Speaking about economic recovery, Federal Reserve Chairman Jerome Powell warned there would be “significant uncertainty” going forward — all due to the ongoing COVID crisis.
“The levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery,” said Powell.
“Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it.”
“Until the public is confident that the disease is contained, a full recovery is unlikely,” Powell said.
Powell also highlighted the challenges facing business as the country continues to weather a pandemic.
“The pandemic is presenting acute risks to small businesses,” said Powell.
“If a small or medium-sized business becomes insolvent because the economy recovers too slowly, we lose more than just that business. These businesses are the heart of our economy and often embody the work of generations.”
Powell noted that the harmful effects of the economic lockdown have not being disturbed equally across the board.
“Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African Americans, Hispanics, and women have been greater than that of other groups,” said Powell.
“If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.”
Corona cases rise
Coronavirus cases in many parts of the United States are rising, with some areas experiences spikes and surges.
The rise in cases has led other officials in the Fed to take a more pessimistic tone.
“This lack of containment could ultimately lead to a need for more prolonged shut-downs, which result in reduced consumption and investment, and higher unemployment,” said Boston Fed President Eric Rosengren.
Minneapolis Fed President Neel Kashkari echoed these statements saying, “Unfortunately, my base case scenario is that we will see a second wave of the virus across the US, probably this fall.”
“If there is a second wave, I would expect the unemployment rate to climb again.”