April 7, 2020
The Boston Globe
The drastic shift from boom times to tough times dramatically darkened the mood among Massachusetts employers last month, sending local business confidence plummeting to levels not seen in more than a decade.
The Associated Industries of Massachusetts business confidence index recorded its steepest monthly drop ever as the business community grappled with the economic implications of the worsening coronavirus pandemic. The index dropped to 40.2 in March, down 21.9 points from February on a 100-point scale, plunging the index deep into negative territory.
"We would call it sobering, but not surprising," said Chris Geehern, an executive vice president at the employer association. "The severity of the drop in business confidence reflects, in part, the suddenness with which all this came about."
The latest index was based on a poll of about 140 employers taken over the final three weeks of March. By way of comparison, the index reached its nadir of 33.3 in February 2009, during the Great Recession. The last time the AIM index was at its current level was in July 2009, when the national economy was just coming out of the recession.
Readings above 50 indicate that the mood is generally upbeat among employers. Business confidence in Massachusetts has been in positive territory since the fall of 2013.
Geehern said most employers were feeling good in January and February, with only minimal supply-chain disruptions from the coronavirus in China, where the pandemic originated. "It didn't seem to be an existential threat back then," Geehern said.
Corporate executives are vexed by all the uncertainty inherent in this crisis. Unlike previous economic downturns, this one is being driven by a public health threat that has proven tough to predict. No one really knows the true end date for the massive shutdowns that collectively drove employers to cut more than 700,000 jobs across the country last month. (Much more extensive job losses are likely to be recorded in April.)
In Massachusetts, Governor Charlie Baker has ordered nonessential workplaces closed until May 4. But Baker has already extended the reopening date once, and it's entirely possible he will extend it again.
"It has businesspeople out to sea a little bit when they're trying to figure out what their next steps should be," Geehern said. "It's wholly dependent on people with stethoscopes around their necks, rather than people with calculators in their pockets."
This uncertainty was echoed by members of AIM's board of economic advisers. Economists see the ability to test for the virus quickly and treat it effectively, or vaccinate against it, as crucial to any meaningful recovery.
Edward Pendergast, managing director at the investment bank Dunn Rush & Co., said shelter-in-place restrictions might be eased by June, but even then it will take at least three more months "for the economy to roll." His best guess: An economic rebound might begin by September.
Economic consultant Elliot Winer said the reverberations could last for up to a year, even if the recovery begins within three months. And there's always the possibility the pandemic could worsen again next fall or winter, after a reprieve in the summer, he said.
"The best possible news now would be positive indications that a vaccine will be forthcoming, and more immediately, indications that we are starting to get the virus under control," Winer said in a statement provided by AIM. "We need some positive news for our general psyche, especially as we will all need to adapt to . . . many societal changes."
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