Stimulus Update: The Big Reason We Won't See a Stimulus Check Anytime Soon

Don't count on a federal windfall in the near term.

When the American Rescue Plan was signed into law in March of 2021, the U.S. economy was still in pretty bad shape. Not only was joblessness still rampant, but many people were unable to go back to work safely in the absence of a COVID-19 vaccine.

These days, however, our economic picture has much improved from a joblessness standpoint. And although many people are struggling with higher living costs due to inflation, the state of the labor market makes a fourth federal stimulus check highly unlikely in the near term.

Jobs are abundant

In July, the U.S. economy added a whopping 528,000 jobs, which far exceeded the 250,000 new jobs experts were predicting. Those added jobs have now made it so that the U.S. has regained all of the jobs it shed during the pandemic. And the national unemployment rate has also returned to its pre-pandemic number -- 3.5%.

Approving a round of stimulus checks makes sense when jobs are difficult to come by and unemployment levels are notably higher than usual. But when jobs are strong, it's very hard to justify that sort of aid. And that's why Americans should not expect to see federal stimulus checks hit their bank accounts anytime soon.

Could stimulus checks go out if a recession hits?

For months, economists have warned that we could be headed for a recession. The Federal Reserve has been aggressively hiking up interest rates in an effort to slow the pace of inflation. The fear, though, is that expensive borrowing will cause a major pullback in consumer spending, to the point where it impacts businesses and forces them to move forward with layoffs.

If a recession were to hit in the near term that results in a large uptick in jobless numbers, then we could see another stimulus round come through. After all, lawmakers have turned to stimulus checks to pump money into the economy during recessions outside the pandemic, so it's reasonable to assume they'd potentially do the same if the situation really warranted it.

But that's also not a situation anyone should hope for. While inflation may be making life difficult on a lot of people right now, a major recession with widespread unemployment could make things exponentially worse. And so to some degree, hoping for another federal stimulus round is akin to hoping for economically disastrous conditions.

That said, a number of states are issuing stimulus checks this summer due to having extra money in their budgets. Clearly, that's not the same thing as aid on a national level. But it's helpful nonetheless.

Meanwhile, as borrowing costs rise in the wake of the Fed's actions and supply chains slowly but surely catch up to consumer demand, we should see inflation start to drop to a more moderate level. That may not happen in a month or two, but by the end of the year, consumers could see some relief. So for now, it's really just a matter of hanging in there.