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Sputtering Economy Erodes Massachusetts Business Confidence

Posted on September 6, 2011

A sputtering global economy eroded the confidence of Massachusetts employers during August, leaving prospects for job growth uncertain in the Bay State through the end of the year.

Business ConfidenceThe Associated Industries of Massachusetts Business Confidence Index fell 1.3 point to 49.2, moving into negative territory on its 100-point scale for the first time since September 2010. Manufacturing led the downturn in the face of persistent uncertainty in the western European economies that are key buyers of goods and services made in Massachusetts.

And three days after the government reported no net job growth nationally during August, the AIM Index hinted that Massachusetts employers are growing cautious about hiring. More than one in three (35 percent) respondents reported adding jobs during the past six months, but only one in four (25 percent) reported plans to hire in the next two quarters.

“Disappointing economic growth continues to take a toll on business confidence, with turmoil in financial markets during the survey period an exacerbating factor,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM’s Board of Economic Advisors (BEA).

“Massachusetts employers are increasingly concerned about where the economy is headed, and some fear that it will slip back into recession.”

BEA member Michael Goodman, Associate Professor of Public Policy at the University of Massachusetts Dartmouth, said the August Index shows unmistakable signs of weakness in the job market.

“Significantly, the share of respondents reporting layoffs in the past six months (14 percent) was nearly identical to the proportion reporting plans to cut jobs over the next six months (15 percent), indicating an expectation of slower job growth rather than more layoffs,” Goodman added.

The 49.2 confidence reading was slightly higher than the 47.7 figure posted a year earlier, but well shy of the  56.1 number posted in April.

 Among the biggest losers in the Index was the Future Index of prospects for six months ahead, which dropped 2.5 points to 48.4. Another significant loser was the Massachusetts Index of conditions within the commonwealth, off 2.4 points to 44.1. The U.S. Index of national conditions saw a smaller decline, down six-tenths to 37.2.

Richard C. Lord, President and CEO of AIM and a BEA member, said sliding confidence reflects weak economic growth throughout the economy.

“Under these circumstances, government has no ‘magic bullet’ at its disposal; what it can do is demonstrate positive engagement with economic issues, and act to promote stability, predictability, and a concern with job creation, which is our most important challenge,” Lord said.