Sentiments among the state’s employers remained in pessimistic territory for a fifth straight month through July, according to the Associated Industries of Massachusetts’ up-to-date monthly Business Confidence Index.
AIM’s monthly survey of Bay State business found that employers are seeing mixed economic signals and feeling uncertain about the future, the index showed.
“The Associated Industries of Massachusetts Business Confidence Index (BCI) lost 0.3 point last month to 48.6, marking the fifth consecutive month the gauge has been below the 50 reading separating optimism from pessimism,” AIM wrote of their July survey.
July’s reading is down a full 3.4 points from the same month last year, but up significantly from April, when it came in at 41.5 points. AIM defines any measurement below 50-points as pessimistic. The index turned to pessimism in March and has remained there since.
Last month’s slight decline came even as the U.S. economy grew by about 3% in the second quarter of the year, “surpassing forecasters’ expectations” and essentially rebounding from the first quarter, “when output contracted at a 0.5 percent rate.” However, it also comes as the jobs market shows signs of volatility and diminished growth.
U.S. employers saw just 73,000 jobs added last month, according to the Bureau of Labor Statistics, much lower than economists were expecting. BLS also found that 258,000 fewer jobs were created in the prior two months than previously estimated.
The person responsible for that report, Director of the Bureau of Labor Statistics Erika McEntarfer, was fired shortly after its publication, with U.S. President Donald Trump claiming that the job’s numbers “were RIGGED in order to make the Republicans, and ME, look bad.” The commander-in-chief has offered no evidence to back this assertion.
According to Sara Johnson, chair of AIM’s Board of Economic Advisors, the low jobs numbers actually do coincide with other economic indicators which show a slowing economy.
“Growth in real final sales to private domestic purchases, a more reliable indicator of demand conditions, slowed to a 1.2% annual rate in the second quarter from 1.9% in the first quarter, with consumer spending and business fixed investment posting tepid growth,” she said.
This is why, according to Johnson, the Federal Reserve held its key interest rate steady during their most recent meeting, “apparently balancing downside risks to the economy against upside risks to rate inflation.”
That may not be the case for long, however, Johnson said.
“With two board members today favoring lower interest rates, a continuation of subpar economic growth could bring a shift toward policy easing,” she said.
AIM surveys more than 140 Bay State businesses to build their Business Confidence Index, the first version of which was published in July of 1991. According to AIM, business confidence reached historic highs in 1997 and 1998, with two months in either year showing 68.5% confidence, and fell to its lowest in February of 2009, when it was measured at 33.3%.
About the Author
