“There is a growing sense that the recovery may come more slowly than we would like, but it will come. And that may mean that it’s necessary for us to do more.”
Federal Reserve Chair Jerome Powell urged lawmakers to consider more measures, such as another pandemic relief package, in order to curtail the long-term economic damage of a depression that has caused “a level of pain that is hard to capture in words.”
“There is a growing sense that the recovery may come more slowly than we would like, but it will come. And that may mean that it’s necessary for us to do more,” Powell said Wednesday, at a webcast event with the Peterson Institute for International Economics. “We know that long periods of unemployment leave a shadow over the labor force and over our economy, over people’s lives en masse. We also know that waves of bankruptcies can weigh on economic activity for years.”
While the central bank has slashed interest rates and invested trillions in loans and asset purchases, Powell has warned it will not be enough to offset economic losses. According to the Labor Department, at least 21.4 million jobs have been cut since mid-March as businesses lay off workers to avoid bankruptcy. The unemployment rate reached 14.7 percent, the highest since the Great Depression, and Powell warned Wednesday that it is likely to spike even higher in the coming weeks.
He also noted that among people who had been working in February, nearly 40% of households earning less than $40,000 a year lost a job in March.
Powell predicted a recovery will depend on treatments, whether lifting social distancing causes fresh outbreaks, and how long it will take for consumer confidence to rebound. “The answers to these questions will go a long way toward setting the timing and pace of the economic recovery,” he said. “Since the answers are currently unknowable, policies will need to be ready to address a range of possible outcomes.”
Prior to the pandemic, Powell had lobbied Congress to cut federal deficits, but the moderate Republican says economic circumstances warrant a wider perspective. “When we are facing the biggest shock that the economy has had in modern times, is, to me, not the time to prioritize considerations like that,” Powell said.
Powell’s caution echoes that of Dr. Anthony Fauci, the nation’s leading infectious diseases expert, who warned the Senate Tuesday that reopening the economy too soon could trigger more outbreaks and lead to “suffering and death that could be avoided.” Both men’s recent comments contrast that of President Trump, who has urged states to reopen quickly despite public health expert warnings.
On Monday, for example, the president criticized leaders in Pennsylvania and beyond for moving too slowly. “The great people of Pennsylvania want their freedom now, and they are fully aware of what that entails,” Trump tweeted. “The Democrats are moving slowly, all over the USA, for political purposes. They would wait until November 3rd if it were up to them. Don’t play politics. Be safe, move quickly!”