December 7, 2016

Post-Trump, state business confidence index continues climb

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Buoyed by rallying financial markets, the lowest state unemployment rate in more than 15 years and the election of Donald Trump, employer confidence in Massachusetts rose to its highest point in more than a year, Associated Industries of Massachusetts said.

AIM’s Business Confidence Index rose 1.9 points to 58.1 in November, the third straight month of improved confidence and 1.2 points higher than a year ago.

The surge was propelled by “across-the-board bullishness about the state and federal economies, along with a continued recovery of confidence among Massachusetts manufacturers,” AIM said Tuesday.

That bullishness, AIM and economists said, was driven in part by Trump winning the presidency on Nov. 8, despite uncertainty around the specific details of his campaign proposals.

“The numbers certainly show a post-election bounce,” Sara Johnson, a senior research director at Global Economics, said. “It might reflect expectations of tax reforms and some reversal of regulations that would help to improve the business climate.”

Raymond Torto, chairman of AIM’s Board of Economic Advisors and a Harvard Graduate School of Design lecturer, said in a statement that after the election employers and investors put aside their concerns about Trump and “decided that the president-elect would prioritize conventional economic growth measures such as infrastructure investment and tax cuts.”

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, and the low was 33.3 in February 2009. The index has remained above 50 for the last three years.

AIM’s Massachusetts Index, which assesses business conditions within the Commonwealth, gained 1.9 points to climb to 59.8 last month, placing it 1.5 points ahead of the same time last year.

Johnson pointed out that the Massachusetts Index is “significantly stronger” than the U.S. Index, which measures national business conditions. The U.S. Index climbed 2.8 points in November to 52.0, breaking into positive territory for the first time since July.

“I think it’s a very vibrant area for new business formation and technology industries. There’s growing synergy between our universities and start-up businesses,” Johnson said. “And I think Massachusetts has a relatively favorable tax climate.”

Employers have been more optimistic about the Massachusetts economy than the national economy for 79 consecutive months, or more than six and a half years, according to AIM.

Helping to bolster the overall confidence index score is the state’s low unemployment rate, which at 3.3 percent is the lowest since April 2001, and greater faith in the state’s manufacturing sector.

AIM’s survey found that 37 percent of businesses expect to hire new employees in the next six months, while only 10 percent said they plan to downsize during that time. The manufacturing sector’s industry-specific index jumped 2.6 points in November and is up 4.1 points on the year, AIM said.

“The most encouraging element of the November (business confidence index) is the degree to which employers are translating their overall optimism about the economy into optimism about their own plans for sales growth and hiring,” Northeastern University professor of public policy and urban affairs Alan Clayton-Matthews said in a statement.

Despite the era of good feelings surrounding Trump and the economy as the New York real estate mogul transitions to the White House, AIM cautioned that the “surprise election of a president with no record in public office upon which to make judgments” could lead to economic uncertainty in 2017.

“Will President Trump and the Republican Congress succeed in reducing corporate taxes? Will they keep their promise to simplify the regulatory structure? What will the potential scrapping of health-care reform mean to Massachusetts? And will the new president follow through on his intent to end or renegotiate trade agreements important to employers? That’s a lot of uncertainty,” AIM President Richard Lord said in a statement. “The good news is that Massachusetts remains one of the strongest state economies in the nation thanks to years of sound fiscal management and attention by elected officials to the needs of employers.”

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