Employer Confidence Surges During July
BOSTON — Massachusetts employers shrugged off mounting evidence of an economic slowdown during July and expressed growing confidence in both the state and national economies.
The Associated Industries of Massachusetts (AIM) Business Confidence Index rose 4.4 points to 62.0 last month, reaching its highest level since September. The Index has gained 0.8 points during the past 12 months and remains comfortably within optimistic territory. The confidence surge was driven by optimism in the Massachusetts economy and a strengthening outlook among manufacturers.
“We have to be cautious in reading large month-to-month changes in the Business Confidence Index, but the fact that employers are more optimistic than they were a year ago and six months ago is a good sign,” said Raymond Torto, chair of AIM’s Board of Economic Advisors (BEA) and lecturer at the Harvard Graduate School of Design. “With a host of seemingly conflicting indicators at play — unemployment in Massachusetts remains at a low 2.9%, while economic growth slowed from an annualized rate of 2.7% to 1.4% during the second quarter — it will be interesting to see how employer optimism holds up for the rest of 2019.”
The AIM Index, based on a survey of more than 100 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 July confidence survey was taken before President Donald Trump touched off financial-market gyrations last week by announcing another round of tariffs on Chinese products.
The constituent indicators that make up the Index all increased during July. The Massachusetts Index assessing business conditions within the Commonwealth surged 7 points to 68.2, while the U.S. Index rose 4.6 points to 62.6. The Massachusetts reading has risen 3.1 points, and the U.S. reading 0.7 points, during the past 12 months.
The Future Index, measuring expectations for six months out, rose 4.6 points to 60.8, leaving it 2.1 points higher than a year ago. The Current Index, which assesses overall business conditions at the time of the survey, gained 4.2 points to 63.2, virtually even with its reading of July 2018.
The Employment Index gained 1.9 points for the month and 0.2 points for the year. Employers continue to struggle to find qualified workers in a full-employment state economy facing a demographic challenge as Baby Boomers leave the workforce.
Non-manufacturers (63.6) were more confident than manufacturers (60.5), who remain concerned about the consequences of tariffs and trade tensions. Small companies (65.2) were more confident than large companies (58.9) or medium-sized companies (62.3). Companies in Eastern Mass. (63.3) continued to be more optimistic than those in the west (59.8).
Michael Goodman, executive director of the Public Policy Center at UMass Dartmouth and a BEA member, said business confidence remains volatile amid a swirl of economic and political issues ranging from trade to the availability of qualified workers. “Employer optimism may reflect the fact that the Massachusetts economy should be somewhat insulated during these final stages of the economic expansion by a unique industry mix dominated by technology and innovation companies,” he noted.
AIM President and CEO John Regan, also a BEA member, said Massachusetts employers already burdened with business and compliance costs could face more of the same soon as the state Legislature debates ways to raise revenue for big-ticket issues such as transportation and education.
“Beacon Hill is awash with calls for more revenue. But the slowing of the economy during the second quarter means this is exactly the wrong time to place additional cost burdens on business,” Regan said. “If the economy goes into a downturn while costs are increasing, that will create big challenges for employers.”