Federal Reserve Chairman Jerome Powell cautioned Sunday that the U.S. economy may not recover from the current coronavirus downturn until the end of next year, and a full return is unlikely without a successful vaccine.
In remarks that will be broadcast later today in an interview with CBS's 60 Minutes, Powell said "we really don't know" how long the current contraction will last, suggesting it could "stretch through the end of next year” before ultimately returning to full strength.
“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year," Powell said in remarks broadcast on CBS's Face the Nation. "For the economy to fully recover people will have to be fully confident and that may have to await the arrival of a vaccine.”
The Atlanta Fed's GDPNow forecasting tool, which provides a real-time estimate of the domestic economy's strength or weakness, is currently suggesting a second quarter contraction of 42.8%, by far the largest in American history.
More than 36 million American jobs have been lost over the past two months, according to weekly payroll data from the Commerce Department, as lockdown orders and 'stay-at-home' restrictions shuttered businesses and factories across 90% of the U.S. economy.
Last week, Powell said the pace and scope of the current U.S. economic downturn is 'without precedent" and cautioned that a recovery could take longer than expected to gather momentum.
Speaking as part of a webinar with the Peterson Institute for International Economics, Powell said the Fed's response to the crisis, which has provided some relief, but 40% of U.S. households with less than $40,000 in annual income losing at least one job and there are still "significant downside risks" to the current outlook.
"The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased," Powell said. "Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs."
"While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks," Powell added.