All around the United States, mask mandates are being lifted, signaling a near end to the coronavirus pandemic. Over the year of quarantine and lockdown, the U.S. has faced the most rapid shutdown of economic activity ever seen. Weeks into the crisis, unemployment passed 10% — the peak recorded during the Great Recession.
Now in June of 2021, the economy seems to have begun its recovery. The unemployment rate was reported to be 5.8% this past May and is predicted to continue its decline to pre-COVID levels. Here are the most recent updates regarding the United States’ economic recovery.
Key Areas of Focus
Three pandemic packages have been approved in the United States as of March 2020. The most recent $1.9 trillion stimulus package notably included the following: (1) cash payments of up to $1,400 for individuals earning less than $75,000 per year; (2) $300 federal unemployment insurance; and (3) an increase in child tax credits from $2,000 to $3,000 per child ages 6-17 and $3,600 per child under the age of 6. It is, in part, these stimulus packages that are responsible for the United States’ unparalleled economic recovery. Last quarter, the economy grew at an annual rate of 6.4%, and expectations for this current quarter are even higher. Supported by government payments, Americans bought a record $221 billion worth of imported goods in January. According to the Federal Reserve, “consumers have accumulated about $1.7 trillion in savings, which could be spent as the economy reopens” and household net worth rose to $130.2 trillion.
2: Labor Shortages
Enhanced federal aid has received criticism from various economists, Republican lawmakers, and business owners who argue that the unemployed are not searching for work because they receive more in government payments than they would through work. Looking at the historic high number of job vacancies, the evidence of a labor shortage is clear. Employers report that 8.1 million positions are open, yet the number of Americans taking jobs “remains subdued: Payrolls grew by just 266,000 in April, when many economists expected a number as high as 2 million.” As a result of these labor shortages, businesses without enough employees have begun to reduce their hours, scale down operations, or permanently close. Stores like McDonald’s, Costco, and Chipotle have also raised wages to attract employees.
Noticing these shortages, 25 GOP governors have announced ending enhanced unemployment aid over the coming weeks. This action will slash or eliminate the benefits for approximately 4 million people, according to the Century Foundation. In addition, the $300 federal unemployment insurance provided by the American Rescue Plan is due to expire after Labor Day.
Some economists, however, point out that the federal payments provide a boost to many lower-income families who have disproportionately lost jobs during the COVID-19 pandemic. Furthermore, increased benefits may not be the “sole driver for workers continuing to stay home. Rather, a few factors may be contributing.” Fears over COVID, childcare obligations, and a discrepancy between skills required for jobs and available workers all are potential contributors to the labor shortage as well.
Despite the labor shortage, Bank of America economists are not particularly concerned: “The shortage is likely driven by expanded unemployment benefits included in the latest stimulus package, concern around catching the coronavirus, and home-schooling demands for working couples…The bank expects that dynamic to fade by early 2022 as stimulus expires and more Americans are vaccinated.”
- Three past stimulus packages have all played a pivotal role in the United States’ rapid economic recovery.
- Some GOP lawmakers, economists, and business owners are concerned about workers relying on their enhanced unemployment benefits, rather than applying for work. This may be a contributing factor to the United States’ recent labor shortage.
- Bank of America economists are not heavily concerned with this labor shortage — they say that the shortage is likely driven by fears over COVID, childcare obligations, and homeschooling demands, which will fade by early 2022.