in Massachusetts for the third quarter, but that was a slowdown from earlier in the year. Payroll employment was up for the quarter but weakened in August and September.”

One employer who participated in the survey summarized the uncertainty:

“We are up double digits, but tariffs are negatively impacting our … prices and lead times. Looking forward to more stable times.”

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 rose 2.4 points to 67.1, leaving it 1.9 points higher than in November 2017.

The U.S. Index gained 2.1 points to 63.7, up 1.5 points from a year earlier.

The Company Index measuring employer assessments of their own operations dropped 0.4 points to 59.2, down 3.1 points year-to-year. The Employment Index slid 3.8 points for the month while the Sales Index was up 2.3 points.

The Current Index, which assesses overall business conditions at the time of the survey, fell 0.7 points last month to 62.6 and 0.8 points for the year. The Future Index, measuring expectations for six months out, gained 2.1 points for the month and lost 1.1 points for the year.

Manufacturers (62.4) were slightly more optimistic than non-manufacturing companies (60.8), reversing a trend that has existed for most of 2018. Companies in the eastern part of Massachusetts (64.0) were significantly more bullish than those in the west (58.5).

Large companies (62.3) and medium-sized companies (62.4) registered higher confidence readings than small companies (59.7).

Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management and a member of the BEA, suggested that the wide swings in employer views of the overall economy and their own prospects may reflect growing discomfort with some emerging trends.

“Employers remain generally optimistic about a Massachusetts economy running at 3.5 percent unemployment and a growth rate of more than 3 percent. At the same time, the slowing housing market, rising interest rates, and continued uncertainty about trade are clearly causing concern,” Tyler said.

Post-Election Economy

AIM President and CEO Richard C. Lord, also BEA member, said employers at least have a clearer view of the political landscape now that the 2018 mid-term elections are completed.

“The prospect of divided government in which Democrats will control the US House of Representatives and Republicans the Senate and the White House provides some assurance to employers who do not relish policy lurches to the left or right,” Lord said.

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

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