By Brianna McKinley
BU News Service
BOSTON — Despite a consistently low unemployment rate and a steady economy, Massachusetts employers expressed less confidence – or more skepticism, depending on how one looks at it – about business prospects for a fifth straight month, according to the widely-watched Associated Industries of Massachusetts’ monthly Business Confidence Index.
Although January’s reading of 57.7 is still considered optimistic – the index runs on a scale of 0 to 100 – it’s also at its lowest level since October 2016. First created in July 1991, the BCI measures current and prospective business conditions in the state and throughout the country by surveying Massachusetts business owners. Its all-time high of 68.5 was recorded in both 1997 and 1998, the group said, and its lowest all-time reading of 33.3 came in February 2009.
The index has remained above 50 since October 2013.
But vacancies left last year by Toys “R” Us in Shoppers World in Framingham and by Sears in the Natick Mall reflect a national trend of big-box stores losing relevance in favor of online retailers and small businesses with loyal followings, such as craft breweries. That has raised questions about whether new businesses, local or chain, small or large, feel assured enough to take the risk of filling empty storefronts.
The state unemployment rate dropped to 3.4 percent in December, its lowest point in 15 years and normally a sure sign of a healthy economy. However, historically low unemployment can lead to higher anxiety for employers who fear they will not be able to recruit qualified candidates, according to Chris Geehern, executive vice president of public affairs and communications for AIM.
“In Massachusetts, the deeper concern among employers is about the limits of a full employment state economy,” he said. “We are aware of one or two employers who have actually postponed expansions or elected not to bid on contracts because they can’t find the people with the skills they need to grow the company.”
Arthur Redding, owner of Hudson Appliance Center in downtown Hudson, echoed that concern.
“One of my biggest challenges is finding good help,” he said. “Every time I want to expand, whether I need a salesperson or a service technician, they are very difficult to come by.”
Continued increases in the state’s minimum wage, now $12 per hour as of Jan. 1, is cited as another reason for the slide in confidence. Although the increase substantially affects employers in the hospitality sector, AIM found that 70 percent of all companies surveyed believed they would be affected in some way by the change.
Geehern said this is because employees who were already earning right about the previous minimum wage now expect a parallel rise in compensation.
The Paid Family and Medical Leave Act, signed into law by Gov. Charlie Baker last June, is another regulatory measure that might be leading employers to be cautious. The law requires that companies be charged a 0.63 percent payroll tax, roughly split in half between employers and employees.
Geehern describes the new law as a burden for companies, not just because of the tax, but because of additional administrative work required when employees use the benefit.
Paul Joseph, president and CEO of the Framingham-based MetroWest Chamber of Commerce, was glad to hear that Dave and Buster’s, a Dallas-based restaurant and entertainment company, plans to fill the spot vacated by Sears in the Natick Mall and thinks similar creative re-purposing of empty spaces is needed.
He also argued that a shift in attitudes toward downtown community planning is necessary to ensure the growth of MetroWest’s economy.
“I’m encouraged by the activity at the local level in towns like Ashland and Natick, and cities like Framingham and Marlborough,” he said. “They are investing in downtown revitalization, emphasizing walkability for shopfronts, and providing support for local businesses that simply didn’t exist five or 10 years ago.”
Joseph added that issues at the federal level have also contributed to local employers’ doubts.
“The political climate has been so uncertain and volatile,” he said. “Last year, businesses were hopeful because of initiatives at the federal level that put money back in the pockets of companies. However, employers are still cautious, not because of the market, but because of regulatory risks. Massachusetts has made sure to think long term and not take for granted the short-term tax advantages.”
Geehern agreed national politics have made employers in Massachusetts wary.
“They are worried about the incipient trade war with China and the imposition of tariffs on goods and services,” he said. “Business owners like predictability and all these elements are adding an air of uncertainty.”
The BCI peaked at 68.5 in both 2007 and 2008.
This article was previously published in The MetroWest Daily News.