Business confidence slips for second straight month, April survey shows

Confidence among Bay State employers fell again through April, marking the second straight month of uncertainty amid concerns over hiring costs and inflation, with additional pressure brought by questions of how to fund fixes to the state’s beleaguered transportation network.

According to the Associated Industries of Massachusetts, their monthly Business Confidence Index for last month falls “marginally within optimistic territory” at 51.9%, and is 0.8-points higher than it was this time last year, but inflation also remains well above the Federal Reserve’s 2% target. The result, AIM’s survey shows, is a confidence score down more than 2.5 points since February.

“Employers and consumers alike are experiencing persistent inflation and slowing economic activity, leading to increased caution. The good news is that real private consumption and investment have continued to rise, while the job market has come into better balance,” Sara Johnson, chair of AIM’s board of economic advisors, said along with April’s report.

AIM noted that just last week, the Federal Reserve indicated that tamping down on inflation may take longer than originally anticipated, meaning that interest rates may not come down anytime soon. One surveyed association member told AIM that while the Fed’s fight with inflation continues, “construction activity has slowed over the past three months as many projects have been delayed or canceled due to high interest rates and/or lack of demand.”

This comes as April’s jobs report from the Bureau of Labor and Statistics shows employers slowed hiring last month, adding just 175,000 jobs. That’s far fewer than the 233,000 forecast by economists and well below March’s gain of 315,000.

That’s actually good news for the Fed, which has been using hikes in their key interest rate in an attempt to slow spending and inflation without killing the economy. Their attempt at a so-called soft landing should eventually come with lower interest rates, but only if they see signs that it’s working.

“A slowdown in payrolls to a decent pace to start the second quarter, coupled with a slowing in wage gains, will be welcome news to (the Fed’s) policymakers,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, told the AP. “Current readings also support the view that rates cuts – and not hikes – are the base case scenario for the Fed this year.’’

That’s also potentially good news for Bay State employers, who told AIM that the cost of everything, including payroll, is making it hard to compete.

“Labor costs, material costs, and energy costs are all up and, while our competitors are also seeing higher materials costs, our labor and energy costs are typically higher due to the state we live in. We rarely can pass those costs on to our customers without losing market share,” one company wrote in the survey.

Also causing concern for employers, according to AIM President and CEO Brooke Thomson, is the state of the MBTA and the solutions offered to fund fixes for it. Jumping to quick solutions, like polls at the border, won’t necessarily solve decades of problems at the T.

“Amid the predictable proposals being tossed about to fund the transformation of transportation, AIM believes we all need to step back and ask: What is the problem we are trying to solve? What information do we need? And how do changing patterns of work and travel shape potential solutions to the problem?” Thomson said.

According to AIM, confidence was highest among North Shore employers, with the April survey there showing 59.6% confidence, and lowest in the Worcester region, which showed 45.9% confidence last month.

AIM surveys more than 140 Bay State businesses to produce their monthly index, the first of which was published in July of 1991. According to AIM, business confidence hit historic highs in 1997 and 1998, with two months in either year showing 68.5% confidence, and hit a low in February of 2009, when it was 33.3%.

Herald wire service contributed.