The head of the US Federal Reserve has warned that America’s economy may be slow to recover in the wake of the COVID-19 pandemic, stating that a full rebound might not be possible until 2021.
Jerome Powell, chairman of the US Federal Reserve told CBS that a full economic recovery would be aided by a coronavirus vaccine, while urging US policymakers to implement further stimulus measures to keep the economy afloat.
In the interview, Jerome Powell said that “this economy will recover. It may take a while… it could stretch through the end of next year. We really don’t know.”
“The data we’ll see for this quarter, which ends in June, will be very, very bad.” Jerome Powell
Powell expects the economy to “recover steadily through the second half of this year,” on the condition that there isn’t a disastrous “second wave of the coronavirus” that could result in more shutdowns and a slowing down of the overall economy.
“For the economy to fully recover, people will have to be fully confident. And that may have to await the arrival of a vaccine,” Powell said, adding that in the meantime, “in the long run, and even in the medium ruin, you wouldn’t want to bet against the American economy.”
The US has already implemented stimulus measures worth $3 trillion, or around 14% of its economy. The Federal Reserve has also moved to inject trillions of dollars into its financial system to keep things moving, and keep investor confidence buoyed.
Keeping people and businesses out of insolvency just for maybe three or six more months while the health authorities do what they can do… we can buy time with that.” - Jerome Powell
According to statistics from the BBC, more than 36 million Americans have filed for unemployment benefits since the middle of March, 2020.
Powell continued to explain to Scott Pelley that “I was really calling out a risk that I think is an important one for people to be cognizant of, the risk of longer-run damage to the economy. And really, the good news is that we have the tools to limit that longer-term damage by continuing to provide support to households and businesses as we get through this.”
“The thing that matters more than anything else is the medical metrics,” Powell explained. “It’s the spread of the virus. The real-time economic data that we’re seeing is just a function of how successful the social distancing measures are. So, the data we’ll see for this quarter, which ends in June, will be very, very bad.”
“There’ll be a big decline in economic activity, big increase in unemployment. So what we’re really looking at is getting the medical data, which is not what we usually look at, taken care of so that the economic data can start to recover.”
“There’s a real risk that if people are out of work for long periods of time, that their skills atrophy a little bit and they lose contact with the workforce. Longer and deeper recessions tend to leave behind damage to people’s careers. The small and medium-sized businesses that are so important to this country, if they have to go through a wave of avoidable insolvencies, you’ve lost something there that’s more than just a few businesses… Keeping people and businesses out of insolvency just for maybe three or six more months while the health authorities do what they can do… we can buy time with that,” he said.
Last week, Democrats in the House of Representatives passed an additional $3 trillion worth of coronavirus relief measures, but it’s likely that this spending bill won’t make it through the Republican-controlled Senate, whose leader Mitch McConnel has stated previously that there is “no urgency” to act and implement further stimulus packages.
It comes at a time where Alex Azar, the US Secretary for Health and Human Services praised local and state leaders for reopening their economies if they meet the federal government’s guidelines for reopening. Reuters is reporting that just 14 US states meet this criteria.
Secretary Azar criticised remarks from the White House’s trade advisor, Peter Navarro who took aim at the Centers for Disease Control and Prevention (CDC) whom he believes “really let the country down with the testing.”
Azar said that “I don’t believe the CDC let this country down… I believe the CDC serves an important public health role and what was always critical was to get the private sector to the table.”
“I think in any individual instance you are going to see people doing things that are irresponsible… we’ve got to get this economy open and our people out and about, working and going to school again,” Azar concluded.