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Employers: I’m OK, You’re Not OK

Posted on October 7, 2014

I’m OK you’re not OK.

BCI.September.2014That seems to be the mindset of Massachusetts employers who remain confident about the prospects of their own companies, but far less so about the political leadership guiding the Massachusetts and national economies.

The Associated Industries of Massachusetts Business Confidence Index released this morning shows that employer sentiment steadied at 54.4 in September after slipping from 56.9 to 54.2 the previous month. Confidence remains well above its reading in September 2013 and has now increased in each of the first three quarters of 2014.

What stands out in the report, however, is the variation between what employers see inside the walls of their companies and what they see outside those walls.

The Company Index, which measures survey respondents’ confidence in the situations of their own operations, rose 1.5 points in September to 58.0, recouping an August decline. The Employment Index gained a point to 55.1, and the Sales Index added eight-tenths to 59.3.

Meanwhile, the U.S. Index of business conditions prevailing nationally was off 1.8 points at 47.0, and the Massachusetts Index of conditions within the Commonwealth declined 2.0 to 50.7.

“Economic growth has probably decelerated since the second-quarter rebound, but it is possible that these declines reflect political dissatisfaction, concerns about effective leadership and policy,” said Katherine A. Kiel, Professor of Economics at the College of the Holy Cross.

“If actual business conditions were driving the drop, we would expect to see that in the company indicators, which remain strong.”

Adds Michael Goodman, Associate Professor of Public Policy and Director of the Center for Policy Analysis at the University of Massachusetts, Dartmouth, “These are good, solid numbers indicating that the commonwealth’s moderate expansion is continuing.

“Notably, respondents report plans to increase net job creation ” 23 percent expect to add staff in the next six months and 11 percent anticipate reducing headcount ” which is a very encouraging sign.”

If employers do have concerns about political leadership, the Business Confidence Index suggests they do not expect the November elections to address them. The Current Index, tracking employers’ assessment of existing business conditions, added half a point in September to 53.9, while the Future Index, measuring expectations for the next six months, shed two-tenths to 54.9.

Manufacturers and firms with 25 or fewer employees rated Massachusetts conditions negatively, while other employers were generally positive about the state.

AIM’s Business Confidence Index has been issued monthly since July 1991 under the oversight of the Board of Economic Advisors. Presented on a 100-point scale on which 50 is neutral, the Index attained a historical high of 68.5 in 1997 and 1998; its all-time low was 33.3 in February 2009. 

Richard C. Lord, President and CEO of AIM, said the contrast between lower scores for state and national conditions and higher ratings for company-specific factors underscores the need for political candidates to debate economic issues.

“I believe that employers ” and indeed voters generally ” would like to see a greater focus in this election cycle on substantive economic issues,” Lord went on.

“In the Massachusetts gubernatorial contest, for example, the candidates themselves are meeting with business leaders and offering economic policy proposals, but media coverage tends to be all about the “horserace’ aspect and the candidates’ personal images. Our nation and state face critical real-life economic decisions in the next few years, so we cannot afford to treat the upcoming elections for Congress, constitutional offices, and the legislature as sports events or celebrity showcases.”