Business Confidence Rises Again in February
BOSTON — The recovery of business confidence in Massachusetts picked up steam during February, driven by surging optimism among employers in their own company prospects and an increasingly bullish outlook among manufacturers.
The Associated Industries of Massachusetts (AIM) Business Confidence Index gained 4 points to 56.4 during a month marked by accelerating business reopenings and progress in the battle to moderate COVID-19.
The reading was 18 points higher than at the onset of the pandemic, but still 5.7 points shy of its level in February 2020. The Future Index portion of the BCI, which measures expectations for six months out, is now almost even with its reading of a year ago.
Massachusetts grew at a 7.9% annual rate in the fourth quarter, double the national pace. At the same time, the state unemployment stands at 7.4%, and hundreds of thousands of people remain out of work because of the public-health crisis.
“Business confidence has risen or remained steady in seven of the last nine months, giving Massachusetts the kind of measured optimism that will drive economic growth as the COVID-19 situation improves,” said Raymond Torto, professor at the Harvard Graduate School of Design and chair of the AIM Board of Economic Advisors (BEA).
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 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 constituent indicators that make up the Business Confidence Index were all higher for the second consecutive month in February. Every indicator is now above 50 and in positive territory for the first time since the onset of the pandemic.
Employers’ confidence in their own companies rose 4.3 points to 59.0. It marked the fifth consecutive monthly increase for the Company Index.
The Massachusetts Index assessing business conditions within the Commonwealth climbed comfortably into optimistic territory, gaining 4.2 points to 54.3. The U.S. Index measuring conditions nationally rose 2.7 points to 50.4.
The Current Index, which assesses overall business conditions at the time of the survey, was up 3.4 points to 51.8. The Future Index increased 4.6 points to 61.0.
The Employment Index gained 3.0 points to 55.6, suggesting that cautious employers may be looking to expand payrolls as soon as pandemic-driven restrictions are eased. A growing number of employers are reporting challenges with hiring skilled workers despite the relatively high state unemployment rate.
Confidence among manufacturing companies climbed 5.1 points to 56.2 during February, leaving it 5.2 points below its year-earlier level.
Medium-sized companies (57.8) were more bullish than large companies (55.5) or small companies (55.0). Companies in Western Mass. (56.9) have a slightly brighter outlook than those in Eastern Mass. (55.9).
Elmore Alexander, retired dean of the Ricciardi College of Business at Bridgewater State University and a BEA member, said higher-than-expected tax revenues in Massachusetts and moderating COVID-19 case numbers support the strengthening of business confidence.
“Much of the economy appears poised for growth once the pandemic is under control,” he noted. “At the same time, there are major sectors such as travel, tourism, and hospitality that still face a steep climb after losing more than a third of their jobs in the past 12 months.”
AIM President and CEO John Regan, also a BEA member, noted that COVID-19 has had a devastating and potentially permanent impact on women in the workforce. The percentage of women participating in the U.S. labor market in October 2020 was the lowest since 1988, and of the 9.8 million jobs that have not yet returned, 55% belong to women.
“In one year, COVID-19 wiped out a generation of progress and put the precariousness of being a woman in the modern American workplace into stark perspective,” he said.
Associated Industries of Massachusetts is asking employers to alter their policies to help women and other caregivers remain on the job during the pandemic. Recommendations include providing pay increases and advancement steps to women caregivers on schedule rather than penalizing those who have been on leave or working limited hours, and extending the time workers can be on leave.