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

Kelly Smith, Prenda CEO, on Microschooling & the Future of K-12 Learning

0 Comments
/
This week on “The Learning Curve,” Cara and Gerard are joined by Kelly Smith, founder and CEO of Prenda, a company that helps create flexible learning environments known as microschools. Often described as the “reinvention of the one-room school house,” microschools combine homeschooling, online education, smaller class sizes, mixed age-level groupings, flipped classrooms, and personalized learning.

Lockdowns – Lawless or Laudable? Grading Gov. Baker’s COVID-19 Emergency Orders 6 Months On

Join Joe Selvaggi and Pioneer Institute’s executive director Jim Stergios for a conversation with Boston Globe columnist Jeff Jacoby about the lawsuit against the Massachusetts Governor’s executive orders. They will explore what can be learned from the first six months of the COVID-19 pandemic, and what must be considered when devising a new way forward.

“City Upon a Hill” Massachusetts Monuments & Memorials: 25 Resources for K-12 Education

In Pioneer’s ongoing series of blogs here, here, here, and here on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Introducing K-12 schoolchildren to Massachusetts monuments & memorials.

U-Ark Prof. Jay Greene & EdChoice’s Jason Bedrick on Yeshivas vs. New York & Religious Liberty

0 Comments
/
This week on “The Learning Curve,” Cara and Gerard are joined by Jay Greene, the Distinguished Professor and Chair of the Department of Education Reform at the University of Arkansas, and Jason Bedrick, the Director of Policy for EdChoice. They discuss their timely new book, Religious Liberty and Education: A Case Study of Yeshivas vs. New York, about the recent battle between Orthodox Jewish private schools and New York's state government over the content of instruction.

Drug Rebates: How Pharmacy Benefit Managers Manipulate Price & Limit Choice

0 Comments
/
Join host Joe Selvaggi and his guest Dr. Bill Smith as they discuss the complex incentive structure between drug manufacturers, health plans, and pharmacy benefit managers. In this episode, they focus on how drug rebates work and how a system intended to optimize value may actually deliver higher costs and fewer choices. Joe and Bill also use this framework to speculate on the price of a COVID-19 vaccine, and who will likely pay for it.

Michelle Rhee, Former Chancellor, D.C. Public Schools, on Leading Urban District Reform & the COVID-19 Moment

0 Comments
/
This week on “The Learning Curve,” Cara and guest co-host Kerry McDonald are joined by Michelle Rhee, founder and former CEO of StudentsFirst and prior to that, former chancellor of the District of Columbia Public Schools (DCPS). 

“Every Child is an Artist…” – 15 Resources for K-12 Art Education

0 Comments
/
In Pioneer’s ongoing series of blogs on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Introducing K-12 schoolchildren to great works of art.

Confronting COVID Constraints: How Certificate of Need laws stifle innovation, increase costs, and reduce quality in healthcare

0 Comments
/
Join Joe Selvaggi and co-host Josh Archambault, Pioneer Institute's Senior Fellow in Healthcare, as they talk with Institute for Justice’s Jaimie Cavanaugh about the effects of Certificate of Need laws on the healthcare system.

Executive branch overreach, blanket orders having harmful effects

0 Comments
/
At the outset of the pandemic, limited knowledge and the need to mitigate risk understandably led to political overreach. At this point in the disaster response, though, we are far better at distinguishing fact from fiction and policies that have worked from those that have not.

“Music is liquid architecture” – 15 Resources for K-12 Education

0 Comments
/
In Pioneer’s ongoing series of blogs on curricular resources for parents, families, and teachers during COVID-19, this entry focuses on introducing K-12 schoolchildren to timeless music.

MA’s Remote Learning Regs Should Specify Consistent District Grading Policies, Return of MCAS in 2020-21

The COVID-19 pandemic-related revisions to Massachusetts’ remote learning regulations should restore state and local accountability by specifying that any remote academic work shall, to the same extent as in-person education, prepare students to take MCAS tests, and that grading criteria should be the same across in-person, remote, and hybrid learning environments, according to a new policy brief published by Pioneer Institute.

The ABCs of the Newest Diagnostic Science for COVID-19 Testing

0 Comments
/
Join Hubwonk host Joe Selvaggi as he talks with Hannah Mamuszka, expert in diagnostic science, about the state of COVID-19 testing technology and its implications for a safer return to school and work in the fall.