State jobless rate soars past 15 percent
The Massachusetts unemployment rate surged above 15 percent in April, smashing four-and-a-half decades of records as the COVID-19 pandemic and the resulting public shutdowns caused massive job losses.
State labor officials announced Friday that Massachusetts shed 623,000 jobs in April, the first full month during which nonessential businesses were ordered to close their physical locations to employees and customers and most residents were urged to stay at home whenever possible.
From March to April, the unemployment rate increased 12.3 percentage points, to 15.1 percent, the highest level since the U.S. Bureau of Labor Statistics began tracking seasonally adjusted unemployment rates at the state level in 1976. The numbers reflect the waves of new jobless claims that have been filed in recent weeks and show how far the state has to go to defeat the virus and return people to their old jobs or new ones.
Michael Goodman, executive director of the UMass Dartmouth Public Policy Center and a co-editor of MassBenchmarks, said joblessness in Massachusetts might not have reached such elevated levels since the recession immediately after World War II.
"I don't think there are a lot of surprises here, but it's still pretty stunning when you look at the data," he said.At least 1 in 7 Massachusetts employees were out of work last month, and economists cautioned that the real figure is likely higher because of gaps that the statewide unemployment rate does not cover.
Goodman said "things are worse than they appear," while Alicia Sasser Modestino, associate director of Northeastern University's Dukakis Center for Urban and Regional Policy, said April's figures "could really just be the tip of the iceberg."
Pioneer Institute Research Director Greg Sullivan estimated that the actual unemployment rate today is more than 22 percent, based on additional unemployment claims filed in May.
Every private industry in Massachusetts besides the information sector reported losing jobs compared with April 2019, though the depth of the cuts varied.Sixty-one percent of positions in leisure and hospitality evaporated from March to April, by far the most significant impact, while construction lost 37.1 percent of its jobs, other services lost 35.7 percent, and trade, transportation and utilities lost 19.5 percent.
Goodman and Modestino said one major red flag in the state data is the level of strain in education and health services, a combined category that lost more than one-tenth of its jobs in April.
With so many colleges and universities and a robust health care sector in Massachusetts, the industries tend to be major and stable employers, they said.
"The fact that they are shedding jobs at as rapid a rate as we've seen is notable," Goodman said. "I think higher ed and health care institutions and health systems are particularly vulnerable, and we've come to rely on those as a source of innovation and economic opportunities. Both of those sectors are pretty heavily exposed here. That's a big vulnerability."
A key question hanging over the recovery process is how many jobs that have been cut will return as states lift mandatory business closures and stay-at-home recommendations.
The Baker administration unveiled plans Monday to begin reviving business activity in Massachusetts on a gradual basis, starting with construction, manufacturing and some additional limited health care services. Employers across the spectrum will face a range of new safety restrictions and caps on capacity.
"Because of that, they're not going to need to hire back the same number of workers they had before the pandemic hit," Modestino said. "Even under a best-case scenario of the economy reopening over the next one or two months, not all of those workers will be recalled."
Progress could be stunted if the COVID-19 outbreak, which already has killed more than 6,000 Massachusetts residents in the past two months, rebounds and the administration reinstates stricter limitations on public activity.
Massachusetts is not alone in facing unprecedented circumstances: 42 other states set their own records in April for monthly unemployment since 1976. The situation has prompted Congress to pass a series of major relief packages, and debate continues on additional aid.
The Bay State had the 16th-highest rate among all states last month, and it landed toward the middle of the pack compared with its New England neighbors. Rhode Island had the highest unemployment rate in the region, at 17 percent, while Connecticut was the lone state nationwide not to crack double digits with its 7.9 percent — a figure that Modestino said might be a reporting error.
Federal labor officials this month reported a 14.7 percent national unemployment rate for April, citing 20.5 million jobs lost that wiped out most of the gains made in the years after the Great Recession.
Modestino warned that about 95 percent of the state's job losses so far have occurred in the private sector, even as state and local governments around the country face budget shortfalls with tax revenues shrinking.
Massachusetts, like many other states, is required constitutionally to balance its budget every year. Gov. Charlie Baker, who Thursday described an "economic calamity" hitting the state, signed legislation last week allowing the Treasury to borrow billions of dollars this fiscal year to cover shortfalls and pay it back next fiscal year, when revenues from the tax-filing deadline delayed from April 15 to July 15 will materialize.
Even then, the Massachusetts Taxpayers Foundation projected, the state's tax collections in fiscal year 2021 could fall $6 billion short of earlier estimates.
Democrats in the U.S. House of Representatives proposed $875 billion in federal stimulus funding for state and local governments and an additional $20 billion for tribal governments, but the legislation has little traction among Republicans.
"We need Congress to pass a state and local aid package yesterday," Modestino said. "The last thing we need right now is to be adding public employees to the unemployment line."
If federal aid does not materialize, Modestino said, Massachusetts leaders should consider increasing the state income tax by 1 percentage point to help fill revenue gaps, potentially on a short-term basis with language reversing the increase once recovery is more stable.
Such an increase might be politically challenging, given how many workers face their own financial pressure. Legislative leaders already have hinted they are unlikely to complete a major transportation tax package that cleared the House before the pandemic hit because of the unpopularity of tax hikes at this time.
"It's a time to be making hard choices, and the fact of the matter is that spending cuts are more damaging to the economy during a recession than tax increases," Modestino said. "Tax increases can be put in temporarily. We can have it tied to economic performance so the income tax reverts to its current rate when we hit some stability."
In Friday's report, labor officials revised their earlier estimate of total Massachusetts jobs lost in March from 18,000 up to 43,800.
The dire economic climate also has put enormous strain on unemployment systems. Since March 15, Massachusetts labor officials have received more than 1.23 million new claims for traditional unemployment insurance or the expanded eligibility Pandemic Unemployment Assistance program.Last month, Baker asked the federal government for a $1.2 billion loan to replenish the state's dwindling unemployment insurance trust fund, which dropped by more than half from March to mid-April.
A spokesman for Baker's labor secretariat, which oversees unemployment programs, did not respond to questions Friday about whether the administration received that loan or requested any additional aid.
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