Are We Headed for a Recession?

https://aimnet.org/are-we-headed-for-a-recession/

Robert Rose, Chief Credit Officer at AIM member Brookline Bancorp., has a unique view of where the US and Massachusetts economies are headed. Is the nation headed for a recession or already there? What can companies do to prepare?

Businesses to Repay $2 Billion for Jobless Claims

Eagle Tribune – Employers will be forced to repay nearly $2 billion in loans taken out by the state to help replenish a fund that pays out unemployment benefits.

Massachusetts saw a crush of jobless claims during the pandemic as hundreds of thousands of workers were sidelined to prevent spread of the virus.

The state borrowed billions of dollars to keep the fund solvent and pay off advances from the federal government to continue distributing benefits during the pandemic. A state law allows employers to be charged a “COVID-19 recovery assessment” of up to 125% of the annual debt service on the borrowing.

More than half of that bill will come due next year when employers will be assessed for $915 million to help the state repay the bonds, according to a new report from the state Executive Office of Labor and Workforce Development.

The annual assessments will drop to $365 million in 2024, $349 million in 2025, and $335 million in 2026, according to the agency’s report.

That’s in addition to the regular employee contributions that businesses are required to pay as part of unemployment insurance.

Business leaders say the assessments will only add to the mounting financial burden borne by employers who pay into the state’s unemployment fund.

“This is going to fall squarely on the backs of small businesses at a time when they are still struggling,” said Chris Carlozzi, state director for the Massachusetts chapter of the National Federation of Independent Businesses.

“Businesses have really been beat up over the past couple years, from a hiring crunch and supply chain issues to the restrictions of the pandemic itself,” he said. “And now the state is asking them to pay more for unemployment insurance.”

Over the past two fiscal years, employers have been assessed about $150 million to help the state repay previous borrowing to keep the jobless fund solvent.

But in August, the state issued $2.68 billion worth of bonds that will pump more money into the fund and pay off any remaining federal debt obligations.

Mail-In Ballots Most Popular in Older, Mostly White Towns

Boston Globe – More than one in five Massachusetts voters have requested mail-in ballots ahead of the Nov. 8 election, but the appeal of this pandemic-era approach is far from universal, state data show.

Those taking advantage of the state’s newly permanent expanded mail-in voting option tend to be older — either near or past retirement age — and they are also more likely to reside in predominantly white or affluent towns.

In three Cape Cod communities — Eastham, Orleans, and Brewster — anywhere from 38 to 39 percent of voters had asked for ballots as of Friday, with the wealthy, mostly white towns of Concord, Lincoln, Sudbury, and Lexington not far behind. In Acton, 40 percent of the town’s 15,787 voters have sought one, the highest share of any town or city.

The three Cape towns are predominantly white, with 93 to 96 percent of residents identifying as such, and are home to older populations. In Eastham, 43 percent of people are 65 years or older; in Orleans, 46 percent are.

The surge in requests from those communities underscores what’s been a stubborn divide in voter engagement between the state’s suburbs and its urban centers, where residents are typically more likely to vote on Election Day itself and generally turn out in numbers far below their suburban counterparts.

Black Friday Season has Already Begun

Boston Globe – Last year, the pandemic hit holiday shopping season hard. Retailers couldn’t stock their shelves fast enough; snarled supply chains jammed the pipeline for books, board games, and glassware. Stockings and ornaments sat on cargo ships for weeks, and shoppers scrambled to find must-have gifts for under the tree.

In 2022, the tables have turned.

Stores right now are dealing with a record $732 billion of unsold merchandise, a 21 percent increase from 2021, according to the Census Bureau. Really, a “sonic boom of inventory,” as Urban Outfitters CEO Richard Hayne put it on an August earnings call. And in a tougher economy — with inflation high and the threat of recession lurking — consumers’ appetite to spend is trending down.

For retailers, it’s another painful twist in what has been a rocky two-plus years since COVID hit, said Jon Hurst, president of the Retailers Association of Massachusetts.

“You can feel that the pandemic is still with us,” he said. “The challenges have just changed.”

After struggling with shortages since March 2020, the biggest brands say warehouses are now unusually full. Target canceled orders from suppliers as early as June to slash inventory. Nike says its North American inventories grew 65 percent in the three months ending Aug. 31. A few stores, such as Gap, are relying on a “pack and hold” strategy by storing overstock items to be sold later in 2023.

Massachusetts’ Middle Class is Feeling the Squeeze. Can the Next Governor Help?

Boston Globe – This November in Massachusetts, the economy is on the ballot. In poll after poll voters say their biggest concerns in the race to be the state’s next governor are financial, with 56 percent of people in a Suffolk University/Boston Globe/NBC10 Boston/Telemundo poll out last week saying they’re somewhat or very worried about their financial situation.

