Last week there were signs that Fed Chair Jerome Powell’s bid for a soft landing may have been successful as job numbers came in higher than expected and optimism returned to the state’s employers. (` Photo/Nathan Howard, file)
After the Labor Department released better-than-expected job numbers, the state’s employers report they are more optimistic about the future than they have been in months.
According to the monthly Business Confidence Index, published by Associated Industries of Massachusetts, business confidence in the state rose 2.8 points to 52.5% in July, moving from bearish to positive territory and months of the decline reversed.
“The confidence boost came as the economies of the United States and Massachusetts defied expectations of a recession amid the Federal Reserve’s 11 rate hikes. “The country’s economy grew at an annual rate of 2.4 percent in the second quarter, up from 2 percent in the first quarter, while inflation fell to a two-year low of 2.97 percent in June,” reads part of the index.
Confidence reported by the state’s employers fell to bearish levels in May for the first time in years and remained below 50% through June, with companies telling pollsters they were struggling to find employees amid a high-inflation environment.
According to the index, businesses are now better positioned with the pace of inflation and workers have more money to spend on rising wages, and the numbers are encouraging enough to ease fears of a recession.
“A strong labor market, buoyant consumer spending and rebounding business investment continue to move the economy in a positive direction. The job market remains particularly strong, giving Americans money to spend: Personal income after taxes and adjusted for inflation rose 2.5 percent in the second quarter,” Sara Johnson, chair of AIM’s economic advisory board, said in the index’s press release.
On Friday, the Bureau of Labor Statistics said the country added a total of 187,000 nonfarm payrolls in July, keeping the unemployment rate essentially unchanged at 3.5%. According to AIM, unemployment in Massachusetts is at a “historic” low of 2.6%.
The association’s chief executive, John Regan, said the recent passage of a $56.2 billion federal budget will help employers remain optimistic about the economy, but he also used the index’s release as an opportunity to to push for the passage of a tax cut package, which is currently in legislation in limbo as lawmakers leave Beacon Hill for the summer vacation.
“AIM supports the House of Representatives’ version of tax reform, a version that lowers the tax on long-term capital gains from 12 percent to 5 percent over a two-year period and the inheritance tax threshold from $1 million to $2 would raise a million. Massachusetts is one of only 12 states with an inheritance tax,” Regan said.
AIM surveys more than 140 Bay State companies to compile its monthly index, the first of which was released in July 1991. According to AIM, business confidence reached historic highs in 1997 and 1998, with two months showing 68.5% confidence in both years. and bottomed out in February 2009 at 33.3%.
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