Rising layoffs? Not so fast. Fraud in Massachusetts inflates jobless claims.

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Widespread fraud in Massachusetts has exaggerated the recent surge in jobless claims, suggesting that a seemingly steady rise in U.S. layoffs is largely a mirage.

New jobless claims in Massachusetts jumped to a 2-1/2-year high of 34,943 two weeks ago, up from less than 7,000 a week in late January.

In the same week of May in 2022, by contrast, new unemployment filings in the state totaled just around 4,000.

A sharp upturn in new claims in Massachusetts starting around late February, as it turns out, largely fueled the increase in total U.S. jobless claims. They jumped to a seasonally adjusted 264,000 in the first week of May from 221,000 a few months earlier.

Read: U.S. jobless claims fall sharply to 242,000 as Massachusetts battles to reduce fraud

Does this mean layoffs in the U.S. haven’t risen at all this year? No. More businesses have laid off workers, especially in high tech. Jobless claims have crept higher after touching a more than half century low of 182,000 last fall.

Yet the increase in jobless claims now appears rather small and not indicative at all of a deteriorating labor market when the fraud in Massachusetts is taken into account.

“If you look at unadjusted claims, they’ve barely budged all year,” noted Richard Moody, chief economist at Regions Financial.

The Massachusetts Department of Unemployment Assistance acknowledged it’s combatting an increase in fraud. “DUA continues its efforts to prevent, detect, and capture these fraudulent claim attempts,” said spokesman Matthew Kitsos.

The state plans to amend recent jobless-claims totals, he said, a process that is expected to reduce the total number filings at the national level as well.

In the most recent week, Massachusetts reported a drop in raw or actual new claims to 20,901 from 34,943. Yet that’s still four times higher compared to the state’s average weekly total in 2022.

Looked at nationally, Massachusetts reported the second highest number of new claims after California, another state that has suffered from excessive fraud since the pandemic.

New claims in Massachusetts easily surpass Texas and New York, two states with a much bigger population and lots more workers.

By contrast, Massachusetts is 13th among the states in the total number of employees, according to the Bureau of Labor Statistics.

Two states with a similar number of employed residents, Virginia and Washington, show a much lower number of new applications for jobless benefits.

New filings totaled 4,965 in Washington last week and a smaller 2,727 in Virginia.

What’s more, not a single state except for Massachusetts has shown an increase of more than 3,000 new claims when comparing the second week of May 2023 to the same week in May 2022.

“I think the correct approach is to look at claims and assume that it’s overstating by 15,000 to 20,000 per week until Massachusetts claims are back down below 10,000,” U.S. economist Thomas Simons of Jefferies said in an emailed response.

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