Employer confidence returned to pessimistic territory during March amid surging energy costs, the war with Iran and a weakening view of the Massachusetts economy.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 5.0 points to end the month at 47.0 on a 100-point scale. The decrease left the Index one point better than its level in March 2025.

Massachusetts employers have now been pessimistic for 12 of the past 13 months.

The decline in confidence came as the conflict in the Midde East roiled financial and commodities markets. The price of oil surged beyond $100 per barrel and the S&P 500 stock index fell 5.1 percent during the month on fears of renewed inflation. Broader economic signals remained stable, however, with the Federal Reserve predicting real GDP growth of 2.4 percent from the fourth quarter of 2025 to the fourth quarter of 2026.

“The US economy is still growing, albeit at a moderate pace. Payroll employment advanced in March, while the unemployment rate stood at 4.3%, still historically low,” said Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the Business Confidence Index.

“We continue to see strong gains in labor productivity and company earnings. Meanwhile, federal tax policies are encouraging business investment.”

Companies that participated in the BCI underscored the split-screen economy.

“Spiking energy costs due to the war with Iran will increase costs for us across the board, while potentially decreasing our customer orders,” wrote one manufacturing company from western Massachusetts.

But another commented: “Rebounding demand is bumpy but strong. Opportunities from years past returning.”

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.

Constituent Indicators

The constituent indicators that make up the Index all fell during March after gaining ground the previous month.

The confidence employers maintain in their own operations lost 2.9 points to 52.6. The March figure was 3.0 points better than a year earlier.

The Massachusetts Index, assessing business conditions within the commonwealth, sank 6.8 points to 38.5, leaving it 6.2 points below March 2025. The 12-month drop was the largest in the Index as employers grow increasingly concerned about the competitive position of Massachusetts.

The US Index measuring conditions throughout the country declined 9.2 points to 38.7, still 2.1 points higher for the year.

The Current Index, which assesses overall business conditions at the time of the survey, was down 4.6 points to 47.1. The Future Index predicting conditions for the next six months slid 5.9 points into pessimistic territory at 46.3.

The Employment Index dropped 2.4 points to close the month at 49.5. The Manufacturing Index fell slightly, 0.6 point to 49.8, but remained 4.7 points better than a year earlier.

Medium-sized companies (49.8) and large companies (48.9) were more confident than small companies (44.2).

Olena Staveley-O’Carroll, Associate Professor of Economics at the College of the Holy Cross, noted that employer confidence has moved in a narrow range in the year since the Trump Administration announced tariffs that were later ruled unconstitutional by the US Supreme Court.

“We’re seeing employers grow more cautious, though not overly pessimistic,” Staveley-O’Carroll said.

“The economy has remained resilient so far, but rising geopolitical tensions, volatile trade policy, a slowing labor market, and the risk of tariff and energy price pass-through to inflation are giving them pause.”

Potentially Harmful Ballot Question

AIM President and CEO Brooke Thomson, also a BEA member, noted that the AIM Board of Directors has voted to oppose a potential November ballot question that would impose rent control statewide. Employers are concerned about the commonwealth’s housing crisis, Thomson said, but rent control is not the answer, especially given the erosion of confidence in the state economy.

“Rent control as outlined in this ballot question will reduce housing supply, hurt property values, and create unintended economic consequences. We are already seeing developers bypass Massachusetts and build desperately needed housing projects in other states,” Thomson said.