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Archived: Snow Can’t Chill Employer Confidence

Posted on March 3, 2015

Epic snow and cold did little to chill the optimism of Massachusetts employers as business confidence surged in February for a sixth consecutive month.

BCI.February.2015The Associated Industries of Massachusetts Business Confidence Index (BCI) rose 1.7 points to 59.8 on a 100-point scale – a total gain of 9.8 points since the same month in 2014. The increase reflects growing employer bullishness about the state and national economies, as well as their own growth and hiring plans.

“A year ago the Index was at an even 50, which is neutral on our scale,” said Raymond G. Torto, Chair of AIM’s Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

“Since then, employers have concluded that economic growth, though uneven, is well established and sustainable. As a result, the Index is at its highest level since October 2006 (59.9), before the Great Recession, and is approaching 60 ” a reading we have not seen in 10 years (62.3 in February 2005).”

The AIM Index, based on a survey of Massachusetts employers, 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.

Analysts say the confidence numbers foreshadow accelerating economic growth in 2015. Employer confidence about conditions six months from now rose two full points to 62.1 in February, while readings of sales and employment activity also increased.

“For the previous six months, employers who report adding staff outnumber those with decreases by about two-to-one (31% – 16%), but for the next period the ratio is better than four-to-one (37% – 8%),” said Michael A. Tyler, CFA, Chief Investment Officer, Eastern Bank Wealth Management, a BEA member.

“A determination to bring on additional personnel is in itself a very strong indication of employer confidence.”

The sub-index for national conditions, a laggard through the recovery, is now well above 50, at its best level since August 2007, before the recession. The indicator of state conditions is just below 60, at its highest point since December 2000, before the prior downturn.

“Massachusetts employers believe that business conditions are generally good, and will continue to improve,” said Fred Breimyer, regional economist at the FDIC.

“Their optimism, though certainly restrained by the experience of severe recession, is now firmly established, and amply supported by trends in the economy.”