Tags: Coronavirus | fed | kashkari | economic | recovery | longer

Fed's Kashkari: Second Virus Wave Will Boost Unemployment Again

Fed's Kashkari: Second Virus Wave Will Boost Unemployment Again
(Iqoncept/Dreamstime)

By    |   Friday, 19 June 2020 04:47 PM

A second wave of coronavirus cases in the fall will probably push the U.S. unemployment rate higher again, Federal Reserve Bank of Minneapolis President Neel Kashkari said on Twitter.

“Unfortunately, my base case scenario is that we will see a second wave of the virus across the U.S., probably this fall. We’re already seeing growth in many states,” Kashkari tweeted Friday while answering questions on the social-media platform. “A vaccine is a long way off.”

“If there is a second wave, I would expect the unemployment rate to climb again. I think the real number today is around 20%,” he added in a follow-up tweet.

The official unemployment rate fell to 13.3% in May after the fallout from the pandemic sent it surging to 14.7% in April. According to projections published on June 10, Fed officials saw unemployment ending the year somewhere between 7% and 14%.

Meanwhile, Federal Reserve Vice Chairman Richard Clarida said the U.S. central bank is prepared to take additional steps to support the economy through the damage caused by the coronavirus.

“We’ve taken very aggressive, proactive action,” Clarida told the Fox Business Network in an interview on Friday. “There’s more that we can do and we will.”

Clarida said the amount of credit the Fed can provide through the nine emergency programs it has unveiled to shore up the economy is limited only by the taxpayer backstops extended to each facility by the U.S. Treasury Department to protect against losses.

“For the foreseeable future I don’t see a limit as being a practical consideration,” he said.

Zero Rates

Fed officials last week held interest rates near zero and signaled they would keep them there through 2022 to help households and businesses make it through the period of shutdowns triggered by the virus. They’ve also said that more stimulus may be needed from both monetary and fiscal authorities.

Chair Jerome Powell urged Congress on Wednesday not to pull back too quickly on federal relief for households and small businesses.

Lawmakers are debating whether to renew the fiscal-aid measures they’ve approved for the millions of Americans who lost their jobs in recent months as businesses closed to stem the spread of the virus. The expanded unemployment insurance payments of $600 a week that formed part of the relief package are set to expire on July 31.

Elsewhere, Federal Reserve Chairman Jerome Powell said the coronavirus-induced slump has worsened economic inequality that has long existed in America, creating more suffering for low-income workers and minorities.

“While we are all affected, the burden has fallen disproportionately on those least able to bear it,” Powell said Friday via video conference, where he also paid tribute to the day marking the end of American slavery. “A particular cruelty of the pandemic has been its disproportionate effects on many areas that were already suffering.”

Powell and Cleveland Fed President Loretta Mester were taking part in a virtual conference about building a resilient workforce in the era of Covid-19 focused on Youngstown, Ohio, a year after the closure of the Lordstown General Motors plant.

Juneteenth

“It is not lost on me that we are meeting on Juneteenth amid a renewed reckoning of racial injustice,” Powell said. “The pandemic has again exposed a range of troubling inequalities, most of them of long standing. As the national discussion continues, it is critical to remember that equity includes access to education, work, and economic opportunity.”

The spread of the virus has caused “immense hardship and suffering,” Powell said. “We will make our way back from this, but it will take time and work.”

The Fed leader said the goals of economic and racial progress are intertwined, citing Martin Luther King Jr.’s “I Have A Dream” speech given not far from the central bank headquarters.

Stark Realities

Noting that prior to the pandemic, the U.S. was experiencing the longest expansion on record with unemployment at the lowest level in 50 years, Powell said this bright picture painted over some glaring cracks.

“That economic good fortune had eluded pockets across the country, including Youngstown.”

Powell said his goal is to return the U.S. economy to a state similar to prior to the pandemic. In congressional testimony this week, he emphasized the Fed wants to restore a tighter labor market that creates more opportunities and lifts wages for lower-income workers.

“The path ahead is likely to be challenging,” Powell said. “But given the opportunity, I’ll always bet on the American people and on the kind of community resolve and dedication we’re hearing about today.”

So far, Congress has authorized about $3 trillion of aid. The White House and Democrat lawmakers are pushing for another package, while many Republicans maintain Congress should wait and assess the economic impact of the measures that have already been put in place.

Clarida, as he and other Fed officials have done repeatedly in recent week, ruled out the idea the central bank may push its benchmark interest rate into negative territory.

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A second wave of coronavirus cases in the fall will probably push the U.S. unemployment rate higher again, Federal Reserve Bank of Minneapolis President Neel Kashkari said on Twitter.
fed, kashkari, economic, recovery, longer
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Friday, 19 June 2020 04:47 PM
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