Amid the sometimes-chaotic change of administrations in Washington, a slow but steady economy kept Massachusetts employers feeling optimistic during the first month of 2025.

The Associated Industries of Massachusetts Business Confidence Index (BCI) edged up two-tenths of one point to 55.6, its fourth consecutive month above 55 on the 100-point BCI scale. The Index ended the month 2.1 points higher than in January 2024.

“The economic expansion is continuing at subdued pace, with the US economy growing at an annual rate of 2.3 percent in the fourth quarter of 2024. Employment growth also slowed to 143,000 jobs in January, even as the national unemployment rate fell to 4.0,” said Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the BCI.

The January survey came as the US Federal Reserve Board left its benchmark rate unchanged, hitting the brakes on lowering borrowing costs for individuals and businesses after a flurry of rate cuts starting last fall. The Fed’s decision to keep rates steady reflects stubborn U.S. inflation, which remains close to 3% on an annual basis.

Survey participants expressed concerns about tariffs, even though the confidence survey was taken before the Trump Administration imposed, and then stayed, 25 percent tariffs on goods from Canada and Mexico last weekend.
“In the design and construction industry we are very concerned about the pending tariffs on goods from Canada, Mexico and China, and how they will impact already high construction costs,” wrote one company.

The AIM Index, based on a survey of more than 140 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, 1997-98, and its all-time low of 33.3 in February 2009.

Confidence varied regionally across the Commonwealth. The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, fell slightly from 57.9 to 57.2; the Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, increased from 53.2 to 55.8; and the North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, lost three points to 56.0.

Constituent Indicators

The constituent indicators that make up the Index were mixed during January.

The confidence employers maintain in their own operations gained 1.9 points to 57.3. That figure was 2.8 points better than in January 2024.

The Massachusetts Index assessing business conditions within the Commonwealth lost 1.9 points to 53.1, leaving it 0.9 point lower than a year earlier. The US Index measuring conditions throughout the country dropped 2.8 points to end the month at 53.0.

The Current Index, which assesses overall business conditions at the time of the survey, lost 0.6 point to 55.7. The Future Index predicting conditions six months from now rose a point to 55.5.

The Manufacturing Index gained 1.5 points to 53.8. The Employment Index rose 2.0 points to 53.4, indicating continued healthy demand for workers throughout the economy.

Small companies (57.6) were more optimistic than large companies (56.5) or medium-sized companies (51.8).

Olena Staveley-O’Carroll, Associate Professor of Economics at the College of the Holy Cross and a BEA member, said the January survey came before President Donald Trump imposed tariffs on three major US trading partners – Canada, Mexico and China. The president later stayed the levies on Mexico and Canada.

“Businesses lose twice with tariffs – first the cost of inputs from the three largest U.S. trading partners goes up and then the retaliatory tariffs make their products more expensive in these important foreign markets,” Staveley-O’Carroll said.

Focus on Implementation

AIM President and CEO Brooke Thomson, also a BEA member, said the business community plans to concentrate during 2025 on ensuring the smooth implementation of sweeping state legislation passed last year on economic development, housing, energy siting and taxation.

“Employers will also work with the Legislature and the Governor to stabilize an unemployment insurance system that is projected to be in the red by 2028. We look forward to collaborating with Labor Secretary Lauren Jones and Administration and Finance Secretary Matthew Gorzkowicz as they conduct a comprehensive review of the solvency of UI and assess potential reforms.”