Massachusetts employers grew more confident for the second consecutive month in March, continuing to create jobs despite wariness about slowing economic growth, persistent supply chain interruptions, and rising prices.

The Associated Industries of Massachusetts Business Confidence Index (BCI) edged up 0.5 points last month to 57.2. The Index remains within optimistic territory but rests 3.7 points lower than its level of a year ago when employers anticipated an early end to the COVID pandemic.

Driving the confidence increase were strengthening employer views about the prospects of their own companies and growing optimism among manufacturers.

The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, showed Worcester Country employers with a 55.1 confidence reading. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, was 57.0.

The Massachusetts economy grew at an 8.2 percent annualized rate in the fourth quarter of 2021, but economists believe factors ranging from Omicron to the Russian invasion of Ukraine dampened that rate in the first quarter. Analysts expect US economic growth to slow from a 6.9 percent annualized rate in the fourth quarter to 1 percent in the first three months of 2022.

At the same time, Massachusetts companies also face persistent uncertainty from commodity inflation, labor shortages and the Federal Reserve’s move to raise interest rates.

“We see a familiar pull and tug in the confidence reading between solid levels of confidence in the underlying economy and concerns about a multitude of geopolitical, resource, cost, and public-health issues.,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors.

“Employers remain confident about the prospects of their own companies in 2022 – and that translates into a strengthening of the Employment Index. According to the Bureau of Labor Statistics, Massachusetts employment increased by 24,000 in the first two months of 2022.”

Supply chain issues continue to test Massachusetts companies.

“We have difficulty getting various types of pipe for our construction projects as well as equipment parts to repair our heavy equipment.  Most vendors have been increasing their prices, yet we can’t increase our prices on our construction contracts.  We are ordering supplies as soon as we know we need them or sooner,” wrote one participant in the Business Confidence Survey.

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 mixed during March.

The confidence employers have in their own companies rose 1.6 points to 60.2, slightly less than it was a year ago.

The Massachusetts Index assessing business conditions within the Commonwealth fell 2.1 points to 55.6, down 5 points since March 2021. The US Index measuring conditions throughout the country remained unchanged at 49.9, just short of optimistic territory and 8.8 points less than a year ago.

Employers are slightly more bullish about future business conditions than present ones. The Current Index, which assesses overall business conditions at the time of the survey, rose 1.2 points to 56.6. The Future Index, measuring projections for the economy six months from now, lost 0.2 points to 57.7.

The Manufacturing Index increased 2.2 points to 55.6 for its second consecutive monthly gain. The Manufacturing Index now stands 3.9 points less than a year ago.

Small companies (61.4) were more optimistic than medium-sized companies (58.2) or large companies (52.4).

Michael A. Tyler, Chief Investment Officer at Eastern Bank Wealth Management and Vice-Chair of the BEA, said inflation is much like a forest fire in that a controlled burn can be healthy while an inferno can cause damage that lasts for years.

“An inflationary fire requires fuel, oxygen, and spark, just like a forest fire. The fuel is an increasing money supply, which has grown by 40% in the past two years. The oxygen is strong consumer and industrial demand, although those seem to be moderating lately. And the sparks include labor shortages, tight housing inventory, and wage pressures,” Tyler said.

Job Market

AIM President and CEO John R. Regan, also a BEA member, said Massachusetts employers have created 173,500 jobs during the past 12 months and 571,400 jobs since the employment trough of April 2020.

The US Department of Labor announced Friday that U.S. employers added 431,000 jobs in March on a seasonally adjusted basis. The figure was just shy of forecasts, and there was an upward revision of 95,000 for the previous two months of this year.

“The ultimate measure of success for the Massachusetts is the number of jobs employers create for the citizens of the commonwealth,” Regan said.

“It’s a remarkable accomplishment that employers have replaced most of the jobs lost during the initial COVID-19 shutdown. That growth underscores the importance of educating and training the next generation of skilled workers to fill the jobs being created.”

The monthly Business Confidence Index, initiated by AIM’s Board of Economic Advisors in July 1991, is based on a survey of AIM member companies across Massachusetts, asking questions about current and prospective business conditions in the state and nation, as well as for respondents’ own operations. On the Index’s 100-point scale, a reading above 50 indicates that the state’s employer community is predominantly optimistic, while a reading below 50 points to a negative assessment of business conditions.   A number of component sub-indices are derived by analyzing responses to selected questions or those of particular groups of respondents. 

Media Contacts:

Sara L. Johnson (Chair), 781-367-0587
Michael A. Tyler, CFA, (Vice-Chair) Chief Investment Officer, Eastern Bank Wealth Management 617-897-1122

Alan Clayton-Matthews, Ph.D., Professor Emeritus of Economics & Public Policy, Northeastern University (617) 512-6224
Edward H. Pendergast, Managing Director, Dunn Rush & Co., 617-451-0001

Elmore Alexander, Dean Emeritus, Ricciardi College of Business, Bridgewater State University, 267-980-4652

Nada Sanders, Distinguished Professor of Supply Chain Management, Northeastern University, 614-284-3908

Michael D. Goodman, Ph.D., Professor of Public Policy, UMass Dartmouth 617-823-2770

Katherine A. Kiel, Ph.D., Professor of Economics, College of the Holy Cross 508-793-2743

Suzanne Dwyer, President, Massachusetts Capital Resource Company 617-536-8251

Jim Sibley, Regional Commissioner, Bureau of Labor Statistics
Barry Bluestone, Ph.D., Professor of Public Policy and Urban Affairs (retired), Northeastern University 617-899-9300
Raymond G. Torto (Emeritus), Ph.D., CRE, Harvard Graduate School of Design 617-930-6625

John R. Regan, President, Associated Industries of Massachusetts 617-262-1180
Christopher Geehern, Executive Vice President, Public Affairs and Communication, Associated Industries of Massachusetts 617-834-4414, @aimbusinessnews