How unemployment may be affected by a second coronavirus wave

How unemployment may be affected by a second coronavirus wave
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Aside from the coronavirus stimulus checks, a key part of relief efforts has been added unemployment benefits for the tens of millions of Americans who have been laid off due to the pandemic. However, with a second wave of the coronavirus coming in the fall, those who get laid off again may face new problems with unemployment, underlining the need for a second round of coronavirus stimulus.

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How a second wave of coronavirus may affect unemployment

Congress is currently debating a second round of coronavirus stimulus checks. However, one discussion that may need to be added into the mix is an extension to the coronavirus unemployment benefits.

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The first round of coronavirus stimulus checks came with the CARES Act, which also brought an extra $600 per week in unemployment benefits for those who are laid off due to the pandemic. The extra $600 a week expires at the end of July. Thus, if a second wave of the coronavirus hits in the fall, those in need of unemployment benefits won't receive the same level of support they're receiving now.

Harvard University professor Karen Dynan told MarketWatch that low-income workers who are laid off now receive more than what they would normally receive each week if they were working. She expressed concern that if the economy reopens too soon, it will end up being like a false start. Thus, the second wave of the coronavirus could result in another sharp increase in unemployment in the fall.

Problems for those who are laid off again in the fall

Aside from the expiration of the extra $600 per week, there is one other problem laid-off workers could face in the fall. Most states include work experience over the past year as a factor in whether workers qualify for unemployment and the amount they receive.

Stephanie Aaronson of the Bookings Institution told MarketWatch that this could present an issue for workers whose employment history is spotty this year due to COVID-19. They could go back to work in the next month or so, only to need unemployment again in the fall when the second wave of the coronavirus hits.

The good news is that the CARES Act temporarily allows workers with spotty work history this year to be eligible for unemployment benefits. This temporary provision expires Dec. 31, so it should cover workers for a second wave of COVID-19 in the fall. However, if the pandemic lasts 18 months, it could become a problem.

One solution for unemployment in a second wave of coronavirus

States have extensions that add up to 20 extra weeks of unemployment benefits during times of heightened unemployment. Congress can add even more weeks of benefits. This extra provision offers some insight into what Congress could do to deal with pandemic-related unemployment if COVID-19 is widespread for an extended period of 18 months or more.

Some have suggested that Congress should enact a provision that offers extended unemployment benefits and kicks in when a selected labor-market indicator reaches a certain level. This solution could provide longer-lasting provisions without lawmakers having to go in and negotiate a new extension for unemployment. It could also be applied individually to each state as each state's indicator changes, meaning that not all states would offer extended unemployment benefits at the same time.

Unemployment is an important part of the coronavirus stimulus response, so lawmakers should make a move before a second wave arrives.

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