Confidence among Massachusetts businesses remained flat during the final month of 2020 as employers ended a tumultuous year with a cautious outlook.

The Associated Industries of Massachusetts Business Confidence Index (BCI) remained unchanged during December at 49.3. The reading was 12.9 points lower than in December 2019, but more than 10 points higher than its 2020 low point in April.

The result reflected solid gains in confidence among employers in the prospects for their own companies and in the Massachusetts economy. Those gains were offset by a dramatic 4.8-point drop in opinions about the national outlook.

The confidence report comes as the Massachusetts economy continues a methodical recovery amid the conflicting swirl of a COVID-19 vaccine roll-out and a renewed surge of cases. The state jobless rate dropped 0.7 points to 6.7 percent during November as private-sector employers created 12,200 jobs.

The commonwealth lost 337,900 jobs between November 2019 and November 2020.

“Massachusetts companies are optimistic about their own prospects, which provides hope that the economy will rebound once the nation gains control of the pandemic,” said Raymond G. Torto, professor at the Harvard Graduate School of Design and Chair of the AIM Board of Economic Advisors.

“But we are, as always, left with the uncertainty of an economic situation that is being driven by a public-health crisis.”

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 Business Confidence Index were mixed during December.
Employers’ confidence in their own companies rose 1.3 points to 53.1, remaining in optimistic territory but still 7.9 points lower than a year ago.

The Massachusetts Index assessing business conditions within the commonwealth gained 1.1 points to 47.3 while the US Index measuring conditions nationally fell to 39.0.

The Current Index, which assesses overall business conditions at the time of the survey, was down 0.2 point to 45.4. The Future Index, measuring expectations for six months out, rose 0.3 point to 53.3, still 8.3 points below its level of December 2019.

The Employment Index declined 1.6 points to 49.5, breaking a string of four consecutive monthly increases. Despite the COVID-driven economic downturn, many employers continue to report challenges with hiring skilled workers.

Confidence among manufacturing companies also weakened slightly, dropping 0.3 point to 51.0. The manufacturing index has dropped 10.4 points during the past 12 months.

Medium-sized companies (51.5) were more bullish than large companies (49.1) or small companies (47.2).

Alan Clayton-Matthews, Professor in the School of Public Policy & Urban Affairs at Northeastern University and a BEA member, said unemployment in Massachusetts is projected to remain above pre-pandemic levels through 2022, with lower-wage workers in industries such as retail and hospitality bearing the brunt of the slowdown. Overall, however, he believes the economy will strengthen as long as the COVID vaccine becomes widely available by the summer.

“Massachusetts tax revenues in the current fiscal year could reach $30.2 billion, which would be significantly higher than what lawmakers are expecting. Revenues could climb 4.4 percent in fiscal 2022 to $31.5 billion,” said Clayton-Matthews, who is also a senior contributing editor at MassBenchmarks.

Legislative Moderation

AIM President and CEO John R. Regan, also a BEA member, said prospects for economic growth in 2021 improved significantly last week when the Massachusetts Legislature completed a protracted two-year session without raising broad-based business taxes.

“We strongly urge the Legislature to continue that cautious approach as thousands of companies hang by a thread trying to survive the pandemic,” Regan said.

“Employers commend the Legislature for passing a $626 million economic stimulus bill and a $16.5 billion transportation bond measure that did not raise corporate minimum taxes.”