Recession and inflation concerns conspired in June to leave Massachusetts employers on the verge of switching to a pessimistic posture.
Associated Industries of Massachusetts reported Tuesday morning that its business confidence index fell to its lowest level since December 2020, fueled by impacts associated with the rising costs of goods and concerns that the economy is heading toward a recession, or already in one.
The index fell 3.9 points to 50.8, just above the 50-point mark which represents the divide between an overall optimism, or pessimistic view. Three of the seven constituent indicators in the index are already below 50 points.
The US index took the biggest monthly tumble, falling 9.1 points for the month and more than 20.3 points in the past 12 months. The Massachusetts Index, which represents an assessment of business conditions in the state, sheds 6.6 points to 47.2, and is down 16.4 over the year. Looking ahead to projections for the economy in six months, the business trade group’s companies logged a reading of 48.1, down 4.6 points, in AIM’s monthly member survey.
While the Massachusetts unemployment rate in May was below 4 percent, it masked a pesky economic problem: finding skilled workers to fill open jobs. The labor market, however, is among a menu of concerns cited by employers.
AIM officials noted 76 percent of CEOs globally tell The Conference Board they expect a recession by the end of 2023 or believe it’s already here, with an economy that “appears to be growing, but employers face growing struggles with soaring fuel prices, supply chain disruptions and financial market volatility.”
“Central banks around the world are raising interest rates with new urgency, hoping to cool inflation by slowing growth of aggregate demand and achieving a closer balance with supply,” said the AIM Board of Economic Advisors chair Sara Johnson. “Capital markets remain open, but financing costs are for businesses, consumers, home buyers, and governments. The year ahead will bring a more difficult environment for builders and capital good producers.”
AIM President John Regan cited polling that showed Massachusetts residents “remain most concerned about the economy and jobs, inflation, housing costs and taxes.”
“The citizens of Massachusetts clearly understand that economic growth and jobs form the basis of their ability to establish a stable life and raise a family,” Regan said. “The emphasis on jobs is especially notable at a time of an acute labor shortage that has allowed workers participating in the ‘Great Resignation’ to pretty much have their pick of new positions.”
In upcoming developments with local economic impacts, the Massachusetts Legislature this month is expected to pass a more than $50 billion budget that will push up state spending, while also advancing a tax relief package, and major economic development and infrastructure spending bills.