Business Confidence Surges in March
BOSTON — As the battle to moderate COVID-19 continues, Massachusetts employers have become enthusiastic about the direction of the economy.
The Associated Industries of Massachusetts (AIM) Business Confidence Index surged 4.5 points in March to 60.9, its highest level since the pandemic and consequent business restrictions went into effect a year ago.
Confidence levels have increased 11.6 points since December as COVID-19 vaccines have raised hopes for an end to the crisis and the federal government provided a $1.9 trillion stimulus injection.
The March reading was 20.7 points higher than it was last year at this time, when the initial wave of the pandemic sent the Index reeling with its largest one-month decline on record.
Massachusetts employers created 14,000 jobs during February, and the unemployment rate dropped 0.7% to 7.1%. Nationally, the government reported Friday that U.S. employers added 916,000 jobs during March, nearly double February’s gain of 468,000.
“Employers certainly remain concerned about COVID-19 variants and rising case numbers, but they are clearly bullish about the underlying strength of the Massachusetts and national economies,” said Raymond Torto, professor at the Harvard Graduate School of Design and chair of the AIM Board of Economic Advisors (BEA). “Several companies told the March survey that commodity prices and domestic demand are both increasing, signaling tentative steps toward recovery.”
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 all higher for the third consecutive month in March. Every indicator is now well above 50 and resting comfortably in positive territory.
Employers’ confidence in their own companies rose 2.8 points to 61.8. It marked the sixth consecutive monthly increase for the Company Index.
The Massachusetts Index assessing business conditions within the Commonwealth rose 6.1 points to 60.6. The U.S. Index measuring conditions nationally surged 8.3 points to 58.7, almost 27 points higher than it was in March 2020.
The Current Index, which assesses overall business conditions at the time of the survey, was up 5.3 points to 57.1. The Future Index, measuring projections for the economy six months from now, reached its highest level since May 2018 at 64.8.
The Employment Index gained 1.2 points to 55.8, confirming the comments of many employers about the challenges of hiring and retaining skilled workers. The hiring issues come despite the fact that more than 300,000 Massachusetts residents remain without jobs more than a year into the public-health crisis.
Confidence among manufacturing companies climbed 3.3 points to 59.5 during March, leaving it 19.8 points better than its year-earlier level. Large companies (67.4) were more bullish than medium-sized companies (60.7) or small companies (54.6). Companies in Eastern Mass. (63.7) have a brighter outlook than those in Western Mass. (56.4).
Nada Sanders, distinguished professor of Supply Chain Management at Northeastern University and a BEA member, said the disruption last week at a company manufacturing the Johnson & Johnson vaccine, coupled with the resumption of lockdowns in key European countries, may moderate the optimism of employers.
“There are areas of the supply chain that were woefully unprepared for COVID-19. Retailers and suppliers, for example, built a supply-chain system that was too complex, in which the slightest crack down the line created a large ripple effect,” Sanders said. “Companies are now addressing those weaknesses, but the events of the past week, including the backup of the Suez Canal, may give employers pause.”
AIM President and CEO John Regan, also a BEA member, said the Massachusetts Legislature’s vote last week to freeze unemployment-insurance rates and create a tax benefit for small companies that received a forgivable loan through the federal Paycheck Protection Program represented significant commitments to the economic recovery of the Commonwealth.
“Add to that the fact that Senate President Karen Spilka told the AIM Executive Forum on Friday that she does not support tax increases this year, and House Speaker Ronald Mariano’s similar statements several weeks ago, and employers are encouraged that lawmakers will maintain a positive environment for business growth in 2021,” Regan said.