Powell told CBS in an interview aired on “60 Minutes” on May 17 that while the Fed is “not out of ammunition by a long shot,” referring to the pallet of crisis response tools the central bank has deployed to shield businesses and families from the worst of the outbreak, he said the U.S. economy could be in for a prolonged bout of pain.
“It could stretch through the end of next year,” Powell said. “We really don’t know. We hope that it will be shorter than that, but no one really knows.”
He said second-quarter economic activity, as measured by gross domestic product (GDP), could fall by an annualized rate of more than 30 percent.
“The numbers are going to be very high. And it’s hard to be precise. I wouldn’t want to guess,” he said. “[It] could easily be in the 20s or 30s.”
Powell’s remarks reinforce statements he made last week, in which he warned of lasting harm to the U.S. economy unless policies were brought to bear to counteract the damage.
“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Powell said in prepared remarks before holding an online discussion with the Peterson Institute for International Economics.
The outbreak of the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus and which causes the disease COVID-19, has battered economies worldwide.
In the United States, the virus-related lockdowns and plummeting demand destroyed a record 20.5 million jobs in April, according to Labor Department figures released May 8, and pushed the unemployment rate to 14.7 percent, both post-World War II records.
“This is a time of great suffering and difficulty,” Powell told CBS. “And it’s come on us so quickly and with such force, that you really can’t put into words the pain people are feeling and the uncertainty they’re realizing.”
A recent Fed report on the economic well-being of U.S. households found that financial conditions changed dramatically for people who lost jobs or whose hours were cut as the spread of COVID-19 intensified.
Still, Powell told CBS that he doesn’t expect the United States to suffer a repeat of the Great Depression, vowing that the Fed would act to prevent the worst.
“In the long run, and even in the medium run, you wouldn’t want to bet against the American economy. This economy will recover,” he said. “There’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”
Still, Powell said that for a robust economic rebound, consumer confidence would have to see a revival.
“Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” he told CBS. “For the economy to fully recover, people will have to be fully confident, and that may have to await the arrival of a vaccine.”