Business Confidence Rises in Massachusetts in May
BOSTON — An emerging economic recovery and good news about COVID-19 pushed business confidence slightly higher in Massachusetts during May.
The Associated Industries of Massachusetts (AIM) Business Confidence Index rose 1.2 points to 61.9 last month, leaving it almost 20 points higher than a year ago. Confidence levels remain comfortably in optimistic territory.
The increase was the fourth in five months and came as Massachusetts Gov. Charlie Baker announced the resumption of full business activity in the Commonwealth. The federal government also said vaccinated people no longer need to wear masks in most public settings.
Meanwhile, the Massachusetts unemployment rate fell to 6.5% during April as employers created 5,100 jobs. Massachusetts has gained an estimated 392,300 jobs since the nadir of the COVID crisis.
“Employers remain confident amid a state economy that is projected to grow at a 8.7% annual rate in the second quarter and 6.9% in the third quarter of this year,” said Sara Johnson, vice chair of the AIM Board of Economic Advisors (BEA) and executive director of Global Economics at IHS Markit. “The economy still faces challenges ranging from persistent worker shortages to global supply-chain disruptions, but there is a sense that we are returning to a more normal economic situation.”
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 were mostly positive during May. Employers’ confidence in their own companies posted its seventh increase in eight months, rising 2.2 points to 63.8. The Company Index was 18.1 points higher than it was a year ago.
The Massachusetts Index assessing business conditions within the Commonwealth was 60.7, up 0.3 point for the month and 23.3 points since May 2020. The U.S. Index measuring conditions nationally lost 0.9 points in May but gained 21.6 points for the year.
The Current Index, which assesses overall business conditions at the time of the survey, surged 3.7 points to 60.3. The Future Index, measuring projections for the economy six months from now, lost 1.3 points for the month at 63.5.
The Employment Index was flat at 56.9 as employers now able to open at full capacity confronted an acute shortage of qualified 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 increased 2.2 points, leaving it 19.3 points higher than its year-earlier level. Small companies (63.2) were more bullish than large companies (62.1) or medium-sized companies (60.9).
Katherine Kiel, professor of Economics at the College of the Holy Cross and a BEA member, said Baker’s decision to lift almost all COVID-related business restrictions will help public-facing industries that were most affected by the pandemic.
“The retail, hospitality, restaurant, and travel sectors that lost hundreds of thousands of jobs throughout Massachusetts last year now have the opportunity to bring back some of those jobs,” she noted. “At the same time, construction and other sectors are likely to benefit from federal stimulus dollars and a possible federal infrastructure bill.”
AIM President and CEO John Regan, also a BEA member, said the economic recovery received an important shot in the arm last week when the Massachusetts Legislature and the Baker administration took multiple steps to stabilize an unemployment-insurance system battered by the COVID recession.
Baker signed legislation that will moderate an unexpected spike in unemployment-insurance taxes by spreading the levies over the next 20 years. The new measure, together with a previous UI rate freeze and the administration’s announcement that Massachusetts will reinstate the requirement that people who collect unemployment benefits must actively search for a job, aims to stabilize the stressed UI system in the short term and encourage people to return to the workforce.
“These were important steps to helping employers and workers alike get back on their feet and move the economy forward,” Regan said. “The one step that remains is for policymakers to use some of Massachusetts’ federal stimulus money to stabilize the unemployment system for the long term.”