- The US entered a new phase of economic recovery “sooner than expected” but still faces challenges in the labour market and in curbing the coronavirus’ spread, Federal Reserve Chair Jerome Powell said in prepared remarks.
- Positive labour market and economic activity data suggest the US is on its way to a V-shaped recovery, but Powell cautioned that consumer confidence can’t fully rebound until the virus threat is fully contained.
- The central bank chief also highlighted the unevenness of the labour market’s recovery. Women, low-wage workers, African Americans, and Hispanics have suffered significant pain from mass joblessness, Powell said.
- “All levels of government” should implement relief policy “for as long as needed” to ensure the economy doesn’t slide into a deeper depression, Powell added
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The US is rushing into economic recovery but still faces several risks on its way to pre-pandemic highs, Federal Reserve Chairman Jerome Powell said in prepared remarks.
Economic indicators tracking unemployment, consumer spending, and manufacturing have largely swung higher in recent months as states reopen and activity resumes. The optimistic signals foreshadow a V-shaped rebound desired by investors, but the central bank chair emphasised that a full recovery hinges on curbing the coronavirus’ spread.
“We have entered an important new phase and have done so sooner than expected,” Powell said in a statement set for Tuesday testimony before the House Financial Services Committee. “While this bounceback in economic activity is welcome, it also presents new challenges – notably, the need to keep the virus in check.”
Powell’s comments arrive as COVID-19 cases spike throughout the US. Texas, Florida, and Arizona are among the states playing host to new virus hotspots and reinstating lockdown measures to contain the outbreak. Fears of a second wave of coronavirus cases will weigh on consumer confidence and could prematurely freeze the nation’s rebound, Powell said.
“The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus. A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” the chair added.
The central bank is also concerned with the unevenness of the labour market’s slump, according to Powell’s remarks. May’s jobs report posted an unexpected decline in unemployment to 13.3% from 14.7%. Investors cheered the positive outcome, but Powell noted “the [labour market] pain has not been evenly spread.” More than 20 million Americans remain unemployed, and the leap in joblessness disproportionately hit lower-wage workers, women, African Americans, and Hispanics, the chair said.
June data slated for Thursday publication will further detail the labour market’s recovery and whether such populations experienced a more substantial improvement in employment over the past month.
The central bank chief again shied away from explicitly calling for additional congressional stimulus. Legislators have repeatedly asked Powell whether he thinks more fiscal easing is necessary, only to hear the chairman clarify that such actions are up to Congress and not the Fed.
“All levels of government” should implement relief policy “for as long as needed” to ensure the economy doesn’t slide into a deeper depression, Powell said in his latest remarks.
Powell is scheduled to appear before legislators at 12:30 p.m. ET Tuesday alongside Treasury Secretary Steven Mnuchin.
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