Fed Chairman said the coronavirus could “easily” lead the U.S. economy to shrink by 20-30% in the second quarter, but affirmed that the country will avoid another Depression.
More than 36 million people have filed for unemployment benefits in the last two months, which is the level last seen since the Great Depression of the 1930, as an aftermath of the business shutdown nationwide in order to control the virus spreading.
Federal Reserve Chairman Jerome Powell estimated the unemployment rate could peak to 20-25%. He said, “I think there’re a range of perspectives. But those numbers sound about right for what the peak may be.” When he was asked whether the U.S. is headed for a “second depression,” he replied, “I don’t think that’s a likely outcome at all. There’re some very fundamental differences.”
“The data we’ll see for this quarter, which ends in June, will be very, very bad. There’ll be a big decline in economic activity, big increase in unemployment,” he told the CBS program “60 Minutes.”
He as well stated that the U.S. economic growth could return in the third quarter. “I think you’ll see the economy recover steadily through the second half of this year,” Powell said.
There were differences between the Great Depression and actual economic recession as the cause of this downturn is not an asset bubble or another associated more fundamental reason but rather a self-induced economic freeze brought on by efforts to combat the coronavirus, added by Powell
Powell gave a confidence that in the long term, the U.S. economy will recover. He said. “We’ll get back to the place we were in February; we’ll get to an even better place than that. I’m highly confident of that. And it won’t take that long to get there.”