Confidence among Massachusetts employers fell for a fourth consecutive month during November amid renewed COVID-19 concerns, supply chain disruptions and the highest rate of inflation in three decades.

The Associated Industries of Massachusetts Business Confidence Index (BCI) declined five-tenths of a point to 57.9 last month. The Index is now at its lowest level since March, though it remains 8.6 percent higher than a year ago.

Employer views of the US economy turned pessimistic for the first time since January while attitudes toward the Massachusetts economy also weakened slightly.

Overall confidence remains in optimistic territory. On the positive side, construction companies and other businesses involved in infrastructure work were buoyed by passage of the $1 trillion Infrastructure Investment and Jobs Act that was signed by President Joe Biden on November 15.

The November Business Confidence Index featured a new, regional confidence reading for Central Massachusetts developed by AIM in partnership with the Worcester Area Chamber of Commerce. The inaugural Central Massachusetts confidence reading was 56.3.
Additional regional business confidence projects are underway with the Springfield Regional Chamber of Commerce and North Shore Chamber of Commerce.

“The collaborative effort with the Worcester Regional Chamber will provide a nuanced picture of the similarities and differences that mark regional economies throughout Massachusetts,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors and Executive Director of Global Economics at IHS Markit.

“The AIM Business Confidence Index has been a remarkable bellwether of employer sentiment through both changing economic cycles and long-term economic shifts during the past 30 years. The Index at once identifies developing trends that will shape the economy and the manner in which those trends will affect the willingness of companies to invest, hire and grow.”

Employers remain concerned about their ability to obtain parts and materials.

“The only way we can continue to grow is to have the supply chain disruptions come to an end, and to have the labor shortages ease. We have had to turn away potential customers due to the inability to ensure delivery times,” wrote one employer who participated in the confidence survey.

Another wrote: “Supply chain disruption is placing a lot of strain on our ability to service our customers. I really believe the supply chain challenges will be with us well into the later part of 2022. It’s a mess.”

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.

Constituent Indicators

The constituent indicators that make up the Index were mostly lower during November.

The confidence employers have in their own companies was virtually flat at 61.1, leaving it 9.3 points better than it was a year ago.

The Massachusetts Index assessing business conditions within the commonwealth declined 0.7 points to 57.3, up 10 points since November 2020. The US Index measuring conditions nationally shed 1.5 points in November to enter pessimistic territory at 48.8.

The Current Index, which assesses overall business conditions at the time of the survey, lost 0.5 points to 57.7. The Future Index, measuring projections for the economy six months from now, declined 0.4 points.

The Employment Index was the only indicator to rise during the month, gaining 0.3 points to 56.2 as signs of a thaw began to appear in the labor market.

Large companies (56.4) were more bullish than medium-sized companies (53.6) or small companies (51.1). Companies located North of Boston (61.9) remained significantly more confident than those in other regions of the commonwealth.

Michael D. Goodman, Professor of Public Policy at the University of Massachusetts, Dartmouth and a BEA member, said the Massachusetts Legislature’s newly approved distribution of federal stimulus money under the American Rescue Plan Act, combined with the rollout of substantial federal infrastructure investments, will add momentum to a state economy that slowed to a 2 percent annual growth rate in the third quarter.

“In addition to boosting growth in the near term, these federal funds will allow Massachusetts to address longstanding and critical challenges including job training, transportation, housing and education,” Goodman said. “Wise public investments in these and other areas will position the state for more sustainable and equitable growth over the long-term,” Goodman added.

Change at the Top

AIM President and CEO John R. Regan, also a BEA member, said employers will watch next year’s gubernatorial election carefully now that incumbent governor and business ally Charlie Baker has decided against running for a third term.

“Any change in the corner officer on Beacon Hill affects the confidence on Massachusetts employers,” Regan said.

“Governor Baker and Lt. Governor Karyn Polito will leave a legacy of disciplined fiscal management and policies that have allowed Massachusetts to remain a pre-eminent center of technology and commerce. From massive regulatory reform to leading the commonwealth through the COVID-19 pandemic, Governor Baker has employed what he calls his ‘get stuff done’ approach to create economic opportunity and prosperity for the citizens of Massachusetts.”