US recovery to take years amid slow growth, says Reserve Bank Chief

*Policymakers forecast economy to shrink by 6.5%, unemployment at 9% in 2020

*Coronavirus surges across United States, throwing reopenings into disarray

Isola Moses | ConsumerConnect

As realities of the impacts of the novel Coronavirus (COVID-19) continue to tell on several economies worldwide, Chicago Federal Reserve Bank President Charles Evans has said that he expects the United States (US) economy to take until late 2022 to recover to its pre-crisis level of output.

Evans, who stated that some economic growth may be permanently lost to the effects of the Coronavirus pandemic, disclosed that “even after three years, my projected recovery places us below where the economy would have been had the virus not occurred.”

The Fed Reserve Bank Chief told a Corridor Business Journal conference in Iowa, via videolink, Wednesday, June 24, reports Reuters.

“The economic impact has been catastrophic for an extraordinarily large number of people and businesses, (and) sadly, the cost has fallen most heavily on some of our most vulnerable populations,” he stressed.

According to him, a surprise jump in payrolls in May 2020 likely signals stronger underlying demand than analysts had expected.

It also probably shows workers and consumers felt comfortable enough to return to stores sooner than anticipated.

And that return, he added, may have its downside.

“My forecast assumes growth is held back by the response to intermittent localised outbreaks, which might be made worse by the faster-than-expected reopenings,” Evans noted.

“The Fed earlier this month signalled it will keep interest rates low for years to support growth, and policymakers forecast the economy to shrink about 6.5% this year and unemployment to end the year at 9%.

On downside risks, he stated that with some 20 million Americans out of a job, a drop in spending and economic activity weighing on inflation, and the most uncertain outlook he’s ever seen in his career.

“Other forecasts with more severe effects on economic activity are almost equally as plausible in my view,” Evans said, adding that while fiscal and monetary policy support have helped, “more may be necessary.”

In particular need are local and state governments, even the most fiscally responsible of which could not have been expected to be prepared to withstand the drop in sales tax and other revenues that are forcing tens of billions of dollars of budget cuts across the country, he said.

He added that “there is a role for the federal government to provide relief assistance of some magnitude.

“Awful lot of employment in state and local government and the associated impact from the things that those employees buy or don’t buy if they are laid off.”

Meanwhile, newly diagnosed cases of COVID-19 and other indicators of the pandemic’s spread soared in hot spots across the US, driving city and state officials to consider slowing or reversing reopening plans.

Agency report also revealed that cases are surging in Texas, Florida, Arizona and in California, which Tuesday, June 23 broke its record for new cases for the fourth day in the past week.

Even in New Jersey, where numbers have been falling, Governor Phil Murphy warned that the transmission rate is “beginning to creep up.”

Coronavirus cases in the US increased by 35,695 from the same time Monday to 2.33 million, according to data collected by Johns Hopkins University and Bloomberg.

The 1.6% gain was higher than the average daily increase of 1.3% the past seven days. Deaths rose 0.7% to 120,913.

California reported 5,019 new cases, its biggest daily jump, for a total of more than 183,000, according to state data. The state also hit a record 3,700 hospitalisations.

Arizona also broke its daily case record, adding nearly 3,600, according to tallies released Tuesday, bringing the total to 58,179. The state also reported 42 deaths, raising the toll to 1,384.

In Florida, local leaders hurried to react to daunting statistics. Palm Beach County, where President Donald Trump makes his official residence, became the latest jurisdiction to mandate masks to fend off the surge, with county commissioners voting unanimously to approve the measure Tuesday.

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