The reasons are obvious, and many.

Sky-high inflation, surging interest rates, spikes in the price of gas and energy, all exist on top of seemingly ever-rising costs for housing, health care, energy, and education that combine to make Massachusetts one of the most expensive places to live in the country.

It all adds up. And it’s been hitting home for people like Shelagh Flynn, a 70-year-old Gloucester resident who spent most of her life in Boston’s Mission Hill neighborhood. After working for nonprofits and as a Boston city employee, she’s now on a fixed income, and feels the pinch on every trip to Market Basket.

“It used to be, I’d get to the end of the month and I’d have a couple hundred bucks left, but with this inflation that hasn’t been true. I’m hitting rock bottom every month,” she said. “I’m not sure that there’s a lot that state government can do.”

Companies Cut Back on Office Space Amid Slow Return to Work and Recession Fears

Boston Globe – Boston’s office market is still struggling to find its footing amid a turbulent economy and an ongoing disconnect between many companies and their employees about returning to the office.

And that has a growing number of big-name companies apparently rethinking just how much office space they need.

General Electric Co. last week became the latest big-name Boston company to bail on a big office this fall, announcing it would vacate its 100,000-square-foot Fort Point headquarters and move to something smaller by early next year. Wayfair, Reebok, and a slew of technology tenants have recently made similar decisions to sublease space they’re under contract to rent for years to come.

Companies in urban Boston listed some 1.1 million square feet of office space for sublease just in the last three months, according to research from commercial brokerage CBRE. That has grown the stock of space available in the sublease market by about one-fourth in the last year, to 3.4 million square feet, about equal to its pandemic high and far more than was typical before COVID.

It’s not just the office market, either — lab space subleases in Boston have more than doubled in recent months “as life science users continue to reevaluate their real estate footprint,” according to a recent report from brokerage Newmark.

There are more people in office buildings than there were — occupancy levels downtown have more than doubled since this time last year — said Lauren Lipscomb, a senior vice president at CBRE in Boston. But the post-Labor Day return to office was smaller than anticipated. That’s putting pressure on employers and company leadership to offer workers something more than the same old offices they left behind in March 2020.

UMass Nurses Win Wage Increases in New Union Contracts

WHDH – Nurses and other health-care professionals in the University of Massachusetts health-care system will receive raises between 8% and 19.5% in recently-ratified union contracts, according to the Massachusetts Nurses Association.

Increases at UMass Memorial Medical Center, Marlborough Hospital, Clinton Hospital and UMass University Medical Center will vary for the 2,770 individuals represented by the union depending on the facility and the length of the contract.

“Our UMass nurses and health-care professionals have been the backbone of the Worcester-area hospitals since the pandemic started in early 2019. But these same professionals have also been overburdened and have often burned out,” said MNA President Katie Murphy.

“Too many patients, too few resources and insufficient compensation have forced them to leave the bedside. But with overdue improvements like those seen in these UMass contracts, we expect that nurses will return to and stay at the bedside — which is exactly what our local communities need.”

For UMass Memorial and UMass University in Worcester, which MNA said have struggled to recruit and retain staff, wage increases are expected to help bring more nurses in and allow the hospitals to achieve the safe patient limits laid out in union contracts.

At both Worcester hospitals, union members will receive 5% raises in the first and second years and 4% in the third.

Per-diem nurses at UMass Memorial, which employs 1,137 union members and ratified its three-year contract on June 29, will also receive raises. At UMass University Medical Center, whose 1,339 union members ratified their contract on Sept. 29, a previously-established “Baylor Plan,” which pays nurses who work 24 hours over a weekend as if they worked 30 hours, permanent.

Rep. Pressley Touts Dems’ Efforts on Student-Loan Forgiveness, Economic Relief

WGBH – The midterm elections are less than three weeks away, and despite some recent polls showing Republicans with a small advantage heading into the Nov. 8 election, U.S. Rep. Ayanna Pressley says she’s confident the Democratic Party can maintain control of the House of Representatives.

Polls show that the economy and the roughly 8.2% inflation rate are some of the most concerning issues for Americans heading into this year’s elections. Pressley said the Democrats can do a better job of touting the importance of economic support packages and the recent launch of President Joe Biden administration’s student-loan forgiveness plan.

“We need to make sure that people are having the means to meet their most basic needs, but also in order to do better,” she said on Boston Public Radio. “I can’t tell you how many people have come up to me in community because of this student debt relief. People are saying now I’ll be the first person in my family to buy a home.”

