Employer Confidence Inches Higher During August
BOSTON — Confidence among Massachusetts employers rose slightly during August amid continued uncertainty around the COVID-19 pandemic and its long-term effect on the state and national economies.
The Associated Industries of Massachusetts (AIM) Business Confidence Index rose a half-point to 46.3, resuming an uneven climb from its 2020 low of 38.4 at the height of the pandemic in April.
The reading was 12.4 points lower than in August 2019 and continued to indicate a predominantly pessimistic outlook among businesses throughout the Commonwealth.
The Index has moved in a volatile pattern since suffering the largest one-time decline in its history during March. Employer sentiment has been constrained by a 16.1% Massachusetts unemployment rate that is the highest in the nation, along with persistent weakness in key economic sectors such as healthcare and education.
“The good news is that employers are showing increased confidence in the prospects of their own companies. The sobering news is that recent announcements of major layoffs by healthcare, higher-education, and hospitality organizations in Massachusetts leave little doubt about the challenges of getting the state economy back on track,” said Raymond Torto, professor at the Harvard Graduate School of Design and chair of the AIM Board of Economic Advisors (BEA).
One employer who participated in the survey noted that “the pandemic has shortened the time horizon for evaluating business prospects. The environment changes so quickly that it’s hard to project conditions six months out.”
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 higher during August. Employers’ confidence in their own companies rose 1.4 points to 49.0, one point shy of an optimistic reading but still 9.2 points lower than in August 2019.
The Massachusetts Index assessing business conditions within the Commonwealth lost 2.7 points to 46.1 as rising COVID-19 cases in early August prompted a pause in a planned four-phase economic reopening. The Massachusetts Index remains 17.8 points lower than a year ago.
The state’s payroll employment in July was 12.6% below its February 2020 level — the third-worst performance after Hawaii (down 16.5%) and New York (down 14.2%).
The U.S. Index measuring conditions nationally ended the month at 38.4, a 1.2-point gain for the month and a 16.8-point loss for the year. The gap between attitudes toward Massachusetts and the nation shrank from 12 points in July — the largest in a decade — to eight points last month.
The Current Index, which assesses overall business conditions at the time of the survey, rose 2.9 points to 44.9, while the Future Index, measuring expectations for six months out, dropped 1.9 points to 47.7. The Employment Index increased slightly, 0.2 points to 47.9, while the Sales Index, a leading indicator, rose 2.2 points to 44.8.
Large companies (47.8) were more optimistic than medium-sized companies (46.1) or small companies (45.0). Also driving confidence levels was the degree to which different industries have been able to reopen under the Massachusetts plan. Manufacturing companies (46.8), many of which have operated throughout the pandemic as essential businesses, remained more confident than non-manufacturers (45.9). And companies in manufacturing-heavy Western Mass. (48.9) were more upbeat than those in Eastern Mass. (44.2).
“There is a clear disparity by industry in the effects of the economic downturn,” said Michael Tyler, chief investment officer at Eastern Bank Wealth Management and a BEA member. “Recent layoff announcements by UMass Amherst, Cape Cod Healthcare, MGM, and several tourist destinations in the Berkshires draw a clear map of which types of organizations are being most immediately affected.”
AIM President and CEO John Regan, also a BEA member, said the end of August brought encouraging public-health news as the positive COVID-19 test rate in Massachusetts fell below 1%.
“We have said all along that resolving our economic issues and putting people back to work depends upon the ability of the medical community and the government to manage the public-health issue,” Regan said. “Several AIM-member pharmaceutical companies are among those engaged in an extraordinary race to develop COVID-19 treatments and vaccines. The clarity brought about by those advances will eventually be the medicine that also heals the state and national economies.”