The chairman of the Federal Reserve said that the US economy could “easily” contract by 20 to 30 percent during a pandemic.
Jerome Powell added in a CBS interview that the economic downturn could last until the end of 2021, and a full rebound may not occur until a vaccine is found.
However, he expressed confidence in the recovery of the economy and said he would never bet against the US economy.
Earlier this week, Powell called on US lawmakers to adopt more economic stimulus and emergency assistance.
More than 36 million Americans have filed for unemployment since mid-March.
How worried should we be?
In an interview with 60 minutes from CBS, Mr. Power said, “This is a time of great suffering and great hardship … you cannot really express the pain that people are feeling.
“This economy will recover. It may take a while, ”he said. “It could go on until the end of next year. We really don’t know. “
Unemployment could peak at 25%, and “the lowest paid” – especially women – are the hardest hit by the recession, he added.
However, he said he thought the United States could avoid a depression – a sustained economic slowdown – because the financial system itself was healthy and the coronavirus pandemic was “an external event” whose economy could recover.
While the economy could “easily” contract by 20-30% this quarter, he expected the economy to “recover steadily in the second half of this year”, as long as the country could avoid ” a second wave of coronavirus ”.
“It is very important to avoid this … it would be very detrimental to the economy and public confidence. “
The interview, which was recorded on May 13, was broadcast on Sunday evening.
The United States has already approved nearly $ 3 trillion (£ 2.5 billion) in new stimulus spending – packages representing about 14% of the country’s economy. The Fed has also taken drastic measures to support the economy, injecting trillions of dollars into the financial system.
Democrats in the House of Representatives on Friday adopted an additional $ 3 billion coronavirus rescue program. However, it should not go through the Republican-dominated Senate, where leader Mitch McConnell said there was “no urgency” to act.
“We have to open this economy”
Meanwhile, the US Secretary of Health and Human Services, Alex Azar, defended the decision of most states to begin lifting the lockdowns.
He told CNN on Sunday that decisions should be made by local leaders because “in almost half of our reporting counties, we have not had a single death,” and more than 50% of the cases came from only 2% of these counties.
Only 14 U.S. states have followed the recommended federal guidelines for reopening – which suggest a daily drop in new cases for two weeks – according to a Reuters study.
Azar said he disagreed with White House business advisor Peter Navarro, who said earlier on Sunday that the Centers for Disease Control and Prevention (CDC) “really gave up on the countries with tests ”.
“I don’t think the CDC has let this country down,” said Azar. “I believe the CDC plays an important role in public health and what has always been essential is bringing the private sector to the table. “
The test kits sent to states by the CDC in February turned out to be defective, which led to criticism of the CDC’s role in the crisis.
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Azar added that he was not worried about images of people in bars who did not socialize.
“I think in each individual case, you will see people doing irresponsible things,” he said. “We have to open up this economy and get our people out, work and go back to school.”
What is the current death toll?
There are more than 1.4 million cases of Covid-19 in the United States and 89,000 deaths, according to Johns Hopkins University.
Texas reported its highest increase in one day in new cases on Saturday since the start of the pandemic, with 1,801 new infections.
It comes after the governor authorized the reopening of all retail businesses on May 1, but with capacity restrictions.
Another 33 people died on Saturday, bringing the statewide death toll to 1,305.