Under the student loan forgiveness program, a single person making less than $125,000 in annual income can have $10,000 forgiven. Recipients of Pell Grants, which are given to people with exceptional financial need, can have up to $20,000 forgiven.

According to White House estimates, more than 800,000 people in Massachusetts are eligible for some form of federal loan forgiveness. Pressley said that the program will also help address racial wealth inequalities.

Sustainability, Climate and Energy

New State Electric Vehicle Incentives Won’t Kick In until 2023

WHDH – If you’ve been waiting for the new Massachusetts electric vehicle incentives to kick in before buying an EV, it looks like you’ll have to keep waiting.

In mid-August, lawmakers passed a big climate bill that, among other things, overhauled the state’s electric vehicles incentive program, MOR-EV. The so-called DRIVE Act bumped the rebate for new EVs from $2,500 to $3,500 and made it available for people who bought used EVs as well. It also, importantly, said the rebate would be given at the point of sale to effectively lower the sticker price of the vehicle, and it offered extra money for lower income residents and people trading in gas-powered cars.

But several months later, none of these changes have gone into effect, leaving consumers, car dealerships and lawmakers frustrated and confused.

“It’s hard for me to accept that the minimum $3,500 subsidy — which became law … upon the date of the governor signing the DRIVE Act— is still not available to my constituents and to other people in Massachusetts,” Senator Mike Barrett, who helped craft the climate law, said at a Senate sub-committee meeting this week. “Why is that?”

State energy officials began by defending the delay, but eventually said there were two reasons for it: administrative back-end work and lack of funding.

“We have an existing contract with a vendor that executes the MOR-EV program. That contract did not anticipate some of the provisions within the new climate legislation,” said Patrick Woodcock, commissioner of the Department of Energy Resources, which administers the MOR-EV program.

Health Care

Healey announces $2.9 Million Grant for Those in Need of Urgent Mental-Health Care

WWLP – State Attorney General Maura Healey has announced a $2.9 million grant program that aims to help patients in urgent need of mental-health care.

The grant program will support nonprofit organizations in Massachusetts that provide services for patients in need of urgent mental health care, without needing to go through a hospital’s emergency department.

“As we see an increased demand for mental health services, it is vital that patients and families can access the appropriate care they need,” said AG Healey. “This grant program will help connect patients in crisis with more immediate mental health support while alleviating the strain on overwhelmed hospitals.”

Reports have shown that patients must wait in an emergency department, or medical-surgical bed, sometimes for days or even weeks, until a psychiatric bed, or other appropriate services, become available. Grantees may use the funds to create new programming and expand the capacity of current programs/services, where current funding sources have fallen short.

Step-Therapy Bill Moving through Informal Sessions

Commonwealth Magazine – For nearly eight years, patient advocate groups have been battling insurers to limit the use of step therapy, a policy requiring patients to try one treatment before accessing a different one. Could 2022 be the year a bill finally becomes law?

Advocates saw hopeful signs Thursday, as lawmakers started moving a bill in informal sessions. But whether it becomes law remains an open question since it still faces some opposition.

Marc Hymovitz, director of government relations in Massachusetts for the American Cancer Society Cancer Action Network, said the bill is a compromise between the House and the Senate. He said patient groups and insurers have continued talking for years to try to get all interested parties on the same page. “It’s a good example of all the stakeholders continuing to talk and continuing to try to get to yes,” Hymovitz said. “It took awhile, probably longer than patient groups wanted, but that’s what happened.”

However, while the House and Senate may agree, not all stakeholders do. Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, said she appreciates that the bill would not ban step therapy, as earlier versions would have. She said her tassociation agrees people should not be required to repeat a medication that is unsafe or ineffective if they change health plans. But she said the bill moving through the Legislature “goes beyond that and impacts the health plans’ ability to lower prescription drug costs and ensure patient safety.”

Step therapy, sometimes called “fail first” therapy, a a policy of insurers requiring a patient to try one drug – often a cheaper, older one – before switching to a different drug. Insurers say this limits costs and improves patient safety by not automatically approving access to the newest, most expensive drug.

Taxation and Budget

Unions and Business execs pour in cash on either side of ‘millionaires tax’ ballot fight

Boston Globe – The opponents of what’s known as the “millionaires tax” just had their most productive two weeks of fund-raising, collecting some $3.7 million largely from business executives.

This marked the first reporting period in which the Coalition to Stop the Tax Hike Amendment outpaced the Fair Share Massachusetts committee, which supports the income tax surcharge that will go before voters next month.

Fair Share raised nearly $3.2 million over the same two weeks, primarily from the National Education Association. In all, Fair Share has raised $21 million so far this year, well ahead of the opponents’ $13 million.

