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Posted on May 5, 2020
Confidence among Massachusetts employers continued to erode during April as the commonwealth became a hotspot for COVID-19 and Governor Baker extended the closing of non-essential businesses until mid-May.
The Associated Industries of Massachusetts Business Confidence Index fell 1.8 points after suffering its largest monthly decline ever during March. The Index ended April at 38.4, nearly 22 points less than a year ago and five points above its all-time low set during the great recession of 2009.
The sustained confidence slide reflects the idling of significant portions of the economy as health officials work to stem to spread of the novel coronavirus. The economic fallout has been widespread – more than 893,000 people have filed for unemployment benefits in Massachusetts during the past six weeks.
“Confidence remains at a pessimistic level as portions of the nation begin to announce plans to gradually re-open their economies. But a meaningful rebound in confidence will depend on a still-uncertain balance of public health factors and economic ones,” said Raymond G.
Torto, professor at the Harvard Graduate School of Design Chair of the Board of Economic Advisors.
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 Business Confidence Index were mostly lower during April.
The Massachusetts Index assessing business conditions within the commonwealth fell 1.8 points to 34.5, leaving it 28.7 points lower than in April 2019. The US Index measuring conditions nationally was essentially flat at 32.1, a drop of 26.2 points during the year.
The Current Index, which assesses overall business conditions at the time of the survey, lost 5.4 points to 31.2. The Future Index, measuring expectations for six months out, provided a lone bright spot as it rose 1.9 points to 45.6.
The Employment Index was down 2.5 points in April and 11.5 points for the year. The Sales Index, a leading indicator, lost 5.3 points to 38.2.
Non-manufacturers (38.4) were slightly more confident than manufacturing companies (36.9). Medium-sized companies (39.4) were more optimistic than both large companies (34.4) or small companies (38.4). Companies in western Massachusetts (39.0) were more optimistic than those in the east (37.3).
Elmore Alexander, Retired Dean of the Ricciardi College of Business at Bridgewater State University, said the economic convulsion caused by COVID-19 has fallen heavily on health care, higher education and other key drivers of growth in Massachusetts.
“The COVID-19 outbreak has been particularly severe in Massachusetts as well so the re-opening of the economy may take longer than in other states and other countries. An important milestone will be whether college students return to campus in the fall,” Alexander said.
Back to Work?
AIM President and CEO John R. Regan, also a BEA member, said the business community has begun to work with Governor Charlie Baker’s 17-member advisory committee to develop strategies to re-open the Massachusetts economy.
“Any decision by government to lift of the prohibition on non-essential businesses will be just the beginning for Massachusetts employers, who will in many cases need to reconfigure workplaces for social distancing and determine how to implement other safety measures such as the wearing of protective equipment, continuing work-from-home policies and ensuring the health of workers and customers,” Regan said.
In the meantime, Regan said, the business community is urging state lawmakers to proceed cautiously while employers and state officials gauge the effect of more than $2 trillion in federal rescue money for business and employees.