Business Confidence in Massachusetts Rises in October

BOSTON — Massachusetts employers appear to be just as ambivalent about the state of the economy as many experts.

The Associated Industries of Massachusetts (AIM) Business Confidence Index continued to hover around the dividing line between optimism and pessimism last month. The Index rose 1.4 points to 51.2 during October, leaving it 0.3 points higher than in October 2022.

The Index has moved for most of 2023 in a narrow range as employers attempt to gauge an economy that has proved surprisingly resilient in the face of rising interest rates, predictions of recession, and war in both Ukraine and the Middle East.

The strengthening of employer sentiment in October reflected brightening views of both the U.S. and Massachusetts economies. The nation’s economy grew at a brisk 4.9% rate in the third quarter, while Massachusetts maintained a record low unemployment rate of 2.6%. At the same time, financial markets weakened, with the S&P 500 and Dow Jones falling during October to post their first three-month losing streaks since 2020.

“Rapid increases in consumer and government spending continue to fuel the economy, suggesting the Federal Reserve may have to keep interest rates high for longer than it originally anticipated. A persistently tight labor market is exerting upward pressure on wages, leaving price inflation uncomfortably high,” said Sara Johnson, chair of the AIM Board of Economic Advisors (BEA).

The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, fell from 46.9 to 45.7. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, rose from 53.5 to 54.2. The Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber, also gained ground, from 52.5 to 54.1.

The constituent indicators that make up the Index were mostly higher during October. The confidence employers have in their own companies gained 0.2 point to 51.9, ending the month 1.7 points down from October 2022.

The Massachusetts Index assessing business conditions within the Commonwealth increased by 3.2 points to 53.6, leaving it up 3.0 points from a year earlier. The U.S. Index measuring conditions throughout the country ended the month at 46.7, which is 3.8 points higher than a year ago.

The Current Index, which assesses overall business conditions at the time of the survey, rose 1.3 points points to 52.2. The Future Index, measuring projections for the economy six months from now, was up 1.5 points to move into optimistic territory at 50.1.

The Manufacturing Index lost 1.2 points to 48.5, falling 2.2 points below its level of a year ago. Confidence among non-manufacturing companies was up 2.3 points to 52.1. The Employment Index fell 1.8 points to 50.1. Large companies (50.9) were slightly more optimistic than medium-sized companies (50.5) and small companies (50.5).

Alan Clayton-Matthews, professor emeritus of Economics and Public Policy at Northeastern University, senior contributing editor at MassBenchmarks, and a BEA member, said the Massachusetts and U.S. economies have so far defied expectations of a slowdown, but all indications are that growth can be expected to slow in the coming months.

“Unemployment in Massachusetts remains at record lows, but we hear anecdotally from some companies in the survey that they have been able to find more qualified workers than they did a year ago. Massachusetts must still reckon with the structural demographic, educational, and other factors that will affect labor supply in the long term,” he noted.

AIM President Brooke Thomson, also a BEA member, said the Healey administration’s recent $4 billion proposal to address the critical shortage of housing in Massachusetts will create economic benefits for employers and workers alike.

“Virtually every employer in Massachusetts has at one time heard a valued employee say, ‘I love working for this company, but my family can’t afford a house here,’” she noted. “AIM looks forward to working with the Healey-Driscoll administration and the Legislature to ensure those conversations become a thing of the past.”