Editorial Staff

Report: MA Likely to See Sharp Spike in Unemployment Rate

/in , , , , , , /by Editorial Staff
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

Valhalla Foundation’s Nancy Poon Lue on STEM Access & Equity

This week on “The Learning Curve," host Gerard Robinson talks with Nancy Poon Lue, incoming Senior Director at the Valhalla Foundation, where she will be leading their K-12 math funding initiatives. Nancy shares her recent work with the EF+Math Program, some of the challenges America has faced in ensuring students have a strong grounding in math and science, and the kinds of results she aims to achieve for kids in all ZIP codes. 

Untangling Variants & Outbreaks: Can Vaccines & Natural Immunity Outrun Delta?

Hubwonk host Joe Selvaggi talks with author, surgeon, and public health expert Dr. Marty Makary about the COVID-19 Delta Variant, the durability of natural and vaccinated immunity, the benefits of booster shots, and the health risks for children as we move into the fall.

Trevor Mattos Shows How Massachusetts Runs on Immigrants

This week on JobMakers, Host Denzil Mohammed talks with Trevor Mattos, research manager at Boston Indicators, the research center at The Boston Foundation, which educates state and local leaders on the important contributions immigrants are making. They discuss the urgency of this work, particularly in a time of divisive disinformation about immigrants and the uncertainty of the pandemic, and some of the surprising findings on the disproportionately large impact immigrant workers, entrepreneurs and innovators are having on the local economy

Yale’s Pulitzer-Winning Prof. David Blight on Frederick Douglass, Slavery, & Emancipation

This week on “The Learning Curve," Cara Candal and guest co-host Derrell Bradford talk with David Blight, Sterling Professor of American History and director of the Gilder Lehrman Center for the Study of Slavery, Resistance, and Abolition at Yale University. He is the author of the Pulitzer Prize-winning biography, Frederick Douglass: Prophet of Freedom.

UVA Prof. E.D. Hirsch, Jr. on Core Knowledge, Equity, & Educating Citizens

This week on “The Learning Curve," co-hosts Cara Candal and Gerard Robinson talk with Professor E.D. Hirsch, Jr., founder and chairman of the Core Knowledge Foundation, professor emeritus at the University of Virginia, and acclaimed author of the books, Cultural Literacy: What Every American Needs to Know and How to Educate a Citizen: The Power of Shared Knowledge to Unify a Nation.

“Key of the Gulf” – Exploring Cuba – 35 Resources for Parents & Students

Castro’s despotism, the Cold War, the Cuban Missile Crisis, and the Embargo, remains the Cuban people – vibrant, creative, pious, and poor, who have continued to inspire and awe with their smiles, culture, music, dance, food, tobacco, resilience, and hopes. With the desire of passing along some of this magic to American families, students, teachers, and schools, we’re providing a variety of resources to educate our people about their neighbors, who live a mere 100 miles from our shores, in Cuba.

Human Rights Advocate Kristina Arriaga on Cuba, Religious Liberty, & Cancel Culture

This week on “The Learning Curve," co-hosts Cara Candal and Gerard Robinson talk with Kristina Arriaga, president of Intrinsic, a strategic communications firm, and former vice chair of the U.S. Commission on International Religious Freedom. Kristina shares her family’s experiences fleeing Castro’s communist regime in Cuba and other hardships, and how her background has shaped her commitment to religious liberty.

Pandemic Pension Payout: Essential COVID-19 Public Workers Rewarded Whether Essential or Working

Hubwonk host Joe Selvaggi talks with Pioneer Institute’s Director of Research and former Massachusetts Inspector General and State Representative Greg Sullivan about HB 2808, COVID-19 Essential Employee Retirement Credit Bonus, discussing the merits of the recently proposed joint bill, its cost, and our current public debt burden in the Commonwealth.

MBTA Ridership Trends Compared to Public Transportation Agencies Nationwide

0 Comments
/
The COVID-19 pandemic had a devastating effect on our economy,…

Public Statement on Implementation of the Charitable Giving Deduction

Despite being awash in cash, the state Legislature just overrode Gov. Charlie Baker’s veto of a provision to delay by yet another year a tax deduction for charitable donations. Rep. Mark Cusack, House chair of the Joint Committee on Revenue, said “it doesn’t mean no, just not now.” If not now, when?

The Globe’s Ornaments – Celebrating the Great Cities of the Ages – 35 Resources for Parents & Students

Celebrating the Great Cities of the Ages - This is part of Pioneer’s ongoing series of blogs on curricular resources for parents, teachers, and students during COVID-19.

Jeeves & Wooster’s World The Comic Genius of P.G. Wodehouse – 30 Resources for Parents & Students

Life and writing can and should be playful, witty, light, fun, and make us smile. This is particularly important during the hard realities and sometimes loneliness of COVID, lockdowns, masks, and the increasingly stilted use of language today. To provide some much-needed comic relief and to help people of all age groups glory in the English language, take ourselves less seriously, and laugh more – please enjoy the world of P.G. Wodehouse!