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Posted on February 7, 2022
Confidence among Massachusetts employers weakened for a sixth consecutive month in January as employers found themselves torn between a strong underlying economy and concerns about COVID-19 and inflation at the beginning of 2022.
The Associated Industries of Massachusetts Business Confidence Index (BCI) declined 0.8 points to 55.9, its lowest level since January 2021. The Index remains within optimistic territory and 3.5 points better than a year ago.
The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, showed Worcester Country employers with a 57.5 confidence reading. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, was 56.6.
The drop in confidence came as inflation reached a 40-year high and the Omicron variant drove a surge in COVID-19 cases, exacerbating an already tight labor market. At the same time, however, the Massachusetts economy grew at a healthy 8.2 percent annual rate during the fourth quarter of 2021.
“Employers face a multitude of uncertainties at the start of 2022, ranging from pandemic-induced absences among employees to rising prices for raw materials. Still, confidence remains in optimistic territory and manufacturers, in particular, are upbeat about their business prospects,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors and Executive Director of Global Economics at IHS Markit.
The results underscored the economic crosscurrents facing employers.
“Omicron has caused our sales to drop considerably and we also have a large number of team members out due to having it or needing to isolate or due to childcare issues,” wrote one employer in the service sector.
But another employer in manufacturing commented: “Never been busier. Attracting skilled labor will be our only limit to growth this year.”
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 constituent indicators that make up the Index were mixed in January.
The confidence employers have in their own companies slid 1.3 points to 58.6, leaving it 3.9 points better than it was a year ago.
The Massachusetts Index assessing business conditions within the Commonwealth declined 0.3 point to 55.3, up 5.0 points since January 2021. The US Index measuring conditions nationally gained 0.8 point in January, though it remained in pessimistic territory at 48.7.
Employers are more bullish about future business conditions than present ones. The Current Index, which assesses overall business conditions at the time of the survey, lost 2.0 points to 54.1. The Future Index, measuring projections for the economy six months from now, rose 0.4 points to 57.7
The Manufacturing Index surged 4.8 points to 60.1, leaving it 9.0 points higher than in January 2021. The Employment Index lost 1.2 points to 54.4.
Medium-sized companies (61.3) were more bullish than large companies (56.6) or small companies (53.2).
Suzanne Dwyer, President of the Massachusetts Capital Resource Company and a BEA member, said the outlook among smaller and medium-sized companies depends in large measure on the markets they serve.
“Middle market companies are experiencing revenue growth particularly in industries such as consumer products, software/technology, business services and medical products. While we continue to hear about supply chain issues and labor shortages, many companies appear to be successfully managing through these challenges,” Dwyer said.
Diversity as Necessity
AIM President and CEO John R. Regan, also a BEA member, said the commitment that many Massachusetts companies have made to diversity, equity and inclusion has become a necessity in a national economy with close to 11 million job openings.
“Diversity, equity and inclusion are imperatives in an economy marked by record numbers of people leaving their jobs and millions of job openings remaining throughout the United States. COVID-19 forever changed the underpinnings of the state and national economies in a manner that will require us to ensure that everyone – all races, genders, ethnicities and backgrounds – participates in the post-COVID recovery and shares in the prosperity it will bring,” Regan said.