Massachusetts employer confidence edged lower for the second consecutive month during August, but remained comfortably in optimistic territory.
The Associated Industries of Massachusetts Business Confidence Index (BCI) shed 0.3 points to 61.2 last month, leaving it 7.1 points higher than a year ago. The Index has been essentially flat since April and now stands 0.2 points lower than at the beginning of 2017.
Last month’s slip reflected offsetting trends in employer attitudes about conditions inside and outside their walls. Employers grew less bullish about their own companies during the month, but showed growing optimism about the national economy and about prospects for manufacturers.
“Employer confidence continues to move in a narrow range defined by broad optimism about both the state and national economies,” said Raymond G. Torto, Chair of AIM’s Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.
“The steady level of confidence readings above the 60 mark reflect a state economy that grew at a 4 percent annual rate during the second quarter while maintaining a steady level of employment growth.”
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.
The Index has remained above 50 since October 2013.
The constituent indicators that make up the overall Business Confidence Index were mixed during August.
The Massachusetts Index, assessing business conditions within the commonwealth, remained unchanged at 63.2, still 6.3 points higher than in August 2016.
The U.S. Index of national business conditions rose 2.3 points to 60.2 amid strong signs of job expansion nationally. The US Index has risen 10.6 points during the past year, more than any other element of the overall Business Confidence Index.
Still, August marked the 89th consecutive month in which employers have been more optimistic about the Massachusetts economy than the national economy.
The Current Index, which assesses overall business conditions at the time of the survey, edged up 0.1 points points to 61.3 while the Future Index, measuring expectations for six months out, dropped 0.6 points to 61.2. The Future Index ended the month 6.3 points higher than a year ago.
The Company Index, reflecting overall business conditions, lost 1.3 points to 60.9. The employment Index surged 2.3 points to 58.0 after losing ground during July.
Executives at manufacturing companies and those at non-manufacturing enterprises maintained almost identical confidence readings – 61.1 for manufacturers, 61.3 for non-manufacturers. The AIM Manufacturing Index has surged 9.9 points during the past year.
“Manufacturers in Massachusetts remain optimistic even though national economic signals for that sector remain mixed. The Institute for Supply Management manufacturing index was strong August, but the IHS Markit US Manufacturing PMI showed manufacturing expanding at its slowest pace since June 2016,” said Edward H. Pendergast, Managing Director of Dunn Rush & Co. in Boston and a BEA member.
Confidence was also remarkably consistent across all geographic regions of the commonwealth. Eastern Massachusetts companies posted a 61.3 reading during August versus 61.1 for companies in western Massachusetts.
AIM President and CEO Richard C. Lord, a BEA member, noted that a significant number of employers who responded to the August survey expressed frustration with the new $200 million health-insurance surcharge and the proliferation of complex and expensive employment laws.
“Amid a generally strong economy, employers feel under siege from a government and an electorate that seem willing to impose crushing financial burdens on job creators in the name of social progress,” Lord said.
“Employers are telling us that additional measures that may be headed to the statewide ballot – paid family leave, a $15 minimum wage and a punitive surtax on incomes of more than $1 million – may force them to relocate.”
The monthly Business Confidence Index, initiated by AIM’s Board of Economic Advisors in July 1991, is based on a survey of AIM member companies across Massachusetts, asking questions about current and prospective business conditions in the state and nation, as well as for respondents’ own operations. On the Index’s 100-point scale, a reading above 50 indicates that the state’s employer community is predominantly optimistic, while a reading below 50 points to a negative assessment of business conditions. A number of component sub-indices are derived by analyzing responses to selected questions or those of particular groups of respondents.