Federal Reserve Chairman Jerome Powell told members of the Senate Banking Committee today that he expects the U.S. economy to have a “full recovery” in the long run following the coronavirus pandemic. “We’ve had the largest economic shock in living memory,” Powell said, commending efforts by both Congress and the Fed to provide relief to individuals and businesses during the crisis. “The economy is going to recover from that, but we just have to be a little patient with it.”
As the economy begins to pull out of the sharp declines it saw in March and April, however, Powell cautioned that “there are parts of the economy that will struggle to return to their old ways of activity.” Even as businesses reopen and individual return to work, the economy is likely to be “well short of where we were in February” with regard to employment, he noted.
Powell also addressed the outsized effect that the pandemic has had on low and moderate-income communities, including communities of color. “This pandemic, the way it hits the service economy particularly . . . has been a real inequality increaser,” he said. “People losing their jobs are, to a large extent, service economy employees with relatively low wages and relatively high percentages of minorities, and also women. That’s who’s bearing the brunt of this.”
He noted that in the short and medium term, additional fiscal support may be necessary to support workers in the hardest-hit sectors—such as travel and entertainment—who may experience difficulties returning to work, while in the longer term, an important focus will be on returning to full employment. “What we learned during the last expansion is that a tight job market is probably the best thing the Fed can do to support gains in LMI communities,” Powell said.
