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

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!

Public Statement on the MA Legislature’s Blanket Pension Giveaway

Beacon Hill just put on full display what happens when it is awash in money. House Bill 2808 is entitled, “An Act relative to providing a COVID-19 retirement credit to essential public workers.”  It calls for adding three years of additional retirement credit to state “employees who have volunteered to work or have been required to work at their respective worksites or any other worksite outside of their personal residences during the COVID-19 state of emergency…” But upon reading the brief bill, it quickly becomes clear that this legislation is irresponsible in the extreme.

Employment trends in the Greater Boston Area and Touristy Massachusetts Counties during the COVID-19 Pandemic

/
Using MassEconomix, Pioneer Institute’s database on employment…

The COVID-19 Impact on Massachusetts Community College Enrollment & Success Trends

Enrollment at Massachusetts community colleges has dropped 32.61…

Elevating Liberal Democracy Above Fragmentation – 30 Resources for Citizens and Schools

In Pioneer’s ongoing series of blogs on curricular resources for parents, families, and teachers during COVID-19, this one focuses on: Elevating Liberal Democracy Above Fragmentation.

“Hellhound on My Trail” Celebrating American Blues Music – 35 Resources for Students

As music historian Ted Gioia tells us, the blues are disappearing from popular music, because of modern technology and it not being taught. American schoolchildren need to know more about the basics of blues music history and its many African-American geniuses, who reshaped the sounds and rhythms of all peoples across the globe. To remedy this, we’re offering a variety of resources to help parents, teachers, and high schoolers.

Why did some nursing homes experience more COVID-19 deaths and infections than others?

/
The COVID-19 pandemic has caused great loss for Massachusetts…

Ely Kaplansky Goes from Immigrant to Inc. 5000 Insurance Entrepreneur

This week on JobMakers, host Denzil Mohammed talks with Ely Kaplansky, President & CEO of Kaplansky Insurance. Since 1974, Ely has created hundreds of jobs in Massachusetts and beyond, with 85 employees in 15 offices across the state today, and he has grown his business during the pandemic, such that Kaplansky Insurance was named to Inc. magazine’s "5000 Fastest-Growing Private Companies in America" list. His success fulfilled the dreams of his parents when they moved from Israel to America in 1955, with just the clothes on their backs and an aunt to take them in. Their journey began in the concentration camps of Germany, and Ely’s story is all about the opportunity and freedom America offers.

Aurora Institute’s Susan Patrick on Digital Learning Lessons from COVID-19

This week on “The Learning Curve," co-hosts Gerard Robinson and Cara Candal talk with Susan Patrick, the President and CEO of Aurora Institute and co-founder of CompetencyWorks. Susan shares observations about the long-term implications of the COVID-19 pandemic for American K-12 education, and the prospects for expanding digital learning.

Celebrating American Independence! – 50 Resources on America’s Founding for Schoolchildren & Citizens

American schoolchildren need to know more about the basic history of and lessons from the American Revolution and War for Independence, including perhaps the greatest leader and hero the country has ever produced, George Washington. To do our small part to help the cause, we’re offering a variety of resources to help parents, teachers, schoolchildren, and citizens better celebrate the Fourth of July!

Why does a gender-gap persist in vaccination rates?

/
Men are more likely to die of COVID-19 than women: 13 men die…

“The Jazz Age” – 1920s America – 50 Resources for High School Students

American schoolchildren need to know more about the basics of the history of and lessons from the 1920s, which did as much as any decade to shape our modern country in the last century. To remedy this, we’re offering a variety of resources to help parents, teachers, and high schoolers: