Employer Confidence Strengthens During August
BOSTON — Massachusetts employers were equally confident about the national and state economies during August, breaking an eight-and-a-half-year run in which they were more bullish about the Commonwealth than the nation as a whole.
The brightening view of the U.S. economy boosted overall business confidence as employers headed for the end of the third quarter. The Associated Industries of Massachusetts (AIM) Business Confidence Index gained two points to 63.2 last month after tumbling more than five points during June and July. The gain left the Index two points higher than a year ago, comfortably within optimistic territory.
Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at Harvard Graduate School of Design, said the last time employers were more optimistic about the national economy than the state was during the nadir of the Great Recession in May 2009, when the AIM Massachusetts Index was 33.1 and the U.S. Index was 34.4.
“The confluence of opinion reflects gathering optimism about the U.S. economy rather than any weakness in the Massachusetts business climate,” Torto said. “The Massachusetts Index rose 1.5 points during the year, but the U.S. Index soared 4.5 points during that same period.”
The optimism about national prospects came despite persistent concerns about rising production costs generated by tariffs and other factors.
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.
The constituent indicators that make up the overall Business Confidence Index were largely higher during August.
The Company Index measuring employer assessments of their own operations rose 2.4 points to 62.1, up 1.2 points from August 2017. The Employment Index gained 2.4 points to end the month at 57.0, while the Sales Index lost 0.8 points to 61.0.
The Current Index, which assesses overall business conditions at the time of the survey, rose 2.5 points to 66.1, leaving it 4.8 points higher than the year earlier. The Future Index, measuring expectations for six months out, rose 1.5 points during August, but remained down 1.0 point for the year.
Non-manufacturing companies (63.6) were slightly more optimistic than manufacturers (62.8). Companies in the eastern part of Massachusetts (65.2) were more bullish than those in the west (60.8).
“All of these numbers are well within optimistic range and reflect the views of employers operating in a state economy that grew at a 7.3% annual rate during the second quarter. The acceleration in economic growth underscored strong gains in employment, earnings, and consumer and business spending,” said Elliot Winer, chief economist with Winer Economic Consulting, LLC, and a BEA member. “Underlying economic strength is, for the moment, overshadowing a somewhat unpredictable public-policy environment.”
AIM President and CEO Richard Lord, also BEA member, said employers are driving a Massachusetts economy that remains historically strong.
“The state unemployment rate remains at 3.5%, wage and salary income surged 19.2% during the second quarter, and economic output has accelerated,” Lord said. He cautioned, however, that the escalating series of tariffs and retaliatory tariffs among the U.S. and its trading partners are starting to take a toll on Massachusetts employers.
“The thousands of member employers of Associated Industries of Massachusetts are increasingly concerned about the negative effect of current and proposed tariffs on Massachusetts companies. Particularly alarming are tariffs on raw materials, components, and finished goods coming from China,” he noted. “While we concur with the need to address China’s unfair trade practices, we do not believe that tariffs are the best strategy. Tariffs are already hurting our companies here in Massachusetts, and additional damage is anticipated by business owners and leaders.”