The Bay Area Council today released its spring Business Confidence Survey, with employers signaling caution about hiring, expressing modest optimism for economic growth over the next six months and giving the regional economy much higher marks than the national economy.

After reaching its highest level ever during the winter quarter, when it appeared the economy might be picking up steam, the business confidence index – the number that distills the overall survey findings – slipped from 66 to 61 out of 100 in the spring survey. Still, the indicator continues to register a favorable outlook, where a reading over 50 signals positive economic times, while below 50 is negative.

“It’s economic whack a mole,” said Jim Wunderman, President and CEO of the Bay Area Council. “There were strong signals earlier this year that the economy might finally be turning a corner and getting ready for a sustained period of increasing growth, which likely explains the record-high confidence we saw in the first quarter. The Bay Area continues to outpace the nation in employment and economic growth, but the progress has been frustratingly slow and uneven. Executives are still signaling optimism that we’re moving in the right direction, which is good news, but the biggest challenge, both here and nationally, continues to be actual hiring. Our overall outlook is improving, but in most sectors it’s not translating into sustained employment growth.”

Download Business Confidence Survey Results and Charts

Attitudes among executives about the national economic picture could have implications for the Presidential race and how President Obama and presumptive Republican candidate Mitt Romney frame their positions to voters. Just 14 percent of those surveyed said they think the national economy will get worse over the next six months leading up to the election, while 38 percent said it will remain the same and 48 percent expect it to get better.

The responses of the 426 CEOs, top executives and economic development officials in the nine Bay Area counties surveyed between May 11 and June 5 show that more than twice as many executives (31 percent) plan to increase hiring over the next six months as plan to shrink their workforce (13 percent). The 31 percent of executives planning to hire is the third-highest level since the Great Recession took hold in 2008. Still, the overall outlook for hiring remains cautious, with 53 percent of executives saying they will stand pat over the next six months.

The construction and transportation industries, among the hardest hit by the economic downturn, got some welcome news in the survey, with 56 percent of executives in these industries saying they expect hiring to increase in the coming months and just 5 percent expecting a decrease. In the leisure and hospitality industry, which has shown some of the most consistent gains over the past few quarters, 41 percent of executives say hiring will continue to grow.

The biggest decline in hiring is expected in the government sector, where 44 percent of officials said their workforces will get smaller over the next six months. The information and high technology sectors, among of the biggest drivers of job growth in recent months, appear to be cooling off a bit, with 72 percent of executives expecting their workforce to remain the same over the next six months.

Despite the tepid outlook for hiring, 62 percent of those surveyed think Bay Area economic conditions are better than six months ago and 59 percent expect economic conditions will continue to improve over the next six months.

San Francisco claimed the title for best hiring outlook in the region, with 47 percent of executives in the city saying they expect to increase their workforce over the next six months. Consistent with the flat hiring expectations in the technology sector, just 4 percent of executives in Santa Clara County expect to shrink their workforce in the next six months – the lowest percentage among all counties. Employers in Contra Costa and Alameda counties continue to have the least favorable outlook for hiring in the near future and continuing the East Bay’s well-established position as a drag on the overall regional economy.

The region’s regulatory climate didn’t win plaudits from executives, with 51 percent saying that local government regulation is a concern for them and their business. Improving the business climate in California and the Bay Area is among the Bay Area Council’s lead policy priorities.

“At a local and regional level, we’ve got to be doing everything we can to make sure our employers succeed, that we’re not putting up barriers or making it difficult for them to invest, grow and create jobs here,” said Lenny Mendonca, Director at McKinsey & Company. We can’t change what’s happening at the national or global levels, but we can do more to ease the regulatory burdens that get in the way of employers generating revenue and creating jobs.”