Confidence among Massachusetts employers weakened slightly last month amid growing economic storm clouds both nationally and in Massachusetts.

The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 1.4 points to 53.9, its lowest level since June. The Index now rests 5 points lower than its level of a year ago.

The decrease reflects the swirl of contradictory elements roiling the economy – surging inflation, rising interest rates and shrinking economic output on the one hand and a persistently strong demand for workers on the other.

The September survey responses came as the Federal Reserve raised interest rates another three-quarters of a point on September 21 and the financial markets closed out their worst month since March 2020.

“Companies remain concerned about inflation, the cost of borrowing and the potential for a recession, but their primary concern remains finding the employees they need to enable growth and maintain operations. Many businesses have been able to increase product prices to compensate for rising costs and have thus sustained or increased their payrolls,” said Sara L. Johnson, Chair of the AIM Board of Economic Advisors.

Employers who participated in the September survey reflect that push and pull.

“I have about 15 clients and all of them report moderate to extreme growth. They are in semiconductor equipment manufacturing, laboratory equipment manufacturing, construction, law, Insurance, HVAC equipment installation, Clean Tech, and a few others.  All doing amazing,” wrote one participant.

But another company noted: “Borrowing costs are near double what they were in 2021. I wish I had fixed more debt costs when rates were lower.”

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, fell from 57.7 to 53.3 last month. The North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, slipped from 56.8 to 53.8.

Constituent Indicators 

The constituent indicators that make up the Index were mostly lower during September.

The confidence employers have in their own companies declined 3.6 points to 54.9, ending the month 5.8 points lower than in September 2021.

The Massachusetts Index assessing business conditions within the Commonwealth dipped into pessimistic territory by losing 6.6 points to 47.5. The US Index measuring conditions throughout the country surged 10.3 points to 57.1, leaving it 4.6 points better than in September 2021.

The Current Index, which assesses overall business conditions at the time of the survey, lost 1.4 points to 55.0. The Future Index, measuring projections for the economy six months from now, fell 1.5 points to 52.7.

The Manufacturing Index rose tumbled 7.4 points to 49.1, well below the 59.2 reading for non-manufacturing businesses.

Medium-sized companies (58.0) were more optimistic than small companies (51.5) or large companies (52.0).

Katherine A. Kiel, Professor of Economics at the College of the Holy Cross and a BEA member, said that employer confidence is being shadowed by uncertainty during the second half of 2022.

“Business owners and CEOs find themselves amid a swirl of trends that include the post-COVID recovery, a tight job market, healthy consumer spending, rising prices, increased borrowing costs and even the prospect of a pandemic resurgence during the winter,” Kiel said.

“Lurking behind all of these issues, the Conference Board forecasts that economic weakness will intensify and spread more broadly throughout the US economy in the second half of 2022 and expects a recession to begin before the end of the year.”

Economic Development

AIM President and CEO John R. Regan, also a BEA member, said Massachusetts employers remain hopeful that the Massachusetts Legislature will pass some version of an economic-development bill that was shelved on August 1 as lawmakers attempted to digest the fiscal impacts a $3 billion tax rebate heading for taxpayers in November.

“The economic development bill includes key provisions for employers, including recapitalization of the Unemployment Insurance Trust Fund and reform to the estate tax. AIM continues to work with the Legislature to find a way to enact this important piece of legislation,” Regan said.

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; 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