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

UVA Law Professor Kimberly Robinson On Legal Debate About Education As Federal Right

/
This week on “The Learning Curve,” Cara and Gerard continue coverage of COVID-19’s impact on K-12 education, joined by Kimberly Robinson, Professor at the University of Virginia School of Law and the Curry School of Education, about her new book, "A Federal Right to Education: Fundamental Questions for Our Democracy," and the need for states to establish a “floor of opportunity” to ensure educational equity.

The past seven weeks of Massachusetts unemployment claims total 25.8 percent of the civilian workforce.

/
The U.S. Department of Labor released its weekly report on jobless claims Thursday morning at 8:30 a.m., reporting that Massachusetts received 55,448 initial unemployment insurance (UI) claims during the week ended May 2. This brings the total of regular UI claims filed in Massachusetts since March 14, the beginning of the unemployment surge, to 781,110. 

National Study Finds Most States Lack Healthcare Price Transparency Laws

At a time when the coronavirus pandemic has caused massive shifts in state policies on telehealth and scope of practice in healthcare, a new Pioneer Institute study underscores that most of the 50 states continue to suffer from weak laws regarding price transparency.  The study identified states that have laws that require carriers, providers or both to provide personalized cost information to consumers before obtaining healthcare services.  Fully 33 states placed in the lowest of the three broad analytic tiers on the strength of their state healthcare transparency laws. 

Explosion in ESL enrollment creates new opportunities, challenges

/
  The U.S. Census Bureau estimates that, between 2010…

COVID-19 will likely lead to a recession. Can Massachusetts municipal budgets handle one?

/
Using municipalities' experiences during the Great Recession, a new policy brief examines the likely impact of COVID-19 on local property taxes, as well as political implications for state aid. We list the municipal revenues by category among the least tax-reliant communities in Massachusetts, show the trajectory of tax revenue growth rate in Massachusetts state and local governments, and rank stabilization fund assets per capita among Massachusetts Gateway Cities.

Conquering COVID-19: When and From Where Will Vaccines and Therapies Emerge?

/
This week on Hubwonk, Host Joe Selvaggi is joined by Pioneer’s Bill Smith, Visiting Fellow in Life Sciences, and Dr. Peter Kolchinsky, Harvard-trained virologist, biotech investor and author of the new book, The Great American Drug Deal, to learn how the SARS-CoV2 works, what a vaccine may look like, and how we might produce it to scale.

COVID-19 Roundup from Pioneer: Human testing of a vaccine; NYT best-selling author John Barry on COVID-19 & warmer weather; Just who’s getting stimulus $?; Latest unemployment #s; What will reopening look like?; Tipping point for Telehealth & more!

/
Pioneer staff share their top picks for COVID-19 stories highlighting useful resources, best practices, and questions we should be asking our public and private sector leaders.

New York Times #1 best-selling author John M. Barry on the 1918 Influenza Pandemic & lessons for COVID-19

/
This week on “The Learning Curve,” Cara and Gerard continue coverage of COVID-19’s impact on K-12 education, joined by John M. Barry, author of the #1 New York Times best seller, The Great Influenza: The Story of the Deadliest Pandemic in History.

The past six weeks of Massachusetts unemployment claims total 24.0 percent of civilian workforce

/
The U.S. Department of Labor released its weekly report on jobless claims this morning at 8:30 a.m., reporting that Massachusetts received 70,714 initial unemployment insurance (UI) claims during the week ended April 25. This brings the total of unemployment claims filed in Massachusetts since March 14, the beginning of the unemployment surge, to 725,018. 

Re-opening for business: What should employers and commercial real estate managers do to prepare?

/
Weeks away from re-opening, now is a time when employers and real estate managers must act. To assist our community in doing a great job of preparing, Pioneer Institute, in partnership with the law firm of Verrill, is sharing two checklists that will help you keep your employees safe, anticipate challenges, and develop feasible and useful methods to successfully deal with those challenges when they do.

Report Finds “Reopening Day” in the Commonwealth Will Likely Include Phasing in Businesses and Contact Tracing

New study compares the reopening of three European countries – Austria, Denmark, and Germany – to highlight approaches that could inform the Commonwealth’s reopening strategy.

To Read or Not to Read Shakespeare? 12 Great Ways to Get to Know The Bard During COVID-19

/
With school closures impacting 50 million children across America, and a challenging transition to remote learning,  many parents are seeking supplementary material to enrich their children's academic experience during COVID-19.  Fortunately, there is a wealth of information available to introduce children of all ages to, arguably, the greatest literary figure in the English-speaking world, William Shakespeare.