Employer Confidence Remains Flat in October
| November 10, 2020
By: Chris Geehern
Massachusetts employers remained pessimistic during October amid conflicting signals from the economy and the COVID-19 pandemic.
The Associated Industries of Massachusetts Business Confidence Index (BCI) lost four-tenths of a point to 46.2 last month, up from a low of 38.4 in April but still 14.7 points lower than a year ago.
Overall business confidence was dampened by darkening views of both the state and national economies. The confidence reading for the Massachusetts economy has tumbled 24.9 points during the past 12 months.
The report comes a week after MassBenchmarks reported that the Massachusetts economy grew at a record 37.7 percent clip during the third quarter, regaining some of the ground it lost when the commonwealth imposed a broad lockdown during the early months of the pandemic. But the specter of lockdowns also re-appeared in October as the United States hit a daily global record 100,000 new COVID-19 cases.
“Massachusetts companies in many sectors have continued to generate products and services through the ups and downs of the pandemic. But they realize that surging caseloads and the expiration of federal stimulus will slow the economy again as we move into the fourth quarter,” said Raymond G. Torto, professor at the Harvard Graduate School of Design and Chair of the AIM Board of Economic Advisors.
One participant in the confidence survey commented: “There is a big divide between growth industries and industries such as travel and tourism, which continue to suffer.”
The October BCI was compiled prior to the November 3 presidential election.
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 in 1997-98, and its all-time low of 33.3 in February 2009.
The constituent indicators that make up the Business Confidence Index were mixed during October.
Employer confidence in their own companies rose slightly to 49.3 – nearly 10 points lower than in October 2019.
The Massachusetts Index assessing business conditions within the commonwealth lost 1.2 points to 42.9 while the US Index measuring conditions nationally declined 2.4 points to 40.2.
The Current Index, which assesses overall business conditions at the time of the survey, was essentially flat at 44.0. The Future Index, measuring expectations for six months out, fell 1.8 points to 48.4.
The Employment Index increased 0.9 points to 49.5, just short of optimistic territory. Despite the COVID-driven economic downturn, many employers continue to report challenges with hiring skilled workers.
Small companies (46.6) were slightly more bullish than medium-sized companies (46.2) and large companies (45.8). Non-manufacturers (47.0) were more bullish than manufacturing companies (45.5).
Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University, noted that the economy continues to be whipsawed by seemingly contradictory trends.
“More than 60,000 renter households in Massachusetts currently face the prospect of eviction while, at the same time, the average price of a single-family home in Massachusetts surged 19.5 percent during September. It mirrors what we see in the overall economy, where there is a clear disparity by industry in the consequences of the economic downturn,” Bluestone said.
Preserving the Business Climate
AIM President and CEO John R. Regan, also a BEA member said the ability of Massachusetts to moderate the spread of COVID without repeating the devastating spring lockdown is essential to maintaining positive economic momentum.
“Hundreds of thousands of our friends and neighbors remain out of work, staring at bleak prospects during what is shaping up to be a long winter. The employers who make up the AIM Re-Opening Task Force, many of whom have operated safety as essential businesses throughout the pandemic, continue to work closely with the Baker Administration to ensure that the commonwealth is able to balance public health and safety with economic survival,” Regan said.