'Something Fishy in Massachusetts': Unemployment fraud in Mass. muddles jobs numbers

By Alice Wallace, CNN

The number of first-time claims for weekly jobless benefits fell last week to 242,000, down 22,000 from 264,000 the week before, according to data published Thursday by the Department of Labor.

Continuing claims, which are filed by people who have received jobless benefits for more than one week, dipped to 1.799 million for the week ended May 6 from a revised 1.807 million the week prior.

Economists were forecasting the latest initial and continuing claims to land at a seasonally adjusted 254,000 and 1.818 million, respectively, according to consensus estimates on Refinitiv.

However, reports of incidents of fraud in Massachusetts have muddied this key piece of economic data in recent weeks.

A week ago, the Department of Labor's report on unemployment insurance filings showed that the number of weekly initial claims jumped by 22,000 to land at their highest level since October 2021. However, a large share of those new claims came from Massachusetts, where the state labor department said the reported gain was a reflection of an increase in fraudulent activity and not necessarily a spike in people filing for unemployment benefits.

"The Massachusetts Department of Unemployment Assistance is experiencing an uptick in fraudulent attempts to access unemployment insurance benefits," Matthew Kitsos, a spokesman for the state's Executive Office of Labor and Workforce Development, said in a statement. "Fraudulent attempts are increasing across the country, and Massachusetts is no exception. The increase seen in initial weekly unemployment claims is not reflective of individuals filing for unemployment insurance but rather fraudulent attempts on the system."

Thursday's report appears to counterbalance that and recent increases in Massachusetts. The weekly claims attributed to Massachusetts fell by 14,042 on a non-seasonally adjusted basis, representing three-quarters of the decline of 18,605 claims.

"Apart from Massachusetts, initial claims have stabilized in recent weeks after drifting higher in [the first quarter], a reminder that labor market conditions are still relatively tight," Nancy Vanden Houten, Oxford Economics lead US economist, wrote Thursday. "While we expect the [Federal Reserve] to leave rates steady at its June meeting, a resumption of rate hikes can't be ruled out if labor market conditions don't ease more significantly."

Continuing claims showing stickiness

In a note issued earlier this week titled "Something Fishy in Massachusetts," Bank of America economists reported that during the week ending May 6, initial jobless claims rose by 6,420 on a non-seasonally adjusted basis, accounting for 45% of the total increase of 13,969 claims. The outsized influence of Massachusetts' claims was an anomaly, BofA economists wrote, noting that the state's total employment accounts for under 3% of overall US employment, and its initial jobless claims are typically under 3% of all weekly US claims.

When excluding and recalculating filings in Massachusetts, initial claims have instead moved "sideways," pointing to limited layoffs, economists Stephen Juneau and Michael Gapen wrote.

Continuing claims, however, appeared to be less distorted by the activity in Massachusetts, the economists wrote. Those continue to serve as a reflection of "stickier" unemployment, they wrote.

"After reevaluating the latest claims data, we take less signal from the initial claims data," Juneau and Gapen wrote in the Tuesday note. "While there are signs that unemployed workers are having a harder time finding a new job due to lower hiring rates, layoffs remain low, and the labor market remains firm."

Weekly jobless claims — which are highly volatile — remain below historical averages: In the decade before the pandemic, weekly claims averaged 311,000.