Business confidence surged to a 14-month high during November as Massachusetts employers saw signs of growth despite inflation, persistent labor shortages and passage of a new income tax that could affect thousands of Bay State businesses.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 7.8 points to 58.7 to end the month comfortably within optimistic territory. The Index is now at its highest level since September 2021 and 0.8 points better than a year ago.

Economists cautioned against reading too much into monthly changes to the Index, but said the numbers provide some evidence that the Massachusetts economy appears to be riding out the broader national economic slowdown.

“Friday’s report that US employers added 263,000 jobs during November underscores a continued demand for workers despite the Federal Reserve’s push to increase interest rates. Even though interest-rate sensitive sectors such as real estate have slowed, employers remain remarkably confident in the prospects of their own companies,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors.

“Industrial commodity prices have fallen by one-third from their early March peak, so manufacturers are seeing significant easing of cost pressures.  Continued slow growth in China is also helping to reduce energy prices.  Businesses may see “light at the end of the tunnel” and are focusing on market growth and investment opportunities beyond 2023.”

Participants in the Business Confidence Index Survey reflected the balance of optimism and challenge faced by employers.

“I anticipate a ramp up in bid opportunities with the Federal Infrastructure bill passing,” wrote one participant.

Another commented: “Costs continue to be a major challenge – specifically in energy, utilities, health insurance, general insurance, overhead.  Demand is steady but it’s difficult to contain costs and maintain growth in profitability.”

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 Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, increased from 47.8 in October to 53.4 last month. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, surged from 51.7 to 60.4.

Constituent Indicators 

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

The confidence employers have in their own companies rose 9.2 points to 62.8, ending the month 1.2 points better than in November 2021.

The Massachusetts Index assessing business conditions within the Commonwealth gained 5.6 points to 56.2, down 1.1 points from a year earlier. The US Index measuring conditions throughout the country rose 5.7 points but remained in pessimistic territory at 48.6.

The Current Index, which assesses overall business conditions at the time of the survey, increased 8.2 points to 60.7. The Future Index, measuring projections for the economy six months from now, gained 7.4 points to end the month at 56.6.

The Manufacturing Index rose 5.6 points to 56.3 compared to a 53.8 reading for non-manufacturing businesses.

The Employment Index rose 5.2 points to 58.5 as employers continued to scour a tight labor market for qualified workers.

Large companies (58.0) were more optimistic than medium-sized companies (54.0) and small companies (52.6).

Elmore Alexander, Dean Emeritus at Ricciardi College of Business, Bridgewater State University, and a BEA member, said employers were encouraged by the results of the November mid-term elections, which left the federal government divided and thus more predictable.

“That coupled with a belief that, while sticking to its guns, the Fed is moderating interest rate hikes, portends a positive economic outlook” Alexander said.

Attractive Economy

AIM President and CEO John R. Regan, also a BEA member, noted that in the widespread concern among employers about the effect of the new income surtax means Massachusetts must redouble its efforts to make itself an attractive place to work and live.

“Behaviors around workforce are changing. Businesses can now draw talent from throughout the country and hire workers who live in lower-cost states. Businesses themselves can locate and invest elsewhere with greater ease and flexibility than in the past. These decisions by businesses and workers alike about where to locate is often spurred by a desire to reduce costs while retaining a good quality of life,” Regan said.

“We used to think about a state’s economic health in terms of competitiveness.  Though previous notions of competitiveness are still relevant, it is important that we engage in a more expansive discussion about what constitutes economic health. This more expansive view includes conversations around whether a state is an attractive place to locate, live, pursue a career, raise a family, and buy a home.”

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 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; Senior Contributing Editor, MassBenchmarks (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