Stress over the prospect of an economic downturn appears to have ticked higher due to dramatic trade and tariff machinations, but the Healey administration last week slightly upgraded its already-strained forecast for the state’s unemployment insurance system.

And in the eyes of one expert regularly relied upon by state budget-writers, the methodology behind the change is “absurd.”

The state Department of Unemployment Assistance published the latest quarterly report about the trust fund used to pay joblessness benefits, again projecting the account funded by a tax on employers will dip into the red by 2028.

However, officials now estimate a slightly smaller deficit on the horizon – about $51 million at the end of 2028 and $364 million at the end of 2029 – than when they last published a quarterly report in January.

Forecasts for UI tax collections and benefit payouts increased from the January report to the new version, with collections growing by a larger rate, which trimmed down the deficit expected in later years, an official said.

Buttressing the forecast is an assumption that the statewide unemployment rate will range between 3.67% and 3.77% through 2029 – a suggestion that Center for State Policy Analysis Executive Director Evan Horowitz said left him “baffled.”

“The projection of an unemployment rate at 3.7% for the next five years is absurd. It’s above that now,” Horowitz said. “The idea that in the midst of a likely coming recession, or if not a recession [then] slowing growth, and global economic perturbation, we’re going to go back to full employment and stay there – it makes no sense.”

“That assumption drives a lot of their modeling. It is one of the two or three most fundamental assumptions,” he added. “Take that away and what is already a relatively grim report about the prospects of our UI Trust Fund would be a macabre report.”

The Massachusetts unemployment rate last fell as low as 3.7% in January 2024. Since then, it has been climbing.

Labor officials announced Friday that the Massachusetts rate rose by one-tenth of a percentage point again to reach 4.4% in March, two-tenths above the national rate.

Administration officials used labor data as well as March 2025 forecasts from rating agency Moody’s to craft their five-year unemployment rate projections, according to a state labor official who agreed to speak only on background.

The official added that the forecast factors in some volatility in the unemployment rate in 2024 and then smooths out in later years of the analyzed period.

When more people are out of work, they draw more money from the unemployment insurance trust fund, cutting into its balance that comes almost entirely from money paid by employers.

Horowitz said an optimistic forecast could mask “how quickly things can and will go south and how prepared we are.”

The latest report, he noted, estimates that the tax rates businesses pay to cover unemployment will move from the fourth-highest allowable level to the highest over a three-year period.

“If we get a recession, that’s not what’s going to happen – [tax rates] are going to jump several levels unless there’s some kind of state intervention,” Horowitz said. “A more honest accounting, I think, would allow policymakers to get ahead and think about how they want to handle a likely jump in rate, as opposed to gradual increases.”

The state’s unemployment system has long been a source of hand-wringing for powerful business groups, many of whom argue that Massachusetts offers some of the highest benefits and broadest eligibility in the nation, saddling employers with high costs.

Massachusetts must also pay $203 million per year from the unemployment insurance trust fund over a decade under a settlement with the federal government to resolve a $2.5 billion error committed by former Gov. Charlie Baker’s team.

The new report for the first time incorporates those costs into its projections.

Healey deputies have said businesses will not see any impact on their UI taxes related to the settlement costs until at least the end of 2026, and pledged to pursue systemwide reforms.

“Since January 2025, Secretary of Labor and Workforce Development Lauren Jones and Secretary of Administration and Finance Matthew Gorzkowicz have met individually with business, labor, and advocacy groups as part of a comprehensive review of the UI Trust Fund and related efforts to assess potential reforms,” said EOLWD spokesperson Matt Kitsos. “More stakeholder meetings are scheduled for the coming weeks and the administration will continue to work closely with all partners to review potential policy and system improvements that support employers and impacted workers.”

Although some – including Horowitz – have argued that businesses would have been on the hook anyway if the Baker administration properly paid benefits, some industry leaders are campaigning for action to prevent settlement costs from falling on employers.