Employer Confidence Strengthens During November
BOSTON — Confidence among Massachusetts businesses last month rose to its highest level since February, inching toward optimism as vaccines raised hopes for an end to the COVID-induced economic slowdown.
The Associated Industries of Massachusetts (AIM) Business Confidence Index gained 3.1 points to 49.3 during November, just shy of the level (50) that denotes an optimistic view of the business economy. Driving the increase was a surge of confidence among manufacturing companies and bullishness among all employers about prospects for the future.
The BCI is up from a low of 38.4 in April but still 11.3 points less than in November 2019.
The confidence report comes as the Massachusetts economy continues a methodical recovery amid the renewed surge of COVID-19 cases. The state jobless rate dropped 2.4 percentage points to 7.4% in October following a record 37.7% rebound in economic output during the third quarter.
“Massachusetts companies appear to believe that the new COVID-19 vaccines will ultimately stem the increase in new cases and restore stability to the economy,” said Raymond Torto, professor at the Harvard Graduate School of Design and chair of the AIM Board of Economic Advisors. “The fact that employers are significantly more confident about conditions six months from now than they are about current conditions is a strong indicator that they see better days ahead.”
The constituent indicators that make up the Business Confidence Index all moved higher during November. Employers’ confidence in their own companies rose 2.5 points to 51.8, crossing into optimistic territory but still 7.1 points lower than a year ago. The Massachusetts Index assessing business conditions within the Commonwealth gained 4.4 points to 47.3, while the U.S. Index measuring conditions nationally increased 3.6 points to 43.8.
The Current Index, which assesses overall business conditions at the time of the survey, was up 1.6 points to 45.6. The Future Index, measuring expectations for six months out, surged 4.6 points to 53.0, still 6.5 points below its level of November 2019.
The Employment Index continued its steady increase, rising 1.6 points to 51.1. Despite the COVID-driven economic downturn, many employers continue to report challenges with hiring skilled workers.
Manufacturing companies recorded the largest increase in confidence, up 5.8 points to 51.3. Many Massachusetts manufacturers have operated throughout the pandemic as essential businesses. Large companies (56.2) were more bullish than medium-sized companies (48.6) or small companies (45.3).
Sara Johnson, executive director, Global Economics at IHS Markit and vice chair of the BEA, sounded a note of caution about the ability of governments around the world to control the spread of COVID-19. She predicts that the U.S. economy will grow at 3.7% in the fourth quarter and then slow to average growth of 1.9% next year.
“The need to bolster struggling economies has swamped notions of austerity. Unfortunately, institutional and political constraints in Europe, the possibility of a divided government in the United States, and limitations on further budgetary expansion in the emerging world mean hopes for big fiscal stimulus remain uncertain,” Johnson said.
AIM President and CEO John Regan, also a BEA member, commended the Massachusetts Legislature for hammering out a state budget last week that avoids raising broad-based taxes on business. He also called upon state and local leaders to keep the economy open in light of the fact that the increase in new COVID-19 cases is not coming from workplaces.
“Addressing the COVID crisis by shutting down the economy again is not a solution,” he said. “Neither is imposing tax increases to resolve the state’s fiscal issues at the expense of business people trying to keep people employed.”