Business confidence in Massachusetts soared to prepandemic levels last month as local employers took heart from the rollout of COVID-19 vaccinations and economic stimulus efforts at the federal and state levels.
The Associated Industries of Massachusetts Business Confidence index hit 60.9 in March, based on a poll of 130-plus AIM members. That was the index’s highest level since the COVID-19 pandemic and subsequent business restrictions sent confidence plummeting one year earlier, resulting in the index’s largest one-month decline. The reading has steadily been climbing this year past 50, the breakpoint between an overall positive mood and a negative one.
“That suggests some robust growth in the economy is underway,” said Sara Johnson, a global economics expert with research firm IHS Markit. “We are seeing light at the end of the tunnel.”
The index was stuck in negative territory for the rest of 2020 after the pandemic hit, even though it recovered somewhat from its nadir last April. Johnson and other members of AIM’s board of economic advisers point to several reasons for the rebound, including the arrival of COVID-19 vaccines and congressional approval in early March of a $1.9 trillion federal stimulus package, the latest effort by Washington policy makers to accelerate the economy’s recovery. In Massachusetts, many business leaders were relieved to see a deal struck around the same time at the State House to prevent a huge increase in unemployment insurance rates and to provide tax relief for recipients of federal stimulus loans that were converted to grants.
AIM’s economic advisers also pointed to the state’s loosening of business restrictions in the past month or so.
“Might be there some wishful thinking embedded in this? Perhaps,” Michael Goodman, an economist at UMass Dartmouth, said of the employer group’s index. “But I do think there are reasons to be optimistic about the near-term future even if that optimism [is] of the cautious variety.”
In general, larger employers tended to be more upbeat about the economic outlook than small businesses in the AIM survey, and those in Eastern Massachusetts were more bullish than those in the western part of the state.
Chris Geehern, an executive vice president at AIM, said the polling shows its members are particularly enthusiastic about the economic outlook for six months from now.
“There really is a sentiment that all we need to do is get people vaccinated, get things under control [with the virus], and by and large the economy has underlying strength,” Geehern said.
A year ago, AIM staffers mainly fielded questions from members that focused on financial survival, such as how to secure a federal Paycheck Protection Program loan. Now, Geehern said, the biggest question revolves around when to bring people back to the office.
“It’s a luxury that they’re looking at long-term issues like that versus short-time issues of survival,” he said.
The latest estimates available show the state’s unemployment rate fell again, to 7.1 percent, in February, while Massachusetts employers collectively added more than 50,000 jobs in the first two months of the year. But the total number of jobs in the state was still more than 300,000 jobs short of prepandemic levels. Many business leaders recognize the state still has a long way to go to recover those lost jobs. The national economy benefited from an unexpected surge of hiring in March, but the state-by-state numbers are not yet available for that month. One encouraging sign: The Massachusetts Department of Revenue reported on Monday that March tax revenue exceeded state officials’ expectations by nearly 27 percent.
Nada Sanders, a supply chain management professor at Northeastern University, said there are still many reasons to be cautious. She noted that AIM’s polling doesn’t reflect the recent supply disruption with the Johnson & Johnson vaccine, the newest lockdowns in Europe, or the most recent rise of more infectious COVID-19 variants.
“We see this tremendous amount of pent-up consumer demand, and I think a number of businesses are going to do well,” Sanders said. “I would temper it just a little bit given the fact we just don’t know which direction [the pandemic] will take . . . It’s changing in real time.”