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Employer Confidence Rises; Reflects Uncertain Recovery

Posted on September 6, 2012

Confidence among Massachusetts employers continues to lurch back and forth in a pattern that reflects the uncertain global economic recovery.

Business Confidence IndexThe Associated Industries of Massachusetts Business Confidence Index added three points in August to 55.2, continuing its recuperation from an 8.5-point plunge in June to 48.3. The increase left the index six points higher than in August 2011 and 7.5 points above its level of August 2010.

“What we have seen in the past few months encapsulates the overall course of this economic recovery,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM’s Board of Economic Advisors (BEA).

“We are beset by persistent uncertainties ” the June survey took place at a time of disturbing news from Europe, and of course there are domestic concerns as well ” while, at the same time, the recovery is consolidating and prevailing business conditions are generally positive.”

Employer confidence rose in almost every category during August, though business people remain far more optimistic about the Massachusetts economy than the national, and their assessments of future conditions remain less rosy than they were in the spring. The Future Index of the AIM survey stood at 55.5 in August, more than three points lower than the 58.7 reading in May.

“Massachusetts employers are on the whole doing reasonably well, and look forward to modestly improved conditions, but they are significantly less optimistic about the near future than they were a few months ago. The six-month horizon now reaches to the so-called “fiscal cliff’ when federal budget cuts and tax increases will take effect unless Congress acts to forestall them,” said Elliot Winer, Chief Economist, Northeast Economic Analysis Group LLC.

Confidence remained higher among manufacturers (56.9, +3.7) than among other employers (53.8, +2.9). The confidence gap also widened between employers in Greater Boston (57.0, +4.3) and those elsewhere in the state (51.8, +0.2).

Richard C. Lord, President and CEO of AIM, noted that employers have registered more confidence in the state economy than the overall U.S. economy in 54 of the previous 55 months.

“This performance by our state, which contrasts starkly with our poor showing in past recessions and recoveries, owes something to the particular nature of this most recent downturn in terms of the economic sectors that were hit hardest, but credit is also due to effective public policy responses to adverse conditions,” Lord said.

“In Massachusetts, we are learning the value of working together to maintain a sound business climate,” he concluded. “That is the lesson Washington should draw from our example.”

The AIM Index, which has appeared since July 1991, 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.