NEARLY A YEAR into the second Trump administration, Democrats atop Beacon Hill are not the only ones unable to shake a sense of economic agita. 

Private sector employers have been feeling the strain, too, unsure about what degree of burden they should expect from tariffs and worried about the downstream effects of federal funding cuts to research. Some are frustrated less about Washington and more about the high cost of living in Massachusetts. 

The Associated Industries of Massachusetts, a trade group representing thousands of businesses, on Monday reported that business confidence dropped again in October, marking the eighth straight month in pessimistic territory. 

It’s the first time the group’s “business confidence index” has remained south of the line separating positive and negative outlooks for that long a stretch since 2020, the first year of the COVID pandemic.  

AIM cited several factors depressing business confidence, including the ongoing federal government shutdown, “rising prices,” and uncertainty about the Trump administration’s approach to tariffs. 

One unnamed employer responded to the survey noting that “federal government contracting is decreasing for small business and tariffs are hurting everyone.” 

Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University, said he found the continued negativity among businesses unsurprising. 

Massachusetts, he said, is likely already in a recession. 

“The driving force is federal,” Horowitz said. “It’s uncertainty around tariff policy, around immigration policy — the unparalleled levels of uncertainty and disruption resonating from Washington.” 

Other indicators also point to economic sluggishness in Massachusetts. Total employment across the state has been essentially flat for more than a year and a half. Over the past year, the statewide unemployment rate has slowly crept up to 4.8 percent, half a percentage point above the national rate. 

AIM’s business confidence index, published monthly based on a survey of employers, uses a 100-point scale. Scores above 50 represent a more optimistic outlook among participants, and scores below 50 mean members feel more pessimistic. 

The latest measurement of 46.5 — which is meant to signify employer readiness to expand and hire — was one point lower than September and nine points lower than one year ago. 

In the 34 years since AIM launched its index, there have been only six stretches of eight or more months with the measurement in negative territory, according to data shared with CommonWealth Beacon. The longest was May 2008 to April 2010 during the height of the Great Recession. 

Retailers Association of Massachusetts President Jon Hurst said while his members have also grappled with uncertainty from tariff threats, they often describe bigger concerns over state policymaking that’s been unable to rein in high costs. 

A February 2025 survey his organization and the UMass Donahue Institute, which conducts research on public policy and economic development, conducted with hundreds of small businessowners found 73 percent of respondents think government at all levels does “more to disadvantage small businesses than it does to help them.” 

“You’ve got to look at who’s causing the problem. Massachusetts, frankly, has the highest cost of doing business and the highest cost of living anywhere in the country,” Hurst said. “If you want to talk about pessimism, it’s the cost of living and the cost of doing business that creates the pessimism and unaffordability.” 

“That’s a Massachusetts problem,” he added. “That’s not a Washington problem.” 

Some analysts disagree on whether the economic outlook in Massachusetts is better or worse than the nation as a whole. 

In AIM’s latest survey, the national index fell to 38.2, a more pessimistic score than the Massachusetts index indicated for the state alone.  

Moody’s Analytics chief economist Mark Zandi said last month that 22 states, including Massachusetts, were either in a recession or at high risk of entering one. 

Horowitz suggested the Bay State’s footing is a little bit worse than its peers in part because its cornerstone industries — health care and education, or “meds and eds” — have been especially affected by federal funding cuts. 

“The industries that usually protect us are amplifying problems,” he said. 

Washington has long played an integral role in the Massachusetts’s innovation sector, providing an average of $8.6 billion per year in funding for research and development, according to a July report from the UMass Donahue Institute. 

The Trump administration has moved to cut hundreds of millions of those dollars, and both academic and business leaders warn that the knock-on effects could be enormous. 

“The impact of the loss of this federal funding stands to have the exact same type of impact on small and microbusinesses that we saw with COVID,” AIM president Brooke Thomson told lawmakers last week. 

Gov. Maura Healey filed legislation in July that would deploy $400 million in state funds — half from the surtax on wealthy households, half from interest generated by the state’s “rainy-day” savings account — to offset some of the federal changes. 

“The intersection between research, education, life sciences, tech, and health care is probably the greatest economic natural resource that Massachusetts has,” Doug Howgate, president of the business-backed Massachusetts Taxpayers Foundation, told lawmakers while testifying in support of Healey’s bill. “The risk that we face for federal changes is bigger than other places, and we need to act proactively to address that.”