Fed Chair Says Economic Recovery ‘May Take A While’

(ConservativePeak.com)- The U.S. Federal Reserve chair, Jerome Powell, said on Sunday’s episode of “60 Minutes” that he thinks the economy will rebound.
However, he said the full recovery could take longer than many people would like to hear.
Powell said he expects the economy will start the healing process in the second half of 2020, but he said the road to a full recovery could end up being quite long. And another outbreak of the coronavirus in the fall or winter (or whenever) would end up being devastating.
As he said on the show:
“This economy will recover. And that means people will go back to work. Unemployment will get back down. We’ll get through this. It may take a while. It may take a period of time. It could stretch through the end of next year. We really don’t know.”
He said the overall economy in the U.S. could “easily” shrink at an annual pace of 30% for the second quarter of this year, with unemployment rising as high as 25%.
The recovery is likely to happen in stages, Powell said, with some sectors of business recovering at a quicker pace than others. Entertain and travel are two industries Powell said would likely lag behind the others.
A complete bounce back of the economy, though, is predicated complete on America being able to avoid a second wave of coronavirus outbreak, and a full recovery may not happen until a vaccine is developed.
“For the economy to fully recover, people will have to be fully confident,” Powell said. “And that may have to await the arrival of a vaccine.”
Harvard economist Carmen Reinhart all but confirmed Powell’s sense that a quick recovery is unlikely. She recently told Bloomberg News:
“Expectations are that we’re going to have this nice V-shaped recovery and life is going to return to normal as we knew it before the pandemic. And my own view is that neither of those are likely to be true.”
A large part of the reason is the pandemic has “devastated” both supply and trade chains. Time will be needed in order for companies to get all their production back in order.
Regarding the service industry, Reinhart had some poignant questions:
“How do we know which retailers are going to come back? Which restaurants are going to come back? Cinemas?”
Kenneth Rogoff, another Harvard economist, has some concerns that the coronavirus pandemic could roll back the trend toward globalization — of connecting the world together. He said:
“There are going to be phenomenal frictions coming out of this wave of bankruptcies, defaults. It’s probably going to be, at best, a U-shaped recovery. And I don’t know how long it’s going to take us to get back to the 2019 per capita GDP. I would say, looking at it now, five years would seem like a good outcome out of this.”
While optimists would disagree, saying the drop-off was only so abrupt because of the coronavirus forcing businesses to actually close, it’s hard to argue that life post-pandemic won’t be dramatically different than before.