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COVID-19

Economic recovery “may take some time to gain momentum,” Fed Chair says

Sabri Ben-Achour, Nova Safo, and Alex Schroeder May 18, 2020
Heard on: Marketplace Morning Report
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Fed Chair Jerome Powell says there's "really no limit" to what the central bank can do with lending programs. Mark Makela/Getty Images
COVID-19

Economic recovery “may take some time to gain momentum,” Fed Chair says

Sabri Ben-Achour, Nova Safo, and Alex Schroeder May 18, 2020
Fed Chair Jerome Powell says there's "really no limit" to what the central bank can do with lending programs. Mark Makela/Getty Images
HTML EMBED:
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Federal Reserve Chair Jerome Powell told CBS’ “60 Minutes” that he thinks it might take until the end of next year, 2021, for the economy to recover, with a lot depending on the timing of a vaccine.

Before the U.S. economy can crawl out of this economic hole, first Powell expects the hole will get deeper. He said unemployment will likely increase through June, with as many as 1 in 4 working Americans potentially out of work at the peak of this.

Powell said we should start to see a reversal in the second half of the year — but not the so-called V-shaped recovery, or a quick return to normal.

“I would say the main thing is to get back on the road to recovery. And I think that can happen relatively soon,” Powell said. “Likely to happen in the second half of the year. That’s a reasonable expectation. After that, the path is going to depend on a range of things.”

Powell also said that timeline depends on the country avoiding a second wave of viral infections and more shutdowns.

The Fed has slashed interest rates, injected trillions of dollars of liquidity into the economy, bought corporate bonds and lent to businesses.

So, if things don’t get better fast, is there more the Fed can do? Powell said there is, such as increasing lending to businesses.

“We’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have,” he said.

One thing the Fed probably will not do? Go to negative interest rates, according to Powell. President Donald Trump supports the idea, but Powell was dismissive, saying there’s mixed evidence they’re helpful.

COVID-19 Economy FAQs

What does the unemployment picture look like?

It depends on where you live. The national unemployment rate has fallen from nearly 15% in April down to 8.4% percent last month. That number, however, masks some big differences in how states are recovering from the huge job losses resulting from the pandemic. Nevada, Hawaii, California and New York have unemployment rates ranging from 11% to more than 13%. Unemployment rates in Idaho, Nebraska, South Dakota and Vermont have now fallen below 5%.

Will it work to fine people who refuse to wear a mask?

Travelers in the New York City transit system are subject to $50 fines for not wearing masks. It’s one of many jurisdictions imposing financial penalties: It’s $220 in Singapore, $130 in the United Kingdom and a whopping $400 in Glendale, California. And losses loom larger than gains, behavioral scientists say. So that principle suggests that for policymakers trying to nudge people’s public behavior, it may be better to take away than to give.

How are restaurants recovering?

Nearly 100,000 restaurants are closed either permanently or for the long term — nearly 1 in 6, according to a new survey by the National Restaurant Association. Almost 4.5 million jobs still haven’t come back. Some restaurants have been able to get by on innovation, focusing on delivery, selling meal or cocktail kits, dining outside — though that option that will disappear in northern states as temperatures fall. But however you slice it, one analyst said, the United States will end the year with fewer restaurants than it began with. And it’s the larger chains that are more likely to survive.

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