Delta Variant & Unemployment Benefits: Potential Economic Impact

A new coronavirus variant has health experts concerned. Here's how it could impact the economy.

The delta variant of COVID-19 has caused an uptick in cases, worrying health experts. Scientists say the variant is considerably more transmissible than previous versions of the coronavirus that have circulated over the past year and a half.

If the delta variant causes a large outbreak, it could force a return of regional and even national restrictions. Those could include mask mandates, capacity limits at businesses, and even the shuttering of bars, nightclubs, and other crowded places.

All of this could hinder our broad economic recovery. Though the national unemployment rate has dropped in recent months, returning to restrictions that limit how businesses can operate could mean the shedding of more jobs.

All of this comes when federal unemployment benefits are headed for expiration. In March, the American Rescue Plan -- a relief bill that put stimulus checks into millions of bank accounts -- extended federal jobless benefits through Labor Day. People receiving unemployed benefits gained a $300 weekly boost, and the self-employed (not normally eligible for unemployment benefits) have also been entitled to payments.

Some states have pulled the plug on federal benefits ahead of the early September expiration date (though Indiana and Maryland residents successfully sued to reinstate them). But as that aid runs out on a national level, it raises questions. Will the delta variant cause a huge economic setback? If so, will the government extend unemployment boosts?

A tough call

Congress may need to rethink ending federal unemployment benefits in early September if the delta variant causes another shutdown. In recent days, 58% of U.S. COVID-19 cases have stemmed from the delta variant, according to the CDC. And in some regions, those numbers were higher.

If the current outbreak gets worse, and the country takes a step backward in its reopening plans, that could make the case for extending federal unemployment beyond September. That said, we're in a very different situation now than when the American Rescue Plan became law. Vaccines are widely available, and barring health issues or other contraindications, anyone who wants one can get it.

At this point, almost 60% of U.S. adults are fully vaccinated against COVID-19. But given the large number of people who aren't, it's possible the pandemic will continue to rage and impact economic progress. Another variable is children under the age of 12, who aren't eligible to receive a coronavirus vaccine. If school outbreaks start, districts may revert to remote learning. That could, in turn, force some people to step away from their jobs to cover childcare.

There's a lot of uncertainty surrounding the delta variant and the trajectory of the pandemic. It's too soon to say whether the economic situation will necessitate extending federal unemployment benefits. But it's something lawmakers should certainly put on the radar.