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Image courtesy of AIM
With interest rate hikes piling on, Massachusetts employers’ confidence slid down to nearly pessimistic levels last month.
The Associated Industries of Massachusetts monthly business confidence index survey showed business confidence – already hovering near the lower bound of “optimistic” territory – slipped 3 points on the group’s 100-point scale, to 50.9 in October. When the index dips below 50, employers’ outlook has turned pessimistic, AIM says. It’s the second drop in as many months.
The reading is now 7.5 points below where employer confidence was one year ago and coincides with the latest 0.75 percent jump in the Federal Reserve’s benchmark interest rate, which has pushed up the cost of financing for most businesses and has significantly slowed activity in the housing and real estate development sectors.
The Index reached its historic high of 68.5 on two occasions in 1997 and 1998, and its all-time low of 33.3 in February 2009.
“Consumers continue to cautiously increase their spending, but we are starting to see higher interest rates adversely affect housing markets and related purchases such as furniture and appliances. Rising interest rates are also affecting the technology sector through constraints on the supply of venture capital and private investment funding,” Sara L. Johnson, chair of the AIM board of economic advisors, said in a statement released with the survey results.
Regionally, Worcester-area businesses were the most pessimistic, with AIM’s Central Massachusetts Business Confidence Index dropping from 53.3 to 47.8 last month.
AIM President and CEO John R. Regan, also a member of AIM’s economic advisory board, said workforce challenges are likely hounding area businesses, noting a summer MassINC survey that indicated the state’s working-age, college-educated population will decline by 10 percent, or 192,000 people, by 2030.
“Many AIM member businesses don’t need a survey to tell them what they already know – that labor shortages and lack of qualified talent, exacerbated by the impact of the COVID-19, have dealt a major blow to day-to-day operations. Our members, across all industries, are unable to fill positions with qualified candidates and the commonwealth is losing workers to lower-cost states,” Regan said in a statement.
