U.S. Economic Recovery Faces Challenge, Unemployment Benefits Expire

Unemployment benefits due to the COVID-19 pandemic have ended for millions of Americans. Investors want to know if the U.S. economy will crash in 2021.

Ambrish Shah - Author

Sep. 7 2021, Published 2:13 p.m. ET

President Joe Biden
Source: Getty

Some federal unemployment benefit schemes that were set up to assist people amid the COVID-19 pandemic expired on Sept. 6. This is regarded as the most abrupt end to government assistance in U.S. history as the Delta variant rattles the recovery from the COVID-19 pandemic. The end of COVID-19 unemployment benefits for more than 7.5 million Americans will challenge the U.S. economic recovery.

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The unemployment benefits expiring reflects a shift in America’s policy response to the COVID-19 pandemic. The government is shifting away from emergency measures to assist the labor market in favor of long-term reforms to the safety-net programs supported by President Joe Biden. However, the transition comes at a time when job growth is slowing amid a surge in coronavirus cases tied to the Delta variant.

american rescue plan economy
Source: Getty
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Unemployment benefits expiration

Over Labor Day weekend, three government assistance programs ended. The programs include Pandemic Emergency Unemployment Compensation for those who already exhausted their state’s unemployment benefits and Pandemic Unemployment Assistance for those individuals (self-employed and freelancers) not typically eligible for unemployment insurance. Millions of people will also lose an additional $300 each week under the Federal Pandemic Unemployment Compensation program.

Why unemployment benefits are expiring

In March 2020, Congress approved a $2.2 trillion coronavirus stimulus package to address the economic consequences of the pandemic. In March 2021, Congress extended the unemployment benefits until Labor Day under the $1.9 trillion American Rescue Plan stimulus package. However, Congress has decided not to extend the jobless benefits.

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The expiration of unemployment benefits coincides with the expiration of additional COVID-19 pandemic assistance. For example, the U.S. Supreme Court halted the CDC's federal eviction moratorium, noting that it hadn't been approved by Congress. The expiration of the eviction moratorium and unemployment benefits might also have a negative impact on other federal spending like large-scale student loan forgiveness.

Will unemployment benefits be extended?

There isn't a sign that Congress will continue to provide these extra unemployment benefits. These plans were always meant to be temporary and related to the COVID-19 pandemic.

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Will the US economy crash in 2021?

Unemployment benefits expiring will delay the economic recovery, slow the demand for jobs, and work against the objective of building a high-pressure economy that can attract more employees. Spending will likely decline significantly after the unemployment benefits expired. Also, families might fall behind on mortgage payments. Needless to say, the loss of unemployment benefits will impact unemployed workers as well as their families.

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The Biden administration and several Democrats are now concentrating on the next stage of the president’s economic plan. The next stage includes up to $3.5 trillion in government funding for education, child care, and measures to combat climate change. Although Republicans have slammed the proposal as a reckless spending spree, the Biden administration's economic officials think that these measures, even if stretched out over eight to 10 years, are necessary to strengthen the job market and promote an equal recovery in the long run.

The Fed is also discussing when and how to start reducing monetary support for economic recovery by decreasing its asset purchases. However, some economists and strategists think that the U.S. economy is robust enough to overcome the loss of government backing.


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