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

COVID-19 Vaccine: The End of the Epidemic is Within Reach

0 Comments
/
Join Host Joe Selvaggi and Virologist and Investor Dr. Peter Kolchinsky as they discuss the rapid development, efficacy, and rollout of the newly approved COVID-19 vaccines.

Knowledge is Power: Sir Francis Bacon and the Scientific Method – 10 Resources for High School Students

In Pioneer’s ongoing series of blogs here, on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Celebrating the 400th Anniversary of Sir Francis Bacon and the scientific method.

Stanford’s Prof. Caroline Hoxby on Charter Schools, K-12 Ed Reform, & Global Competitiveness

0 Comments
/
This week on “The Learning Curve,” Cara and Gerard are joined by Caroline Hoxby, the Scott and Donya Bommer Professor of Economics at Stanford University and a Senior Fellow of the Hoover Institution.

The 400th Anniversary of the Mayflower – 15 Resources for K-12 Students

In Pioneer’s ongoing series of blogs on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Celebrating the 400th Anniversary of the Mayflower’s voyage.

SABIS® President Carl Bistany on International Education, Charter Public Schools, & At-Risk Students

0 Comments
/
This week on “The Learning Curve,” Cara and Gerard are joined by Carl Bistany, the president of SABIS® Educational Systems, an education company founded over 130 years ago that serves young women in the Middle East, and poor and minority students in the U.S.

MBTA Cuts Ahead: COVID Causes Commuters To Consider Comprehensive Changes

0 Comments
/
Host Joe Selvaggi and Pioneer Institute Senior Fellow Charlie Chieppo discuss the reasons for the recently proposed cuts to MBTA service, and offer suggestions as to how the agency’s leadership could use this crisis to improve the service’s long-term health.

Pioneer Report Spotlights Decade-long Building Boom in Massachusetts Construction Industry

In the lead-up to the COVID-19 crisis, the Massachusetts construction industry enjoyed a boom in select subsectors, though employment numbers had yet to recover from the setbacks of the Great Recession, according to a new report from Pioneer Institute that draws data from the MassEconomix web tool.

Contracting with private providers could avert MBTA cuts

0 Comments
/
In response to a collapse in MBTA service in the winter of 2015, the newly formed Fiscal and Management Control Board (FMCB) set the authority on a course of bold reforms. The COVID-19 pandemic is once again presenting new and significant challenges to T leadership that require a rethinking of how service is delivered to stave off painful service cuts.

Pioneer Institute Statement on MBTA Service Cuts

Even as MBTA ridership and revenue have been gutted by the COVID-19 pandemic, the system remains a lifeline for so many residents in the Greater Boston area, especially those working in essential services like health care or in industries most impacted by the pandemic such as the restaurant sector.  Facing a crisis of this magnitude, T leadership must first do its all to rethink how it delivers services before reflexively making cuts.

Pioneer Checklist Includes Steps for Policy Makers, Business Owners to Revitalize Hardest-Hit Industries

Combining the recommendations of studies published earlier this year, Pioneer Institute has released “A Checklist for How to Revitalize the Industries Hit Hardest by COVID-19.” The recommendations for policy makers are organized in three sections: Immediate Relief, Tax Policy Changes and Permanent Reforms.  Business owner recommendations are split into COVID-19 Health and Safety Protocols, Expanded Services and Steps to Improve Cash Flow.

Capturing Voter Intent: What Polling Error Teaches Us About Electoral Trends

0 Comments
/
Join Host Joe Selvaggi and Harvard Professor Chase Harrison as they discuss polling methodology and what errors in 2020 reveal about voting during COVID-19 and changing attitudes toward pollsters.

Pioneer Report Highlights Pre-Pandemic Employment Growth in Massachusetts’ Hospitality & Food Industry

In the lead-up to the COVID-19 crisis, the Massachusetts Hospitality and Food Industry enjoyed generally positive employment growth, according to a new report from Pioneer Institute that draws data from the MassEconomix web tool. Most of the Hospitality and Food Industry employment across the state is concentrated in full-service restaurants and hotels.