Cannot use import statement outside a module - Middy 3.0.4 w/ Jest, TypeScript

Describe the bug Cannot run Jest tests with any versions of Middy above 3.x, as imports are not resolving for Middy dependencies. I have attempted using babel-jest to resolve .js dependencies with the same issue. This is a Serverless framework app with about 13 TypeScript functions we deploy to individual Lambdas to AWS.

What is also strange is that the functions will build fine with Serverless framework for deployments. It seems to be only tests that cannot parse import statements correctly.

Error mesage:

Environment (please complete the following information):

Dev dependencies

• Node.js: [14.16.1]
• TypeScript [^4.7.2]
• @middy/core [3.0.4]
• @middy/http-cors: [3.0.4]
• @middy/http-error-handler": [3.0.4]
• @middy/http-json-body-parser": [3.0.4]
• @middy/http-response-serializer": [3.0.4]
• @middy/validator": [3.0.4]

Test dependencies

• Jest [^26.6.3]
• TS-Jest [^26.5.6]

jest.config.js:

module.exports = {
  collectCoverage: true,
  coverageDirectory: "jest-coverage",
  moduleFileExtensions: ["js", "ts", "json", "node"],
  modulePaths: ["<rootDir>"],
  testMatch: ["**/*.spec.ts"],
  transform: {
    "^.+\\.ts?$": "ts-jest",
  },
  verbose: true,
  testEnvironment: 'node'
};

tsconfig.json

{
  "compilerOptions": {
    "baseUrl": "./",
    "esModuleInterop": true,
    "preserveConstEnums": true,
    "strictNullChecks": true,
    "sourceMap": true,
    "allowJs": false,
    "target": "es6",
    "typeRoots": ["node_modules/@types"],
    "resolveJsonModule": true,
    "moduleResolution": "node"
  }
}