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The U.S. economy is heading toward an increasingly uncertain autumn as a surge in the Delta variant of the coronavirus coincides with the expiration of expanded unemployment benefits for millions of people, complicating what was supposed to be a return to normal as a wave of workers re-entered the labor market.
That dynamic is creating an unexpected challenge for the Biden administration and the Federal Reserve in managing what has been a fairly swift recovery from a recession. For months, officials at the White House and the central bank have pointed toward the fall as a potential turning point for an economy that is struggling to fully shake off the effects of the pandemic — particularly in the job market, which remains millions of positions below prepandemic levels.
The widespread availability of Covid-19 vaccines, the reopening of schools and the expiration of enhanced jobless benefits have been seen as a potent cocktail that should prod workers off the sidelines and into the millions of jobs that employers say they are having trouble filling.
But that optimistic outlook might be imperiled by the resurgent virus and policymakers’ response to it. Big companies are already delaying return-to-office plans, an early and visible sign that life may not return to normal as rapidly as expected. At the same time, long-running federal supports for people hurt by the pandemic are going away, including a moratorium on evictions, which ended on Saturday, and an extra $300 per week for unemployed workers. That benefit expires on Sept. 6, and some states have moved to end it sooner.
Federal lawmakers are also planning to repurpose more than $200 billion worth of Covid relief to help pay for a $1 trillion infrastructure plan. An infrastructure bill moving through the Senate would rescind previously allocated virus funds for colleges and universities along with unused unemployment benefits and airline aid. It would also claw back unspent funds from some expired small-business programs to help offset the plan’s $550 billion in new spending.
White House economists have said they see no need yet to consider major new measures to bolster the recovery. After months of blockbuster economic growth, falling unemployment numbers, and complaints from business leaders and Republicans that government support is preventing workers from taking jobs, administration officials remain locked into their current policy stance despite renewed risks.
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