If it seems like you’re hearing the “R word” less frequently in casual conversation lately, you’re not the only one.
A year ago, many local executives fretted that another recession could be right around the corner, possibly by the end of 2019, or in the first half of 2020. Trade tensions and geopolitical uncertainties loomed. To many, we’ve simply had it too good, for too long.
Well, we made it to the end of 2019 intact, and there’s no recession in sight — knock on wood. Employers in Massachusetts became increasingly upbeat during the fall, as evidenced by the latest Massachusetts Business Confidence Index released on Tuesday by Associated Industries of Massachusetts. The final score of 62.2, based on polling that AIM conducted in December, was 3.6 points higher than a year ago and the index’s highest mark in 15 months. (Readings above 50 show more optimism than negativity out there.)
As recently as September, many AIM members were bracing for the worst — convinced a recession was on the horizon. Maybe not anymore.
Chris Geehern, an executive vice president at AIM, said his group’s members are less worried about an imminent downturn than they were six months or a year ago. That relief, he said, is reflected in the poll numbers. As the year concluded, it became increasingly clear that both the national and state economies would steer clear of a recession for now.
The easing of trade tensions in December inevitably played a role, especially because about one third of the poll respondents are manufacturers. The United States and China had reached a détente, easing fears about escalation in the trade battles between the two nations, and the House of Representatives passed the long-awaited sequel to NAFTA. (Senate majority leader Mitch McConnell told reporters on Tuesday that he expects the Senate will approve the new North American trade deal later this week.)
AIM’s polling data isn’t particularly scientific, with its sample size of 120 or so companies. But the monthly survey remains a useful way of getting a read on how employers view the economy, locally and nationally.
But what about consumers? One proxy is the annual membership survey by the Retailers Association of Massachusetts, to gauge the success of holiday sales. Jon Hurst, RAM’s president, said his members reported sales growth of 3.9 percent for the November-December period, compared to the same time in 2018. The growth was similar to what they saw in 2018, but it exceeded expectations, and also the long-running average.
That lines up with what retailers told researchers with the Federal Reserve Bank of Boston for the Fed’s Beige Book survey in November. (The next one comes out on Wednesday.) Manufacturers, meanwhile, were more positive in that survey than they had been in the past, and construction on commercial buildings in Greater Boston is moving at a breakneck pace.
On Tuesday, Boston Fed chief executive Eric Rosengren said he has since been hearing largely positive news from executives in the region. One big complaint remains: Many are understandably finding it tough to fill jobs, at a time when the state’s unemployment rate is under 3 percent.
One measure of state economic growth, the MassBenchmarks report, dropped a big goose egg in October: It showed that the state’s estimated gross domestic product contracted in the third quarter, by 0.2 percent.
What happened? The shortage of workers to fill jobs was blamed for the stalled growth. But maybe not: A report released on Friday by the Bureau of Economic Analysis, showed the Massachusetts economy grew better than expected for that quarter: 2.2 percent, right around the national average.
Michael Goodman, an economist at UMass Dartmouth, said he expects the MassBenchmarks assessment will be revised upward, as more data comes in. Goodman also cautioned against making too much out of the AIM index. The polling took place before the latest flare-up with Iran, he said, and the uncertainties around trade and immigration continue to vex employers.
But the rise in confidence among employers should at least tell us one thing: Maybe we don’t need to worry about the “R word” anytime soon, after all.