Business confidence in Massachusetts surged to an outright enthusiastic level in March, buoyed by COVID-19 vaccination progress and the final passage of a $1.9 trillion federal spending law.
The Associated Industries of Massachusetts’s monthly confidence index shot up by 4.5 points last month, capping a gain of 11.6 points since December. At 60.9 on a scale of 0 to 100, the index now rests comfortably in positive territory heading into the spring, marking a complete reversal from a year ago.
While the state’s unemployment rate remains elevated at 7.1 percent, employers in recent months have continued to add jobs and appear more bullish about economic and vaccination prospects than they are bearish about the ongoing uptick in virus cases, according to the survey of about 140 employers.
AIM’s employer confidence index in March 2020 took its largest monthly tumble in its 30-year history. Since then, it has risen by nearly 21 points and the business trade group pointed to more recent good news — Friday’s report that U.S. employers added 916,000 jobs during March, nearly double February’s gain.
In a statement, AIM President John Regan said the business group was also encouraged that Democratic legislative leaders are not pursuing tax increases this year and recently agreed with Governor Charlie Baker to a new law reducing the size of unemployment insurance taxes stemming from last year’s historic job losses.
The latest confidence index reading caps a wild swing and puts the index within 8 points of surpassing its all-time high of 68.5, which was hit twice in 1997-98. The index sank to its all-time low not during the pandemic, but in February 2009 as part of the Great Recession.
Michael Goodman, a public policy professor at UMass Dartmouth, said the rising employer confidence also reflects the warmer weather that’s approaching and the loosening of pandemic-related travel and business restrictions “notwithstanding some of the troubling signs of rising infection rates.”
While employers are encouraged that drags on the economy seem to be receding, Goodman identified as risks “anything that might interfere with the rollout of vaccinations” and/or the emergence of coronavirus variants that might be resistant to existing vaccines.
AIM’s Future Index, which measures economic projections six months from now, last month reached its highest level since May 2018 at 64.8, up 3.8 points from February.
Employer optimism may be moderated due to the recent Johnson & Johnson vaccine manufacturing problem and the resumption of COVID-19 lockdowns in European countries, according to Nada Sanders, a supply chain management professor at Northeastern University and member of AIM’s Board of Economic Advisers.
“There are areas of the supply chain that were woefully unprepared for COVID-19,” Sanders said. “Retailers and suppliers, for example, built a supply chain system that was too complex, in which the slightest crack down the line created a large ripple effect. Companies are now addressing those weaknesses but the events of the past week, including the backup of the Suez Canal, may give employers pause.”
State officials plan to release March jobs and unemployment rate data on Friday, April 16. Also on next week’s calendar: the likely release of a House Ways and Means Committee rewrite of Governor Charlie Baker’s $45.6 billion fiscal year 2022 budget. Baker’s budget called for a slight drop in overall state spending.
