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Employers Maintain ‘Show Me’ Attitude Toward Economy

Posted on April 1, 2014

Massachusetts employers might just as well be from Missouri these days as they continue to exhibit a “show me” attitude about the strength of the economy.

BCI.March.2014The Associated Industries of Massachusetts Business Confidence Index rose 1.1 points in March to 51.1, holding close to a neutral 50 on its 100-point scale. Bay State employer sentiment has remained locked for 18 months in a narrow range between optimism and pessimism as both the state and national economies have failed to develop sustained growth momentum.

“Business confidence in Massachusetts has been in neutral range for a year, dipping below neutral when there was a threat of federal default and when the government shut down in October, but otherwise with not much upside,” said Raymond G. Torto, global Chairman of research at CBRE and Chair of AIM’s Board of Economic Advisors (BEA).

Torto and other analysts point to several factors that are holding down confidence, including a generally negative view of national conditions, deadlocked national politics, weak readings among small employers and hiring levels that have been less robust than might be expected during a recovery period.

The AIM confidence index is up a point from its level of last March, but below where it was as recently as September.

The Current Index, tracking employer assessment of existing business conditions, added nine-tenths of a point from February to 49.3, while the Future Index, measuring expectations for the next six months, rose 1.2 to 52.9.

“The numbers are a bit better than February’s, and last March’s, but still reflect some fear of economic uncertainties,” remarked Sara L. Johnson, Senior Research Director of Global Economics at IHS Global Insight, a BEA member. “The fundamentals driving consumer and business spending (incomes, balance sheets, and credit availability) are improving.”

The U.S. Index of business conditions prevailing nationally rose 1.9 points in March to 46.2, and the Massachusetts Index of conditions within the commonwealth had a similar gain to 48.6.

Neither increase ignited much hiring, the survey shows. The Employment Index lost 1.3 points to 50.1. Employers, many of them facing pressure on prices, are reluctant to add staff.

“It is increasingly clear that lack of confidence among smaller employers is a serious concern for Massachusetts,” said Richard C. Lord, AIM’s President and CEO, a BEA member.

“In our March survey, larger employers were positive about business conditions in our state, but those with 25 employees or fewer were markedly negative. Ours is predominantly a small-employer economy, and our hopes for creating jobs to bring down the unemployment rate ” particularly in regions of the commonwealth that are being left behind in the recovery ” depend on the growth of those small firms.”