The U.S. economic outlook remains highly uncertain and depends on controlling the spread of the coronavirus pandemic, Federal Reserve Chairman Jerome Powell said today during the National Association for Business Economics virtual annual meeting. While the recovery “has progressed more quickly than generally expected,” there is a risk that any initial gains from reopening may transition to “a longer than expected slog back to full recovery as some segments struggle with the pandemic’s continued fallout,” Powell said.
He also cautioned that a long period of slow economic progress could further exacerbate existing disparities in the economy as “weakness feeds on weakness.” The pandemic-related downturn has fallen heavily on lower-wage workers in public-facing service industries, job categories overrepresented by minorities and women, and employment in the bottom quartile of wage distribution is still 21% below the level in February, while only 4% lower for other workers, he noted.
As policymakers work to address the economic effects of the pandemic, Powell suggested that a strong policy response is needed. “Too little support would lead to a weak recovery, creating unnecessary hardships for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.” He added that “even if policy actions ultimately prove to be greater than needed, they will not go to waste.”