Federal Reserve Chair Jerome Powell on Sunday warned that the nation’s unemployment rate could soar to 25 percent during the worst of the coronavirus crisis, though he said the economy should recover more quickly than during the Great Depression, when joblessness last reached those levels.
“Those numbers sound about right for what the peak may be,” Powell said on CBS’ “60 Minutes” after reporter Scott Pelley asked whether unemployment could reach 20 percent or even 25 percent.
His remarks came just days after the central bank released a survey showing that one in five American workers lost their jobs in March — including almost 40 percent of those in lower-income households.
The Fed chief expressed hope that the economy would come out of recession in the second half of the year, but cautioned that a second outbreak of the coronavirus could derail that path.
“This economy will recover,” he said. “We’ll get through this. It may take a while. … It could stretch through the end of next year. We really don’t know.”
The central bank has taken extraordinary measures to rescue the economy since the pandemic began sweeping through the country — slashing interest rates to zero, rolling out trillions of dollars in lending programs for financial markets, and taking the unprecedented step of bailing out state and city governments.
“There’s really no limit to what we can do with these lending programs,” Powell said. “There’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”
He said the economy stands a good chance of bouncing back more quickly than in the 1930s.
“When the Depression, well, when the crash happened and all that, the financial system really failed,” Powell said. “Here, our financial system is strong.”
But he took the opportunity to again warn that Congress will need to spend more to prevent long-lasting damage, even after U.S. lawmakers have shelled out trillions of dollars for American businesses and consumers.
The most important policy objectives should be to “keep workers in their homes, keep them paying their bills,” he said. “Keep families solvent so that when this comes, we come out the other end of this, we’re in a position to have a strong recovery.”
This blog originally appeared at Politico on May 17, 2020. Reprinted with permission.
About the Author: Victoria Guida is a financial services reporter covering banking regulations and monetary policy for POLITICO Pro. She covers the Federal Reserve, the FDIC and the Office of the Comptroller of the Currency, as well as Treasury, after four years on the international trade beat, most recently for Pro and previously for Inside U.S. Trade.
