Employer Confidence Stabilizes in June
BOSTON — Employer confidence stabilized in Massachusetts during June despite a continued swirl of conflicting economic and political signals around the globe.
The Associated Industries of Massachusetts (AIM) Business Confidence Index rose 0.5 points to 57.6 last month, rebounding from a May drop that left it at its lowest level since October 2016.
The Index has declined 3.7 points since June 2018 but remains within optimistic territory. And though confidence levels are virtually unchanged since January, the AIM Index reflects constantly changing headlines about international trade, economic growth, and the direction of interest rates.
“We’re seeing confidence go up one month and down the next in the same way that financial markets have been whipsawed by almost daily changes in the economic outlook,” said Raymond Torto, chair of AIM’s Board of Economic Advisors and lecturer at Harvard Graduate School of Design. “Employers remain concerned about the prospect of an economic slowdown but were encouraged at the end of June by larger-than-expected job growth numbers, signs of a thaw in the U.S./China trade battle, and signals that the Federal Reserve might ease interest rates.”
Tariffs continue to influence employer confidence. One AIM member reported seeing “cost increases for construction materials due to the effect of tariffs. This is creating some uncertainty in the pricing of new construction projects.”
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.
Constituent indicators were mixed during June. The Massachusetts Index assessing business conditions within the Commonwealth rose 0.3 points to 61.2, while the U.S. Index rose 3 points to 58.0. The Massachusetts reading has declined 1.6 points during the past 12 months, and the U.S. reading has dropped 2.0 points during the same period.
The Future Index, measuring expectations for six months out, rose 0.2 points to 56.2. The Current Index, which assesses overall business conditions at the time of the survey, gained 0.8 points to 59.0, 4.5 points lower than a year ago. The Employment Index declined 0.4 points for the month and 2.2 percent for 12 months. Analysts say employers continue to struggle to find qualified workers in a state economy with a 2.9% jobless rate.
Non-manufacturers (60.1) were more confident than manufacturers (54.4), who have seen their confidence levels drop 8.1% since June 2018. Large companies (59.0) were more confident than small companies (58.4) or medium-sized companies (55.6). Companies in Eastern Mass. (58.5) continued to be more optimistic than those in Western Mass. (56.3).
AIM President and CEO John Regan, also a BEA member, said Gov. Charlie Baker and the Massachusetts Legislature have made several decisions recently that boosted employer confidence. Those decisions included postponing the start of contributions for paid family leave and allowing the MassHealth assessment to lapse as scheduled in December.
“Employers have been encouraged by the willingness of state policymakers to meet businesses halfway on some of these complex issues,” Regan said. “Our hope is that lawmakers will continue this mindful approach to the economy.”