Former Dallas Fed adviser and CEO of Quill Intelligence LLC and chief strategist Danielle DiMartino Booth on economic recovery and whether the U.S. needs extra coronavirus stimulation.
Federal Reserve Chairman Jerome Powell said Thursday that the U.S. economy could return to the coronavirus pandemic level “fairly soon” thanks to a deluge of financial and fiscal aid over the past year.
The nearly $ 4 trillion in direct fiscal stimulus approved by Congress and the Trump administration – including the $ 2.2 trillion March CARES law and the $ 900 billion bill passed in December – played a key role in deepening to ward off economic damage, Powell said.
While stressing that the economy will not even recover until the pandemic is under control, the head of the central bank said he was ‘optimistic’ about the outlook for the next few years.
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“You’re in a situation where we could get back to the old economic peak pretty soon and succeed,” Powell said during a virtual webcast with Princeton University. ‘We can do a lot of damage to people with low and moderate incomes, who by the way still have very high unemployment, but with the reopening of the service economy later this year, we hope to get back there. ‘
In the space of just two months, the coronavirus pandemic and the economic strike it caused have wiped out more than 20 million jobs, a rate not seen since the Great Depression. Before the crisis began, unemployment fell at a low age.
The U.S. economy has so far recovered about half of the lost jobs, with about 9.8 million more Americans unemployed compared to February. The unemployment rate is 6.7%.
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The outbreak was also a catalyst for bankruptcies among small and large businesses, causing an unprecedented 33.3% contraction in the country’s GDP in the second quarter.
The Fed responded to the pandemic by taking a series of extraordinary actions to support the economy, including lowering interest rates to near zero, purchasing an unlimited amount of Treasurys (a practice known as quantitative easing) and borrowing of facilities in the crisis period to ensure that credit flows to households and businesses.
“The thing we focus on best is to return quickly enough to a strong labor market so that people’s lives can return to where they want to be,” Powell said. “We were in a good place in February 2020, and we think we can get back there much sooner than we feared.”
More help may be on the way: Elected President Joe Biden will announce his long-awaited coronavirus stimulus proposal on Thursday night amid new evidence that a surge in COVID-19 cases nationwide is hampering the country’s recovery.
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The plan, which could carry a price tag of at least $ 1.5 billion, is widely expected to include: a commitment for $ 1400 stimulus checks, an extension of additional unemployment benefits that will expire in March, funding for the distribution of vaccines and aid to the state and local governments. The $ 1,400 payouts are in addition to the $ 600 that most Americans received this month, bringing the total check amount to $ 2,000.