Already worried to start the year about the possibility of an economic slowdown, the confidence of Bay State employers in the economy in the midst of the global coronavirus pandemic plummeted in March to near Great Recession levels as unemployment soared and commerce ground to a halt.
Economic advisors to the state's largest business trade group predict a recovery is still three to six months away and could be slow.
The timeline for a rebound is also wholly dependent on the ability of public officials to control the spread of COVID-19, and the effectiveness of the social restrictions that have tilted the economy into decline.
"The unprecedented one-month erosion of business confidence represents the unique set of circumstances that have changed almost every aspect of life during the past month," said Raymond Torto, professor at the Harvard Graduate School of Design and the chair of the board of economic advisors to Associated Industries of Massachusetts (AIM).
AIM, which represents about 3,500 employers in Massachusetts, planned Tuesday morning to release the results of its newest business confidence survey, which will show the largest monthly decline in confidence in the economy since the organization began its index in 1991.
Confidence in the economy among many of the largest Massachusetts employers fell 21.9 points to 40.2 on a 100-point scale in March, the first time the marker has moved into pessimistic territory since October 2013.
To put the drop in perspective, AIM said the previous record for a single-month decline was 9.6 points in October 1998. Employer confidence in the economy is just seven points higher than at its lowest point during the Great Recession in February 2009.
"Massachusetts companies are trying to map out their futures in the face of government orders to cease operations and the uncertainty of forces beyond the scope of traditional economic models," Torto said in a statement.
The release of the March survey results coincides with a virtual gathering of Beacon Hill leaders and experts planned for Tuesday to help lawmakers improve their understanding of how the economic upheaval will influence tax revenues, and therefore the state's budget for this year and next.
Early estimates suggest the loss of at least a few billion dollars in revenue that the state would otherwise be using to support more than $44 billion a year in spending on payroll, debt, pensions and services like education, health care, food stamps, and rental vouchers.
Sales and income taxes could be particularly hard hit as workers have lost their jobs and non-essential businesses shuttered their physical businesses last month.
In Massachusetts, a record 181,062 people filed initial unemployment benefit claims during the week ending March 28, about a 22% increase over the prior week. The unemployment rate in Massachusetts had been hovering at 2.8% as of January, but is sure to spike.
Northeastern University economist Alan Clayton-Matthews, who will participate in the Legislature's roundtable Tuesday, said the initial unemployment claims filed last week suggest an unemployment rate of 10%.
"Even big universities will be hit hard if students can't or won't come back to campuses in the fall," Clayton-Matthews said. "Several sectors such as tourism and travel are likely to lag when the pandemic is over; and the loss of income during the pandemic may keep the economy from 'bouncing back' quickly when the pandemic is over – it's not like there will be a pool of savings supporting pent-up demand like there was after WWII."
The AIM index is based on a survey of more than 140 employers, and has been conducted monthly since July 1991 based on a scale of zero to 100, with 50 being neutral. The index has twice peaked at 68.5 in 1997 and 1998, and hit its low of 33.3 at the depths of the Great Recession in February 2009.
All the indicators in the survey were down, AIM reported, including a 29.5 point drop in business conditions, an 18.1 point decline in the future index measuring expectations for six months from now and a 12.2 point dip from March in the employment index, as unemployment claims in Massachusetts have skyrocketed in recent weeks.
The employment index, AIM said, has lagged business confidence in recent years because of a "persistent shortage of workers."
Edward Pendergast, managing director of Dunn Rush & Co, said that if by June the state can begin to relax some of its "shelter in place" guidelines, then by September the economy might start to rebound.