Boston Herald

Business confidence turns pessimisti­c

- By Matthew Medsger mmedsger@bostonhera­ld. com

Business confidence among the state’s employers fell last month to the lowest level seen since the height of the pandemic, according to a recent survey of Massachuse­tts employers.

The Associated Industries of Massachuse­tts, in its monthly Business Confidence Index, says Massachuse­tts business owners’ faith in the economy plunged half-a-point in May, dropping from 50.1% to 49.6% and continuing a downward trend that first began in November.

And while a half point may not sound like a lot, the move is significan­t as a reading below 50 indicates a pessimisti­c outlook.

“Massachuse­tts employers turned pessimisti­c about the economy for the first time since December 2020 last month as the state economy slowed to a crawl and the Federal Reserve continued to raise interest rates,” the survey reads, in part.

The index, taken well ahead of Friday’s unexpected report from the Bureau of Labor Statistics showing the economy had added a further 339,000 jobs and before the deal to suspend the debt ceiling had cleared Congress, reflects an ongoing concern among employers that the nation may be barreling toward economic recession or policy driven calamity.

“Businesses have been stung by both stubbornly high inflation and persistent­ly high interest rates, which have dampened demand and raised costs. It’s unfortunat­ely not surprising that the Future Index indicates that business leaders expect these conditions to worsen further,” Michael Tyler, Chief Investment Officer at Eastern Bank Wealth Management and Vice Chair of AIM’s Board of Economic Advisors said with the survey’s release.

“Thankfully, a possible recession would likely be shallow and short, cushioned by a strong jobs market and healthy consumer spending,” Tyler said.

Though circumstan­ces may have seemed particular­ly dire to business owners as of last month, according AIM President John Regan, doing away with concerns of a U.S. default and the consequenc­es of what might follow will hopefully put the minds of employers at ease.

“The President and Congress did the right thing in hammering out an agreement that will maintain the stability of the global financial system. Employers need all the predictabi­lity they can get as the economy continues to slow down,” Regan said.

Friday’s jobs report also showed a slight uptick in the unemployme­nt rate, which has Fed watchers wondering if the economy has slowed enough that Federal Reserve Chair Jay Powell could consider a pause in the central bank’s on-going crusade against inflation via raises to the key interest rate, an eleventh of which may or may not materializ­e out of June’s meeting of the Board of Governors.

AIM surveys more than 140 Bay State businesses to produce their monthly index, the first of which was published in July of 1991. According to AIM, business confidence hit historic highs in 1997 and 1998, with two months in either year showing 68.5% confidence, and hit a low in February of 2009, when it was 33.3%.

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