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Archived: Massachusetts Employer Optimism Grows at Halfway Point of 2014

Posted on July 1, 2014

BCI.June.2014As the Massachusetts economy reaches the halfway mark of 2014, we know several important things about the mindset of Bay State employers:

  • They are far more confident about the sustainability of the economic recovery than they were are the beginning of the year;
  • Their persistent skepticism about the inability of government to manage fiscal issues has abated, at least for the moment;
  • Small companies, which held a far darker view of the economy than their larger counterparts for 18 months, have now grown equally optimistic as the overall economy has strengthened;
  • They remain more bullish about the Massachusetts economy than the national outlook, though the gap between the two is closing.

The Associated Industries of Massachusetts Business Confidence Index (BCI) declined slightly to 53.7 percent in June, but the gauge remains almost three points above its January reading and 4.7 points more than in June 2013. The Index, released this morning, posted an overall confidence reading of 53.8 for the second quarter.

“The positive quarterly average, reflects the diminution in recent months of major economic policy conflict in Washington which has contributed to stronger business confidence,” Raymond Torto, global Chairman of research at CBRE and Chair of the AIM Board of Economic Advisors (BEA) noted.

“With less ambient uncertainty, employers are becoming more positive about adding personnel, a sign of confidence that is reflected in our survey,” Torto added. “The other notable improvement is in responses from small employers, those with 25 or fewer employees, who are now about as optimistic as mid-size firms.”

The AIM Index 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. In June 2013 it stood at 48.9.

Every measure of employer confidence has strengthened during the past 12 months.

The Current Index, which assesses overall business conditions at the time of the survey, was 4.1 points above last June’s level at 52.8, and the Future Index, measuring expectations for six months out, was up 6.7 from a year before at 54.6. The Massachusetts Index, assessing business conditions within the commonwealth was up 3.3 points on the year to 50.9, and the U.S. Index of national business conditions was 7.6 ahead of last June at 48.2.

“Massachusetts has generally outperformed the nation economically since the onset of the recession,” said Alan Clayton-Matthews, professor at the School of Public Policy and Urban Affairs at Northeastern University, a BEA member.”Our state is well positioned to continue to thrive, but is inevitably standing out less as the rest of the country returns to normal performance.”

“The employment results, even with a marginal loss for the month, continue to reflect a moderate upward trend,” said BEA member Elliot Winer, Chief Economist, Northeast Economic Analysis Group LLC. “Among employers responding to the survey, 41 percent expected to add personnel in the next six months, while only 10 percent foresaw staff reductions, a marked improvement from the already positive 38 percent-23 percent split for the prior six months.”

Richard C. Lord, President and CEO of AIM and a BEA member, said two areas of improvement are particularly significant.

“Small employers are much more confident than they had been, and are looking to add jobs, which speaks to a revival of the entrepreneurial spirit so important to our economic future,” he noted. And, he added, the overall change of attitude among employers towards a great willingness to hire “offers hope that we are definitively past the “jobless recovery’ phase and can continue to bring unemployment down across the commonwealth.”