SPRINGFIELD — Business confidence was virtually unchanged during April even as the Massachusetts economy surged with business reopenings, federal stimulus money, and widespread distribution of COVID-19 vaccines.
The Associated Industries of Massachusetts (AIM) Business Confidence Index fell 0.2 points to 60.7 last month after surging more than 10 points during the first quarter of 2021. The reading was 22.5 points higher than in April 2020 when pandemic-related business closures spread throughout the Commonwealth. Confidence levels remain comfortably in optimistic territory.
The April BCI came as MassBenchmarks reported that the state economy grew at a torrid 11.3% clip during the first three months of the year. Massachusetts employers created some 13,000 jobs during March, and the state unemployment rate fell to 6.8%.
“Employer confidence remains at a high level, and companies feel good about the underlying fundamentals of the economy,” said Raymond Torto, professor at the Harvard Graduate School of Design and chair of the AIM Board of Economic Advisors (BEA). “Confidence is even higher when employers look six months into the future, as they anticipate continued moderation of the public-health crisis.”
The AIM Index, based on a survey of more than 140 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 constituent indicators that make up the Business Confidence Index all moved in a narrow range during April. Employers’ confidence in their own companies fell 0.2 points after posting six consecutive monthly increases. The Company Index was 19.8 points higher than it was a year ago.
The Massachusetts Index assessing business conditions within the Commonwealth was 60.4, down 0.2 points for the month but 25.9 points better than in April 2020. The U.S. Index measuring conditions nationally lost 0.2 points in April and gained 26.4 points for the year.
The Current Index, which assesses overall business conditions at the time of the survey, slid a half-point to 56.6. The Future Index, measuring projections for the economy six months from now, was flat for the month at 64.8.
The Employment Index gained 1.1 points to end the month at 56.9, confirming the comments of many employers about the challenges of hiring and retaining skilled workers. A separate AIM survey last month revealed that 60% of employers currently have job openings, and 53% cannot find qualified workers to fill those vacancies.
Confidence among manufacturing companies remained steady at 59.5, leaving it 22.6 points higher than its year-earlier level.
Large companies (68.4) were more bullish than medium-sized companies (59.8) or small companies (54.6). Companies in Eastern Mass. (63.3) have a brighter outlook than those in Western Mass. (56.6).
Michael Goodman, acting provost and professor of Public Policy at UMass Dartmouth and a BEA member, said the strong growth of the Massachusetts economy during the first quarter is the result of federal fiscal policy that has boosted incomes and business and consumer spending, as well as rising vaccination levels. Both developments bode well for the Commonwealth’s economic outlook.
“The Future Index of the BCI is now almost 10 points higher than the Current Index, which sends a clear signal that Massachusetts employers anticipate a strong economic recovery,” Goodman said. “Absent some unexpected disruption to the vaccine rollout or the emergence of vaccine-resistant viral variants, we can expect our robust recovery to continue.”
AIM President and CEO John Regan, also a BEA member, said employers are also encouraged by the Massachusetts Legislature’s disciplined fiscal approach so far in 2021.
“Senate President Karen Spilka and House Speaker Ronald Mariano have both indicated that they do not expect Beacon Hill to impose new, broad-based business taxes this year, and that sends a strong message that lawmakers are committed to helping companies get back on their feet after the pandemic,” Regan said. “We remain concerned about some of the tax proposals coming out of Washington and about the prospect of an income-tax surcharge here in Massachusetts, but we are working with our partners in government to maintain an economy that encourages growth and jobs.”
