Report: MA Likely to See Sharp Spike in Unemployment Rate

Share on Facebook
Share on Twitter
Share on
LinkedIn
+

State should join others in lobbying Congress for large block grants to avoid severe fiscal crisis 

BOSTON – The COVID-19 recession could cause Massachusetts’ unemployment rate to skyrocket to 25.4 percent by this June, according to a new policy brief published by Pioneer Institute.  The Commonwealth’s unemployment rate was 2.5 percent in February.

“Massachusetts should join with other states to lobby Congress for large block grants to assist state governments during this unprecedented time,” said Greg Sullivan, co-author with Charles Chieppo, of Unprecedented Massachusetts unemployment projections set the stage for a state budget crisis.  “The alternative is a state budget crisis of unprecedented severity.”

On April 2nd, the federal Bureau of Labor Statistics announced that 148,452 people in Massachusetts filed for unemployment insurance (UI) during the week ending on March 28, up from 4,712 during the first week of March.  At 8.6 percent, the Commonwealth ranked sixth in the country in terms of the percentage of its total civilian workforce making jobless claims.

Nationally, the April 2nd jobs report found that 6.65 million people filed for unemployment insurance during the same week, more than double what many economists expected.  As a result, the total number of Americans seeking unemployment benefits has increased by more than five-fold in just two weeks.

Even before the worse-than-expected jobs report, Federal Reserve Bank of St. Louis economist Miguel Faria-e-Castro estimated that national unemployment could rise to nearly 10 times the February 2020 rate of 3.5 percent.  This would be both the highest rate and the fastest rise in U.S. history.  Even during the Great Depression, it took four years for unemployment to increase from 3.2 percent before the 1929 stock market crash to 24.9 percent in 1933.

Faria-e-Castro predicts that the number of unemployed Americans will rise from 5.76 million in February to 52.8 million in June.  If Massachusetts experiences a similar eight-fold increase in that time, about 975,000 state residents would be unemployed, which translates to a 25.4 percent unemployment rate.

More than a quarter of the workforce being unemployed would trigger a severe state budget crisis.  In the Great Recession, during which Massachusetts unemployment rate peaked at 8.3 percent, the Commonwealth’s income tax revenue fell from $12.5 billion in fiscal 2008 to $10.1 billion in fiscal 2010.

Sales tax revenue declined by just 5 percent during that period, but the COVID-19 recession is fundamentally different because governments have effectively ordered non-essential businesses to close.

Massachusetts is expected to receive $2.67 billion from the recently enacted Coronavirus Aid, Relief and Economic Security Act.  The legislation will also temporarily increase the federal matching rate for Medicaid, provide an additional $600 a week for up to four months to everyone collecting UI benefits, expand the categories of workers eligible for UI and fund an additional 13 weeks of benefits beyond the normal unemployment time limit.

This would help state finances because UI benefits are taxable.  But the $1,200 rescue checks most adults will receive are not, and the law doesn’t help Massachusetts fund the usual 30 weeks of unemployment benefits.

“State block grants are a must,” said Pioneer Executive Director Jim Stergios.  “Spending the Commonwealth’s $1.7 billion UI reserve or digging too deeply into the recently restored $3.3 billion rainy day fund would undermine our fiscal health and weaken our ability to conduct the people’s business.”

About the Authors

Gregory Sullivan is Pioneer’s Research Director. Prior to joining Pioneer, Sullivan served two five-year terms as Inspector General of the Commonwealth of Massachusetts and was a 17-year member of the Massachusetts House of Representatives. Greg is a Certified Fraud Investigator, and holds degrees from Harvard College, The Kennedy School of Public Administration, and the Sloan School at MIT.

Charles Chieppo is a Pioneer senior fellow. Previously, he was policy director in Massachusetts’ Executive Office for Administration and Finance and directed Pioneer’s Shamie Center for Restructuring Government. While in state government, Charlie led the successful effort to reform the Commonwealth’s public construction laws, helped develop and enact a new charter school funding formula, and worked on state workforce issues such as pension reform and easing state restrictions against privatization.

About Pioneer

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Get Our COVID-19 News, Tips & Resources!

  • This field is for validation purposes and should be left unchanged.

Related Content

The 65th Anniversary of the Murder of Emmett Till: 6 Key Resources for K-12 Education

Continuing Pioneer’s ongoing series of blogs on curricular resources for parents, families, and teachers during COVID-19, this post focuses on the 65th anniversary of the murder of Emmett Till, which is August 28, 2020.

Daughters of Liberty: Celebrating the Centennial of Women’s Suffrage & History – 10 Key Resources for K-12 Education

/
In Pioneer’s ongoing series of blogs here, here, and here on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Celebrating the Centennial of Women's Suffrage & Women’s History.

Christensen Institute’s Julia Freeland Fisher on K-12 Disruptive Innovation, Professional Networks, & Social Mobility

/
This week on “The Learning Curve,” Cara and Gerard are joined by Julia Freeland Fisher, director of education research at the Clayton Christensen Institute.

Effects of Covid-19 on the Accommodation and Food Services Industry

/
Since March, lockdowns and safety regulations from the Covid-19 pandemic have dramatically affected the Accommodation and Food Services industry. The sector is predicted to lose at least 2.1 billion dollars in Massachusetts before recovering. These losses affect individuals, businesses, and Massachusetts’ economy as a whole. 

Mapping K-12 School Reopening in Massachusetts

/
As the 2020-21 school year begins for the approximately 950,000 schoolchildren in Massachusetts, our state and country are working to adapt to the unprecedented moment presented by COVID-19. To aid in these efforts, Pioneer Institute is posting a database and map of districts’ reopening plans.

Doctors Beyond Borders: Firefly Health Shines a Light on Virtual Primary Care

/
Join Hubwonk host Joe Selvaggi as he speaks with Firefly Health President Fay Rotenberg and Primary Care Doctor and Co-Founder Jeff Greenberg as they discuss the promise and potential of virtual primary care to deliver direct doctor access, price transparency, and more holistic healthcare that may revolutionize the healthcare system.

COVID-19 Roundup from Pioneer: COVID vaccine update; Back to School?; Who’s really getting PPP Loans?; Hubwonk: COVID & public spaces; What about school sports?; & more!

/
COVID-19 Roundup from Pioneer: COVID vaccine update; Back to School?; Who's really getting PPP Loans?; Hubwonk: COVID & public spaces; What about school sports?; & more!

Drawing on State Guidelines to Keep Youth Baseball Alive during COVID-19

/
Since Major League Baseball finalized its reopening plans in…

President of D.C.’s AppleTree Institute, Jack McCarthy on Charter Schools and Fall Reopening

/
This week on “The Learning Curve,” Cara and Gerard are joined by Jack McCarthy, president and CEO of AppleTree Institute for Education Innovation and board chair of AppleTree Early Learning Public Charter School. Jack shares what animated him to establish this highly innovative early childhood charter public school network that serves the most vulnerable children in Washington, D.C.

Youth Basketball and COVID-19: Preparing an Indoor Winter Sport for a Global Pandemic

/
With a COVID-19 vaccine’s widespread availability still estimated…