Most of the money is being spent to flood the airwaves with ads to persuade voters about Question 1 ahead of next month’s statewide vote. The ballot question would hit any earnings over $1 million with a 9 percent income tax rate, while keeping earnings below that threshold at the state’s standard 5-percent income tax.

Question 1′s stated goal is to raise money — at least $1.3 billion annually — for transportation and education. Estimates show around 20,000 taxpayers would be affected in any given year, though many would be one-time payers with windfalls from selling a business or real estate.

Proponents say Question 1 creates a more equitable tax structure and helps pay for badly needed fixes to schools and roads, while opponents say it will unfairly hurt small businesses and harm the state’s economic competitiveness.

Voters Have Repeatedly Said No to Raising Taxes on the Highest Earners. This Time Might be Different.

Boston Globe – A heated ballot campaign to raise taxes on the wealthy overshadows a ho-hum gubernatorial race. Opponents blast TV airwaves with an ad featuring a fisherman who worries new taxes will hurt small business owners. Proponents of the union-backed initiative tamp down fears with an ad of their own: “Of course some people’s taxes will go up a little, but they can afford it.”

The year was 1994, the last time voters faced a ballot question to change how income taxes are collected in Massachusetts. They resoundingly rejected the measure.

Now some of the same players on both sides are at it again ― from the Massachusetts Teachers Association, on one side, to the Massachusetts High Technology Council, on the other ― locked in a battle over the economic soul of the Commonwealth. Question 1 on the November ballot is billed as an effort to raise more money for education and transportation by increasing taxes on households with an annual income greater than $1 million.

This is the sixth attempt to persuade voters to undo the state’s flat income tax rate. Each previous time — 1962, 1968, 1972, 1976, and 1994 — proponents lost in a landslide. While some of the dynamics of the failed 1994 campaign exist today, there are critical differences that would suggest the sixth time might prove to be the charm for proponents.

“We were out-staffed. We were out-advertised. It was a tough situation,” recalled Peter Enrich, an emeritus professor of tax law at Northeastern University who was involved in the 1994 effort and serves as an adviser to today’s Question 1 proponents.

This go-round, backers of the tax measure have raised about $24.8 million, almost exclusively from education unions, while the opposition — bankrolled by the business community and wealthy individuals — has $13.7 million, according to state campaign finance filings.

Education

Appeals Court Stays Student-Loan Forgiveness Initiative

A U.S. appeals court on Friday temporarily blocked President Joe Biden’s plan to cancel billions of dollars in college student debt, one day after a judge dismissed a Republican-led lawsuit by six states challenging the loan-forgiveness program.

The 8th U.S. Circuit Court of Appeals granted an emergency stay barring the discharge of any student debt under the program until the court rules on the states’ request for a longer-term injunction while Thursday’s decision against them is appealed.

U.S. District Judge Henry Autrey in St. Louis ruled on Thursday that while the six Republican-led states had raised “important and significant challenges to the debt relief plan,” he threw out their lawsuit on grounds they lacked the necessary legal standing to pursue the case.

Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina said Biden’s plan skirted congressional authority and threatened the states’ future tax revenues and money earned by state entities that invest in or service the student loans.

White House press secretary Karine Jean-Pierre said Thursday’s temporary order does not prevent borrowers from applying for student debt relief or bar the Biden administration from reviewing applications and preparing them for transmission to loan servicers.

Nashoba Tech Receives $2.5 Million Grant for Electrical, Veterinary Programs

WHDH – Nashoba Valley Technical High School received the maximum award available — $2.5 million — in the latest round of Skills Capital Grants.

Gov. Charlie Baker, Lt. Gov. Karyn Polito and Education Secretary James Peyser announced the grants during a recent visit to Westfield Technical Academy.

The high schools receiving grants will make strategic investments over the next two years to grow their career-education programs to provide more learning opportunities for high-school students and adult learners, with several schools, including Nashoba Tech, expanding their Career Technical Initiative adult-training programs to offer more learning opportunities in the late afternoon and evening.

According to the Baker Administration, over the next five years, the grant awards will directly impact about 10,000 students across 38 different programs.

Nashoba Tech will split the $2.5 million award between the Electrical Technology and Veterinary Assisting programs — the two largest and fastest-growing technical programs at the Westford-based school.

Massachusetts Launches Six-Year STEM Academies for Young Students

MassLive – Massachusetts plans to launch between four abd six so-called STEM Tech Career Academies, allowing students to earn both their high school diplomas and postsecondary credentials through free six-year programs at community colleges.

Up to 2,000 students could be enrolled in the programs to earn associate degrees and industry credentials, the Baker administration announced Thursday, coinciding with the fifth annual Massachusetts STEM Week. The academies will feature collaboration with high schools, community colleges and employers.