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Posted on October 31, 2021
Confidence among Massachusetts employers drifted lower during October, dampened by a slowing state economy and a persistent labor shortage.
The Associated Industries of Massachusetts Business Confidence Index (BCI) declined five-tenths of a point to 58.4 last month. The Index remains 12.2 points higher than a year ago but now sits at its lowest level since March.
Employers grew less optimistic about both the state and national economies amid concerns about rising labor costs and supply chain interruptions. Companies also face uncertainty about taxes and federal spending as Congress and President Biden struggle to hammer out infrastructure and social spending bills.
The confidence reading comes as MassBenchmarks reported that economic growth in Massachusetts slowed to an annualized rate of 2.0 percent in the third quarter from 6.7 percent in the second.
“Employer confidence has been unsettled by a multitude of factors ranging from the continued presence of COVID-19 to product shortages to the exodus of people from the work force. At the same time, employer confidence in the prospects for their own companies strengthened during October, especially among manufacturing companies,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors and Executive Director of Global Economics at IHS Markit.
The inability to hire qualified workers remains foremost on the minds of Massachusetts employers.
“It’s almost impossible to hire help and for them to stay,” wrote one participant in the business confidence survey.
“We would be hiring more help if we could find them,” commented another.
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 Index were mixed during October.
The confidence employers have in their own companies rose 0.5 points to 61.2, leaving it 11.9 points better than it was a year ago. The Massachusetts Index assessing business conditions within the commonwealth declined 2.0 points to 58.0, up 15.1 points since October 2020.
The US Index measuring conditions nationally shed 2.2 points in October and gained 10.1 points for the year.
The Current Index, which assesses overall business conditions at the time of the survey, lost 1.5 points to 58.2. The Future Index, measuring projections for the economy six months from now, increased 0.4 points.
Confidence among manufacturing companies gained 2.2 points to end the month 15.9 points higher than its year-earlier level.
Large companies (61.0) were more bullish than medium-sized companies (56.5) or small companies (57.1). Companies in eastern Massachusetts (63.2) remained significantly more confident than those in the western part of the commonwealth (52.8).
Nada Sanders, Distinguished Professor of Supply Chain Management at Northeastern University and a BEA member, said the October confidence survey underscores the frustration that companies are feeling from worldwide supply chain problems.
“Companies responding to the survey say that supply chain problems and surging prices for key materials are constraining their operations and growth,” Sanders said.
“Consumers are being affected as well as we move into the holiday season. Many people are not going to be able to get the goods that they want by the usual holiday time. Lead times are extremely long, and there are massive shortages and price hikes.”
First Step on Unemployment Insurance
AIM President and CEO John R. Regan, also a BEA member, said a proposal last week by the Massachusetts House of Representatives to invest $500 million into the unemployment insurance system represents a modest first step to addressing the staggering $7 billion debt in the fund used to pay jobless benefits.
“Employers face potentially crippling long-term rate increases to pay down a deficit caused by a public-health emergency beyond their control. Employers appreciate the House Ways and Means Committee’s commitment of $500 million, but AIM believes the Legislature must provide additional resources if the commonwealth’s economic recovery is to continue,” Regan said.