Confidence among Massachusetts employers rebounded during May as the state and national economies continued their tenuous expansions.

The Associated Industries of Massachusetts Business Confidence Index (BCI) gained 1.4 points to 53.3 last month, ending a two-month slide. The reading remained within optimistic territory and was 3.7 points higher than in May 2023.

Survey participants reported stable business conditions despite a swirl of factors such as inflation, persistently high interest rates and slowing growth. Embedded in the Index was a significant confidence gap between manufacturing companies (46.0) and non-manufacturing enterprises (54.7).

“Steady hiring nationally continues to fuel consumer spending. US employers added 2.75 million jobs during the past 12 months, including 272,000 just in May,” said Sara Johnson, Chair of the AIM Board of Economic Advisors.

“Payroll employment in Massachusetts also grew 2.2 percent on an annualized basis during the first quarter, just above the national growth rate of 2.0 percent, and well up from the state’s annualized job-growth pace of 0.7 percent in the fourth quarter of 2023.”

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.

Employers who took part in the April survey acknowledged some ambivalence about economic conditions.

“Still doing okay, but booking for future sales is slowing considerably,” wrote one company.

But another observed: “We have implemented a transformational strategy … with significant growth objectives over the next 10 years.”

Confidence varied regionally across the Commonwealth. The Central Massachusetts Business Confidence Index, conducted with the Worcester Regional Chamber of Commerce, rose from 45.9 to 50.6; the Western Massachusetts Business Confidence Index, developed in collaboration with the Springfield Regional Chamber of Commerce, slid from 48.4 to 44.8; and the North Shore Confidence Index, conducted with the North Shore Chamber of Commerce, remained firmly in optimistic territory at 55.7.

Constituent Indicators 

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

The confidence employers have in their own companies rose 1.0 point to 54.8. That figure was 3.0 points better than a year ago.

The Massachusetts Index assessing business conditions within the Commonwealth surged 3.6 points to 53.8, leaving it 4.1 points higher than in May 2023. The US Index measuring conditions throughout the country rose slightly to 48.1, up 5.5 points over the past 12 months. The state index consistently runs higher than the US Index.

The Current Index, which assesses overall business conditions at the time of the survey, gained 1.7 points to 53.1. The Future Index predicting conditions six months from now rose 1.2 points to 53.5.

The Manufacturing Index was down 0.5 points last month after gaining ground in April. The Employment Index was down slightly to 50.7, barely remaining in optimistic territory.

Large companies (53.3) were more optimistic than medium-sized companies (52.2) or small companies (50.5).

Barry Bluestone, retired Professor of Public Policy and Urban Affairs at Northeastern University and a BEA member, noted that several companies participating in the Business Confidence Index said that the soaring cost of housing in Massachusetts is driving valuable employees and their families out of state.

“The fact that Governor Maura Healey and the Massachusetts House of Representatives have put forward proposals to increase the supply of housing in the Commonwealth is a good sign that elected officials are determined to address this important economic issue,” said Bluestone, who did extensive academic work on the cost of housing.

House on Housing

AIM President and CEO Brooke Thomson, also a BEA member, agreed that House of Representatives version of the Affordable Homes Act is a monumental step forward towards addressing the Commonwealth’s housing crisis.

“This historic investment will help reduce the prohibitive cost of housing in the state, which is the number one issue for our members and the business community at-large right now. We have a supply problem, and the only solution is to build our way out and provide access to thousands of new homes for our workers. The House bill provides much-needed investments and implements key policy changes without imposing any anticompetitive policies. This an ideal bill,” Thomson said.