Amid uncertainty over global conditions and slowing domestic job growth, employer confidence fell in Massachusetts last month as companies took an increasingly bearish view of the U.S. economy, according to survey results released Monday, July 4.
The Associated Industries of Massachusetts’ monthly business confidence index dipped 1.6 points to 56.1 in June, the business group said, putting confidence levels about two-tenths of a percentage point lower than their mark from one year ago.
The AIM index has been issued monthly since July 1991. It is presented on a 100-point scale, with a score of 50 being neutral. The all-time high of 68.5 was recorded in both 1997 and 1998, the group said. The low was 33.3 in February 2009.
Katherine Kiel, Ph.D., chair of the Department of Economics at the College of the Holy Cross, said June’s results were complicated by Great Britain’s June 23 vote to leave the European Union.
“We did have a drop over the last month and part of the issue, I think, was that the surveys were coming back in right around the Brexit vote,” she said. “Some people answered the survey when they were quite confident it wasn’t going to happen and some came in after the vote to leave. So it complicates interpretation of the data this go around.”
The Brexit vote “caused financial gyrations and concern about U.S. exports in the face of a rising dollar,” AIM said. Kiel said the vote’s aftershocks and prolonged political uncertainty in Great Britain could continue to be felt by American companies in the coming months.
“Any time there is uncertainty that obviously causes people to be less confident about decisions they planned on making,” Kiel said. “As long as there is this uncertainty, no one knows what the impacts will be and we’ll see that for a while.”
Massachusetts businesses in June also had to contend with the slowest pace of job creation in the United States since 2010, which caused some to wonder whether the country could be headed towards another recession.
“Massachusetts employers are trying to balance a range of economic and political distractions that pull them in different directions month to month,” Raymond Torto, chair of AIM’s Board of Economic Advisors, said in a statement. “The good news is that employers remain highly confident in the Massachusetts economy and in the prospects for their own companies.”
Confidence in business conditions in Massachusetts dropped 0.8 points to 58.5 on the index, AIM said, up 1.6 points from its mark last June. AIM reported that confidence levels were higher in Greater Boston (58.9) than in the rest of the state (55.6) in June.
“Despite concerns about the potential effect of a strong dollar on exports, employers continue to believe that Massachusetts has the type of economy that will ride out all the global uncertainty,” economist Barry Bluestone, director of Northeastern University’s Dukakis Center for Urban and Regional Policy, said in a statement.
That confidence in the state economy, Kiel said, could be a function of local businesses having observed the state “go through difficult times and manage things fairly well.”
“They’re fairly confident in the ability of state government to work with business and make the right kinds of decisions,” she said. “People are probably less confident about the national government’s ability to manage things.”
AIM President and CEO Richard Lord agreed, crediting the “sustained optimism” in the state’s economy to “the ability of the Legislature and several administrations to maintain disciplined fiscal policy while creating an environment that allows employers to grow.”
With a $39.15 billion annual budget awaiting Gov. Charlie Baker’s signature, Kiel said businesses have turned their eyes to Beacon Hill. After both branches of the Legislature had approved a spending plan for fiscal year 2017, it became clear that tax revenue growth projections were too optimistic and the state would be working with a smaller-than-expected purse of money for fiscal 2017.
“There is work that needs to be done and I think at this point people are hoping and believing they’ll manage to get things straightened out,” she said. “They’re certainly watching, it affects everything. I think people are also watching with GE coming in, what’s that going to look like? There are a lot of things coming at us and it will be interesting to see how it all gets handled.”