The United States faces a severe economic recession in the wake of the global pandemic, but it will suffer no other Great Depression, and this year it will begin to recover, Federal Reserve President Jerome Powell said Sunday.
The world’s top economy was strong before the COVID-19 outbreak, which led to the closure of companies across the country, Powell said. Data shows that more than 30 million jobs were destroyed by shutting down thousands of businesses across the country in order to stop the spread of the virus.
For the period from April to June, the figures “will be very, very bad. There will be a big decline in economic activity, a large rise in unemployment,” Powell told the CBS program “60 minutes.” But “there are some very fundamental differences” between the current crisis and the Great Depression of the last century, he noted.
The U.S. economy could fall “easily” between 20 and 30 percent this quarter, and unemployment could reach between 20 and 25 percent, but “should be a much shorter recession than it is associated with the 1930s.”
The other key difference with that crisis is that, instead of raising interest rates, the Fed lowered them zero and is willing to look at new ways to support the economy, Powell said. “I think there’s a good chance of positive growth in the third quarter,” the Fed’s president said.
Long-term economic damage
But he warned that it may take time to get back to normal and that the United States will not see a full recovery without a COVID-19 vaccine. “The economy will recover steadily during the second half of this year,” but the full recovery will “take a while,” he said. “It could extend until the end of next year. We really don’t know.”
“For the economy to fully recover, people will have to have complete confidence, and that will be with the advent of a vaccine,” he said. The Fed cut the benchmark rate for lending money and injected billions of dollars into the financial system and programs to support small and medium-sized enterprises and state and local governments.
Powell said the Fed is ready to make more efforts in the same direction, and reiterated that more public spending will be needed to support workers and businesses to allow the economy to recover.
“If we allow people to run out of work for long periods, if we let businesses fail unnecessarily, there will be long-term economic damage,” he stressed.
“The good news is that we can avoid this if we give more support now.” The crisis “has come so quickly and with such force that the pain that people feel and the uncertainty that reigns today can really be expressed in words,” he stressed.
