| Massachusetts employers gave a big “Bah Humbug” to the year-end economy as business confidence withered in the face of a government shutdown and the largest one-month stock market decline since the Great Depression.
The Associated Industries of Massachusetts Business Confidence Index lost three points to 58.6 during December, its lowest level since December 2016. Confidence readings have dropped five points during the past 12 months.
The retreat was led by an 8.6-point drop in employer views of the national economy, and a 4.7-point drop among manufacturing companies.
Overall confidence remains within optimistic territory, but less comfortably so than earlier in 2018.
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 a reading above 50 being 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 Massachusetts economy remains strong, with a 3.3 percent growth rate and an unemployment rate of 3.4 percent, but employers are increasingly concerned about factors such as financial-market volatility, a dysfunctional national political debate and challenges such as the cost of providing health insurance to employees,” Raymond G. Torto, chairman of AIM’s Board of Economic Advisors, said in a statement.
One employer who participated in the survey summarized the uncertainty: “A tremendous amount of unknowns are ahead.”
Employers don’t expect to change their outlook anytime soon.
The Current Index, which assesses overall business conditions at the time of the survey, fell 2.6 points last month to 60.0. But the Future Index, measuring expectations for six months out, dropped 3.4 points for the month and 7.2 points for the year.
Non-manufacturers (59.4) were slightly more optimistic than manufacturing companies (57.7), re-establishing a trend that existed for most of 2018. Large companies (60.5) registered higher confidence readings than medium-sized companies (57.3) and small companies (57.7). Companies in Eastern Massachusetts (59.8) were more bullish than those in the west (57.0).
Paul Bolger, President of Massachusetts Capital Resource Company and a member of the BEA, suggested that uncertainty about economic factors such as slowing corporate profits, rising interest rates, and trade are overshadowing employer confidence in what remains a fundamentally strong growth pattern.
“Employers are cautiously watching earnings warnings from Apple and other major brands, while hoping that negotiations between the US and China are able to ratchet down the trade war,” Bolger said in a statement.
