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Employers Remain Wary of Economic Recovery

Posted on April 3, 2013

Massachusetts employers continue to exhibit a “show me” attitude about the strengthening economic recovery.

Business Confidence IndexThe Associated Industries of Massachusetts Business Confidence Index released yesterday shows that confidence among Bay State employers hovered at neutral during March even as stock markets, real estate and Massachusetts employment hit post-recession highs.

Economists believe governmental uncertainties ranging from the federal budget sequester to the banking crisis in Cyprus continue to weigh down employer attitudes about future growth.
The AIM Index gained 1.1 points in March to 50.1, leaving it barely positive on its 100-point scale but down 4.7 from a year earlier.

“We see stock market indices at or near all-time highs, real estate values coming back up, and the U.S. unemployment rate edging down,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc., the chair of AIM’s Board of Economic Advisors (BEA). 

“At the same time, there are new causes for concern ” the sequester, which many survey respondents expect will have negative effects; banking woes in Cyprus; proposed state tax increases. The recovery is moving forward, but it is still more of a healing process for the economy than a return to full vigor.”  

The Current Index, measuring employers’ assessment of existing business conditions, was up 1.2 points at 48.6, while the Future Index, tracking expectations for the six months ahead, added nine-tenths to 51.6.

“These results suggest that Massachusetts employers have not yet fully embraced the prospect of economic growth,” said Michael A. Tyler, Chief Investment Officer, Eastern Bank Wealth Management, a BEA member.

“The economy in general is on the mend, but many of the smaller employers who make up the majority of respondents to AIM’s survey are still feeling squeezed by sluggish sales growth.”

Employers continue to feel more sanguine about the Massachusetts economy than the national. The U.S. Index of business conditions prevailing nationally lost 1.5 points to 40.5 during March, while the Massachusetts Index of conditions within the commonwealth gained 2.2 to 47.6.

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