The Adverse Effect of Fiscal Stimulus in the United States on Labour Market Recovery During 2021

The Adverse Effect of Fiscal Stimulus in the United States on Labour Market Recovery During 2021

Authors

  • محمد عمر الحموي سورية

Keywords:

Fiscal Stimulus, Labour Market Recovery, USA

Abstract

This paper seeks, through the descriptive analytical method, to highlight the negative effect that the fiscal stimulus packages had on the U.S. labour market recovery during 2021, by analysing the effect of unemployment compensation provisions on the incentives of individuals that were unemployed due to the economic impacts of the COVID-19 pandemic. First, the paper discusses the situation of the U.S. labour market since the beginning of the pandemic, majorly through unemployment rates and the number of jobs lost by the economy. Afterwards, it explains the monetary response towards the pandemic on part of the Federal Reserve System, and the fiscal response by the U.S. government and congress, which took the form of trillions of dollars in stimulus spending packages that included some provisions related to enhancing the amount and duration of weekly unemployment benefits. Lastly, the paper analyses the effect of those provisions on the recovery of the labour market, and concludes that the average weekly benefits received under the relief bills were equal to or even greater than the average weekly earnings in some industries such as trade, leisure and hospitality, which incentivized workers in these industries to remain unemployed for longer periods of time and search for better paying jobs, thereby negatively affecting the recovery of the labour market during the second and third quarters of 2021

Published

2023-04-02
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