Last night in a media interview, Jerome Powell, chairman of the Federal Reserve, spoke of the potential for another three to six months of government financial assistance to companies and families.
In an interview with CBS's "60 Minutes" news program, Powell repeatedly mentioned health issues as essential to the success of the reopening of the American economy, calling on Americans to "help each other" by adhering to the rules of social separation as local governments begin to lift restrictions on social and economic activities.
States are now relaxing restrictions designed to slow the spread of the coronavirus. This has increased the hope for a gradual return to normalcy, but has also increased the risk of new infections.
As Congress discusses the potential of additional economic assistance, Powell exceeded the boundaries of a typical central bank interview, calling directly for more financial spending. He also urged people to wash their hands and wear masks to help stem the spread of the coronavirus.
Under the best of circumstances, Powell said, the road to recovery will be long, with the possibility of additional job losses until June. He stressed that some parts of the economy such as the travel and entertainment industries, may be under pressure until a vaccine is reached.
The economic devastation is already severe. Powell said unemployment could reach 25% before it begins to decline, and gross domestic product may contract at an annual rate, perhaps 20% in the period April to June. These levels are reminiscent of the Great Depression of the 1930s, although Powell said he believed it was unlikely that a long-term meltdown of this magnitude would occur.
He said: "Assuming there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year. So, for the economy to fully recover, people will have to be fully confident and that may have to await the arrival of a vaccine.”
Meanwhile, Powell said, the Federal Reserve and Congress may need to do more to ensure that people can pay their bills. Starting in March, US law-makers earmarked $3 trillion to compensate for job losses and other economic problems related to the epidemic, and are debating whether to do more.
The Federal Reserve has also approved a range of programs to help companies and financial markets operate during the epidemic, and to try to reduce individual and corporate bankruptcies.
Powell spoke of the Federal Reserve’s willingness to expand existing programs or add new ones.