Employer views of both the state and national economies grew darker last month despite still-solid GDP growth and a resilient Massachusetts job market.

The Associated Industries of Massachusetts Business Confidence Index (BCI) slipped 1.5 points to 47.5 on a 100-point scale. It marked the seventh consecutive month that the Index fell below the 50-reading separating optimism from pessimism.

The September index was 5.7 points less than the same month a year ago. The responses were collected at about the time that the Federal Reserve cut interest rates on September 17 but before the October 1 government shutdown.

The strongest element of the September numbers was the Employment Index, which rose 3.1 points into optimistic territory at 52.6. Massachusetts grew at a brisk 4.5 percent annual rate in the second quarter.

“Employers are navigating the crosscurrents of an economy that has seen robust growth recently but is vulnerable to sharp increases in tariffs, persistent inflation, and excessive federal budget deficits. Real GDP grew at an annualized 3.8 percent pace in the second quarter, but momentum is cooling,” said Sara Johnson, Chair of the AIM Board of Economic Advisors (BEA), which oversees the BCI.
Companies that participated in the BCI continued to cite uncertainty as an impediment to growth.

“Until we know how the tariffs are going to be applied, and the amount, our customers have largely stopped buying,” said one manufacturer.

Another manufacturer commented: “We recently purchased a piece of equipment essential to our business operation. The tariff associated with that purchase was $9,438. Tariffs are anti-business and are a direct tax on small businesses already operating in a competitive and challenging economy.”

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 were mixed in September.

The confidence employers maintain in their own operations rose 0.2 point to 51.8. That figure was 2.4 points less than in September 2024.

The Massachusetts Index, assessing business conditions within the commonwealth, lost 2.9 points to 42.7, leaving it 8.6 points lower than a year earlier. The US Index measuring conditions throughout the country fell even more, dropping 5.1 points for the month and 12.5 points for the year.

The Current Index, which assesses overall business conditions at the time of the survey, shed 1.3 points to 48.6. The Future Index predicting conditions six months from now declined 1.6 points to 46.5.

The Manufacturing Index edged down 0.2 point to 45.9, leaving it 4.6 points lower than the year earlier. The Employment Index rose 3.1 points.

Medium-sized companies (49.0) and large companies (48.9) were more confident than small companies.

Simona Mocuta, Chief Economist at State Street Global Advisors and a member of the BEA, said that US economic data remains resilient but faces a challenging period.

“Essentially every US data release in late September came in stronger than anticipated. A big surge in new home sales in August, an upward revision to the final read on Q2 GDP, a beat on consumer spending and a decline in unemployment claims, all equated to an overall message of macro resilience,” Mocuta said.

“The critical question is whether this momentum continues. We suspect it may be broken at some point over the next several weeks, at least in regard to labor-market data. As former government employees who took advantage of the DOGE deferred resignation program come to the end of that arrangement, initial unemployment claims should start to move higher again over the course of October. We look at this as a soft patch with the Fed easing helping to stabilize labor market conditions but worries about a recession will likely revive again.”

Optimism Amid Uncertainty

AIM President and CEO Brooke Thomson, who recently moderated AIM’s 2025 Economic Outlook discussion, agreed that Massachusetts employers continue to push forward despite a swirl of political, economic and technological uncertainty.
“Employers are concerned about international trade, the emergence of artificial intelligence and the cost of doing business in Massachusetts, but, at the same time, the Fed just lowered interest rates, unemployment has been steady, and the financial markets have surged,” Thomson said.