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November 1, 2016

Mass. biz confidence rises, but barely up from last year

A "surprising" improvement in the outlook of manufacturers and the lowest unemployment rate in 15 years drove business confidence among Massachusetts employers up last month, according to data released Tuesday by Associated Industries of Massachusetts.

AIM's Business Confidence Index rose 0.3 points to 56.2 in October, the second straight month of improved confidence and 0.6 points higher than a year ago. The boost was propelled by the state's 3.6 percent unemployment rate in September, its lowest level since June 2001, and "a 2.6-point jump in the manufacturing index, which has lagged overall confidence readings for the past 18 months," AIM said.

Manufacturers, AIM said, have been less confident in business conditions as they "struggled with economic weakness in Europe, China and other key export markets."

"Local unemployment rates dropped in 22 of 24 labor market areas throughout Massachusetts during September, which is consistent with gains in the AIM Employment Index over both the month and year," Sara Johnson, a senior research director of global economics at IHS Global Insight and a member of the AIM Board of Economic Advisors, said in a statement provided by AIM. "Both sets of numbers indicate that Massachusetts' economy continues to perform well."

AIM's survey found that 39 percent of responding companies added employees in the last six months while 19 percent reduced staff. Thirty-eight percent of companies said they expect to hire in the next six months and 10 percent said they plan to downsize, according to AIM.

AIM's Massachusetts Index, which assesses business conditions within the Commonwealth, gained 0.9 points to climb to 57.9 last month, placing it 3.8 points ahead of the same time last year. The U.S. Index, which measures national business conditions, remained unchanged at 49.2 in October, 1.7 points lower than its level of October 2015.

Employers have been more optimistic about the Massachusetts economy than about the national economy for 78 consecutive months, according to AIM.

The AIM index has been issued monthly since July 1991. It is presented on a 100-point scale, with a score of 50 being neutral. The all-time high of 68.5 was recorded in both 1997 and 1998, the group said, and its low was 33.3 in February 2009. The index has remained above 50 for the last three years.

Real gross domestic product in Massachusetts grew at an annual rate of 3.7 percent in the third quarter, up from 3.6 percent in the second quarter and 2 percent in the first quarter, according to MassBenchmarks, published by the University of Massachusetts Donahue Institute and released on Friday.

Looking ahead, the economic journal's leading index predicted an annualized state economic growth rate of 2.4 percent in the fourth quarter and 2.1 percent in the first quarter of 2017. According to MassBenchmarks senior contributing editor Alan Clayton-Matthews, "It is unlikely that the pace of employment and earnings growth in Massachusetts can continue at the current pace given weak global economic performance and demographic constraints on labor force growth." He added, "A major headwind is the tightening labor market. With fewer unemployed workers and with more baby boomers retiring, it is becoming more difficult for employers to find the workers they need."

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