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Confidence among Massachusetts employers rose again in August, despite ongoing worries about inflation, recession and hiring challenges, a new survey says.
The Associated Industries of Massachusetts’ monthly Business Confidence Index rose 2.5 points to 55.3 after posting a two-point gain in July, putting firms’ feelings further and further from the index’s midpoint, which indicates whether business sentiment has turned pessimistic.
The index’s reading is still 6.7 points below where it was in August of 2021, however, and most survey responses came before Federal Reserve Chair Jerome Powell and Fed Vice Chair Lael Brainard indicated the central bank plans to continue raising interest rates and keeping interest rates at a high level for some time in order to combat inflation.
“AIM’s August survey supports the view that our state and national economies are growing at a sluggish pace and are not yet in recession,” Sara Johnson, chair of AIM’s board of economic advisors, said in a statement. “Weak labor force participation is a constraint on growth that is fueling wage and price inflation. As the Federal Reserve aims to bring inflation back to 2% on a sustained basis, tightening financial conditions will be a headwind to business growth in the year ahead.”
Businesses are currently being squeezed by two main factors, AIM said: a tough time finding workers and suppliers hiking prices far above pre-pandemic rates. Different pieces of AIM’s August survey showed that firms are more optimistic about business conditions six months from now than they area about current conditions, although both saw positive gains.
Manufacturers are more optimistic than non-manufacturers, and medium-sized firms were more optimistic than small or large ones, by a significant margin.
“We lived through a so-called jobless recovery after 2008 when employment growth was painfully slow. More recently, despite a notable slowing of state economic growth, demand for skilled and educated workers remains strong,” Michael D. Goodman, professor of Public Policy at UMass Dartmouth and an AIM economic advisor, said in a statement. “This suggests employers may be holding onto workers that they may not need be able to fully utilize today out of concern that they will not be able to find them when they need them in the future.”
AIM also noted that uncertainty around state tax givebacks and federal corporate minimum tax policies are also afflicting companies.
