Fed Laying Blame on Federal Unemployment Insurance for Labor Shortage

The Federal Reserve is pointing to the continued availability of enhanced federal unemployment insurance as one of the reasons why the economy is not rebounding as quickly as officials had anticipated.

Federal Reserve Report

In its semiannual report delivered to Congress, the Fed listed these unemployment supplements as a reason for the alarming shortage of available labor throughout the nation. This vast surplus of jobs has put a damper on the economy’s ability to recover from the ongoing COVID-19 pandemic and the resulting recession.

Many Democrat-leaning states have still not opted out of the $300 weekly federal unemployment supplement offered in addition to the individual state unemployment insurance.


The federal supplements are due to continue through September 6.

The 75-page report also said that the federal benefits are also contributing to the growing labor participation gaps between different demographic groups.

Fed Response

While the Fed’s report could not be clearer about the reasons for the labor shortage, the organization did not go so far as to recommend that lawmakers immediately abolish the enhanced federal payments.

In recent testimony to Congress, Fed Chair Jerome Powell expressed that the decision to change the enhanced benefits program for the unemployed should be left up to those representatives who are elected.


In addition, Powell said that other factors to blame for the sluggish economy include workers who may be hesitant to return to the labor force because of the fear of COVID-19 and schools still being closed, making it challenging for some caretakers to leave the home.