The second quarter of 2020 is on track to be the worst for the state economy in the recorded history of Massachusetts and gross state product “may decline on the order of 50 percent,” economists at MassBenchmarks said Tuesday.
The COVID-19 pandemic and government-mandated businesses closures imposed to try to slow the spread of the coronavirus have blown a hole in the state’s economy. In weeks, Massachusetts went from a sub-3 unemployment rate to a record high of 15.1 percent, and tax collections went from $235 million ahead of benchmarks to now standing $2.253 billion behind expectations.
“State economic performance in the second quarter of 2020 is shaping up to be the worst in the recorded history of the Commonwealth,” MassBenchmarks, which is published by the UMass Donahue Institute with the Federal Reserve Bank of Boston, wrote in a summary of its May 28 editorial board meeting. “While board members agreed that the economic damage from COVID-19 is probably greatest in the current quarter, they were similarly unanimous that projecting the path of the economy is highly uncertain and more about future epidemiological conditions than economic fundamentals.”
How quickly and to what extent Massachusetts recovers from its worst-ever quarter will depend upon “an effective public health response,” and strict adherence to social distancing and the use of face coverings, the board determined.
As policymakers consider ways to balance the state budget, MassBenchmarks said it is as important as ever to heed the Hippocratic command to “first, do no harm.” The group urged legislators to “avoid counterproductive state and local spending cuts” and to consider temporarily raising some state tax rates.
“The coming months will be very difficult but, if our households, businesses, and institutions can be protected from the pandemic’s spread and sufficiently buffered from its economic aftermath, the Commonwealth will be much better positioned to recover more quickly whenever both economic and public health conditions return to some semblance of normalcy,” MassBenchmarks wrote. “While that may begin as soon as later this year, a full recovery from recent economic and fiscal shocks will take much longer.”
