Employer Confidence Inches Up in February

BOSTON — Business confidence rebounded modestly during February as optimism about the state and national economies outweighed a darkening outlook among Massachusetts manufacturers.

The Associated Industries of Massachusetts (AIM) Business Confidence Index gained 0.5 points to 58.2 after dropping in January to its lowest level since October 2016. Confidence remains within optimistic territory but has lost 6.8 points during the past 12 months.

The February increase was driven by a 3.4% jump in employer views of the state economy and a 3.3% rise for the national economy. The government announced last week that the U.S. economy grew at a 2.9% rate in 2018, matching 2015 as the biggest increase since the end of the 2007-09 Great Recession.

“Employers remain generally optimistic about a state economy that continues to run at full-employment levels and a U.S. economy that is projected to grow by 2.2% this year” said Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at the Harvard Graduate School of Design. “At the same time, the erosion of confidence among Massachusetts manufacturers during the past 12 months raises some concern about the long-term sustainability of the recovery.”

The AIM Index, based on a survey of 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. It has remained above 50 since October 2013.

AIM President and CEO Richard Lord, also a BEA member, said the comments provided by employers on the February AIM Business Confidence Index Survey show that many companies remain bullish about 2019, while others remain concerned about issues ranging from gridlock in Washington to the persistent shortage of skilled employees.

“There are plenty of mixed signals 10 years into the economic recovery,” Lord said. “Massachusetts employers face rising wage costs, rising raw-material costs, and the challenge of integrating new public-policy mandates such as an increased minimum wage and paid family and medical leave. It’s the right time in the business cycle for state and federal government to follow the lead of the Federal Reserve and pause the imposition of expensive new initiatives.”