Chairman Powell delivered semiannual testimony before the Committee on Banking, Housing, and Urban Affairs this week, noting significant uncertainty in economic recovery from the pandemic. After “unprecedented speed” of a fall in economic activity, 20 million jobs were lost since February resulting in an unemployment rate of 13.3%, with expected record decline in GDP for the quarter.
Powell notes disparity in the downturn,
“As discussed in the June Monetary Policy Report, 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. 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.”
There is also a greater risk to losing small to medium-sized businesses in an extended downturn and a longer road to recovery for those industries relying on group gatherings.
Congressional relief efforts such as expanded unemployment, stimulus checks, and the PPP have helped, and businesses continuing to reopen sends positive signs as well but recovery is far from over. The Federal Reserve is committed to supporting the economy by keeping interest rates near zero, supporting and encouraging the flow of credit, and working to get the labor market back on track. Chairman Powell is confident the economy will fully recover but it is going to take some time to get there.
Former Federal Reserve Chair Bernanke, along with over 150 top economists, released a statement this week encouraging Congress to pass additional relief legislation to counter prolonged suffering particularly of minority communities. According to the group, the bill should include continued unemployment support, new assistance to states, investments to support employment, and aid to stabilize aggregate demand.
A consensus seems to be that full economic recovery will rely on continued relief measures and the public's perception of safety in returning to work and life as known before the pandemic.