The U.S. job market would recover to its pre-pandemic levels by fall of 2022 if President Joe Biden’s $1.9 trillion ‘rescue plan’ is implemented, according to new estimates by Moody’s Analytics. That would be an entire year sooner than if no more relief is passed.
“We would recover all of the 10 million jobs that were down since the pandemic hit,” Mark Zandi, Moody’s Analytics chief economist, told Yahoo Money. “If we get no more fiscal — if nothing gets through — it's late 2023 before we get back to full employment.”
If Biden’s full plan is adapted by March, 10 million jobs will be added by the fall of 2022, filling a 9.8 million jobs gap to get to pre-pandemic levels. The economy would create 7.5 million jobs in 2021 and 2.5 million in 2022 leading to full recovery of the jobs lost in the pandemic, according to Zandi.
While Democrats now control both chambers of Congress, the party has a thin majority in the 50-50 Senate with Vice President Kamala Harris’s tie-breaking vote. The new stimulus plan also is unlikely to pass through reconciliation, meaning 60 Senate votes and bipartisan support may be needed for the plan to become law.
“This is a negotiation and it has to go through the legislative process, which could be difficult,” Zandi said. “I don't think they're going to get $1.9 trillion through into law. I do expect something closer to half of that.”
A package half the size of Biden’s ‘rescue plan’ — or below $1 trillion — would mean a slower recovery, delaying the recovery of the 10 million jobs until the spring of 2023, according to Zandi.
‘Among the least beneficial aspects of the program’
The $1.9 trillion legislation includes $1,400 stimulus payments, an extension of key unemployment programs, $350 billion to state and local governments, an increase in tax credits for low- and middle-income families, and $160 billion for a national program on vaccination and testing.
The plan would also put in place a federal moratorium on evictions and foreclosures until the end of September and allocate billions of dollars toward food insecurity.
Some of the plan’s provisions would provide a bigger boost to the economy than others, according to Zandi. The funding allocated to unemployment programs, food assistance, and state and local government aid would benefit the job market recovery the most and would provide the largest increase to GDP versus other provisions in the plan.
The extended unemployment programs include the Pandemic Unemployment Assistance (PUA) program, which provides jobless benefits to self-employed and others who don’t qualify for regular benefits, along with the increase in the extra weekly unemployment benefit to $400 from $300.
Around $465 billion of Biden’s $1.9 trillion ‘rescue plan’ is earmarked to go directly to Americans’ wallets in the form of $1,400 checks. But that provision doesn’t increase GDP as much as other provisions and may have a lower impact on the recovery given the amount allocated to fund the payments.
The direct payments are not as targeted as unemployment benefits, and many households may save rather than spend the money. But they are popular among lawmakers from both sides of the aisle and could be distributed quickly, according to Zandi.
“That’s among the least beneficial aspects of the program,” he said. “It's not only about what's in the package, it's about can you get it into law. It’s also important getting it done quickly and getting it into the economy.”