A strong outlook among manufacturers and a sense among all employers that economic conditions are improving helped drive business confidence up in July to a level not seen since before the COVID-19 pandemic, Associated Industries of Massachusetts said.
On the zero to 100 scale of AIM's Business Confidence Index, confidence among Massachusetts businesses registered a 65.6 in July. That's 2.2 points more confident than in June and about 20 points more confident than Bay State employers were last July.
It's even 3.3 points more confident than companies were in January 2020, just before the coronavirus sent the index spiraling to a low of 38.4 in April 2020.
The relatively rosy view of business conditions and the confidence in the economy among employers come while Beacon Hill is flush with cash and as the federal government advances a $1 trillion infrastructure bill that AIM President John Regan said "will be another pillar of the recovery."
Massachusetts state government collected more than $5 billion more than it had expected for the budget year that ended June 30 and the Department of Revenue followed that up by reporting July collections that were more than 5% greater than July 2020 receipts. The state pension fund also announced last week that it closed the one-year period ending June 30 with the highest return in its history and almost $96 billion invested.
The unemployment rate in Massachusetts dipped below 5% for the first time since March 2020 in June, settling at 4.9% as more people returned to the workforce.
"Every component of the Business Confidence Index rose during July, from employer assessments of their own business prospects to their hiring plans," Sara Johnson, chair of AIM's Board of Economic Advisors and Executive Director of Global Economics at IHS Markit, said.
Each individual indicator that make up the Business Confidence Index was up in July, AIM said, and has climbed by double-digits over the last year.
The Massachusetts Index, which assesses business conditions only within the state, increased 2.4 points to 66 last month — up 17.2 points since last July. Meanwhile, the US Index measuring conditions nationally, which has gained 21.8 points for the year, rose only one-tenth of a point in July to an even 59.
The Current Index, which gauges overall business conditions at the time the survey was taken, rose 3.3 points to 66.6 in July while the Future Index that measures how employers feel about the economy six months out, increased 1.3 points to 49.6, just slightly in negative territory.
AIM's survey of employers also revealed that business confidence is not spread evenly across sectors or geography. Overall, large companies were the most bullish with a confidence reading of 70.6 compared to the 65.5 that medium-sized companies registered and the 59.1 reading for small companies.
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Companies in eastern Massachusetts were "significantly more confident" with a 69.2 confidence reading than companies in the western part of Massachusetts, which recorded a 61.7 confidence rating in July, AIM said.
Johnson also said the Business Confidence Index results show that Massachusetts employers "see the recovery gaining momentum despite the presence of the Delta variant of COVID-19."
Though it may not have altered many business perspectives through July, the Delta variant has changed much of the calculus around returning to pre-pandemic habits for workers and consumers. Alan Clayton-Matthews, professor emeritus at Northeastern University, warned that the mutant's continued spread could throw a wrench in the rosy economic projections for the rest of 2021.
"Economic growth is expected to remain strong in the second half of the year, but there is a risk that rising COVID-19 Delta variant cases could slow the recovery," Clayton-Matthews said.