The optimism lasted exactly one month.
In February, the Massachusetts Business Confidence Index had crossed the line separating pessimism from optimism for the first time in a year—a small but significant respite for the state’s employers after months of mounting uncertainty. In March, that relief vanished. The AIM Business Confidence Index, the longest-running barometer of business sentiment in Massachusetts, fell from 52 to 47 points. Any reading below 50 indicates that employers view the economic outlook with more concern than confidence.
The number that matters most here isn’t 47. It’s 5—the five points lost in a single month, against a backdrop where the national economy continued to add jobs at a pace that surprised analysts. In March, the United States generated 178,000 new jobs, and the unemployment rate remained relatively stable at 4.3%. GDP continued to grow. Corporate profits held steady. Labor productivity kept rising. And yet, Massachusetts employers retreated.
The reason is called Iran.
As the conflict in the Middle East intensified, oil prices reacted with the volatility that always characterizes energy markets in times of war. The price of a gallon of gasoline in the United States surpassed $4 on a national average for the first time since 2022, following Russia’s invasion of Ukraine. For Massachusetts—a state with long winters, heavy reliance on natural gas for heating and manufacturing, and supply chains that depend on land and sea transport—the impact is not abstract. A manufacturing company in the western part of the state summed it up bluntly in the survey: the rise in energy costs will affect everything, from production to customer demand.
The problem is that this energy shock hit an already fragile foundation. The AIM has been tracking business sentiment in Massachusetts since 1991. For most of the past year, the index had been in negative territory, with a brief recovery in February that many analysts warned was fragile because the data was mostly collected before the situation in Iran escalated. Economist Michael Goodman of UMass Dartmouth put it plainly last month: the conflict in the Middle East has direct implications for energy prices, inflation, and supply chains—exactly the three variables that weigh most heavily on business confidence in Massachusetts.
What makes the picture more complex is the coexistence of conflicting signals. The national economy continues to perform well—the ISM manufacturing index reached 52.7% in March, indicating expansion. The Fed projects real GDP growth of 2.4% between now and the end of the year. Federal fiscal policies are stimulating business investment. And yet, in that same month, 64% of comments from manufacturers surveyed nationwide were negative, with 40% citing the war in Iran and 20% pointing to tariffs as active pressures on their operations.
Massachusetts feels this split-screen dynamic with particular intensity. The state is home to one of the most complex and globally integrated economies in the country—biotech, finance, education, and advanced manufacturing—and that complexity means more points of exposure when the global environment deteriorates. Added to energy costs and geopolitical uncertainty is an internal debate: the possibility that a question on statewide rent control will appear on the ballot in November, which AIM has already announced it will actively oppose, arguing that it would reduce the housing supply and drive developers away from the state.
The picture that emerges is not one of an economy in crisis. It is one of an economy that continues to grow but has lost, at least for now, the confidence of those who must make decisions about hiring, investing, and expanding.
When employers hesitate, the real economy feels the impact later.
