Powell Warns Recovery May Stretch to the End of 2021

Mish

Fed Chair Jerome Powell has a stark economic message on 60 Minutes tonight about how long the recovery may take.

Jerome Powell will be on CBS' 60 Minutes this evening. The New York Times has a preview.

“This economy will recover; it may take a while,” Mr. Powell said in a preview of the CBS program “60 Minutes” that aired Sunday morning. “It may take a period of time, it could stretch through the end of next year, we don’t really know.”

“Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year,” he said. “For the economy to fully recover, people will have to be fully confident, and that may have to await the arrival of a vaccine.”

No Shocker 

This is not a shocker although it is unusual for the Fed chair to be this blunt. 

The message is warranted as the economic data has been nothing but grim.

  1. May 8: Over 20 Million Jobs Lost As Unemployment Rises Most In History
  2. May 15: Retail Sales Plunge Way More Than Expected
  3. May 15: Industrial Production Declines Most in 101 Years

Fed Promotes More Free Money

The Fed cannot directly give money away so that burden falls on Congress. 

In additional unusual moves, Fed Chair Jerome Powell and Minneapolis Fed President Neel Kashkari both asked for Congressional Action.

This is a sign of panic. I commented on May 14, Panic Sets In: Fed Promotes More Free Money.

The Fed seldom steps in with fiscal recommendations, especially more deficit increasing measures. 

Mish

Comments (53)
No. 1-19
Sechel
Sechel

Don't see how we have a full recovery until there's we have a vaccine or at the very least a national program of testing and tracing. Without that it will be difficult to convince people to board airplanes, eat at restaurants and go to malls, take a cruise??, and none of those things can be done at pre-covid-19 levels.

I see some problems now I didn't see a few months ago. Companies will switch to having workers tele-commute. They'll save huge sums on rent but this will place strains on office space, cmbs and banks. Restaurants can't operate at reduced capacity and brick and mortar retailers will continue to lose out against e-commerce. This was already occurring but now it
accelerates.

Powell's righ about a 2nd wave being the wild card. Fauci pretty much says its going to happen and the certainty of such increases the less precautions the country takes as it reopens.

Old economy won't come back. Period. There will be a new economy and that takes time.

Zardoz
Zardoz

Looking like we need to invade somebody pretty soon to get those poll numbers straightened out...

TimeToTest
TimeToTest

What is extremely disturbing about this is the fed speak part.

Fed speak is we expect the recovery to take until late 2021.

Decoded fed speak. We are about to enter a global depression and we may not be able to hold this together much longer.

Central bankers don’t say these kinds of things.

Montana33
Montana33

He's lobbying hard to get that 3 trillion passed. This proves what you've been saying all along Mish - it's far worse than markets are recognizing. That last statement - for the economy to fully recover we may have to wait for a vaccine - is a direct contradiction to Trump's statements about the recovery.

gregggg
gregggg

We have bee recovering since 1913. When is it going to finally recover?

Realist
Realist

The US economy was already heading towards a zero growth future. This pandemic simply brought that future forward to today. 2020-2030 will show zero average growth, and declining living standards for the vast majority of Americans. And it won’t matter who gets elected to congress, the senate or the presidency.

Once people finally awaken to the reality, and change their expectations, they will find satisfaction in things that don’t focus on conspicuous consumption. Though it will take time. I believe that this has been a message from Chris Martenson for a long time.

Casual_Observer
Casual_Observer

Powell should just tell people to buy stocks and flood the bond market with more money so there is a melt up in stock up prices. If people took their checks and buy stocks under this scenario he could get more hands into the human fund - money for people

Anda
Anda

I guess he's telling everyone someone pissed in the punch bowl, but that's all there is to drink.

mmc1968
mmc1968

Total U.S. death rate for 2020 is below average, CDC says:

From the CDC's own website:

YTD (May 9th) Deaths by Pneumonia/Flu: 87.4k
YTD (May 9th) Deaths by Coronavirus: 60.3k

Captain Ahab
Captain Ahab

Powell admits FED has failed miserably. Recovery May Stretch to the End of 2025

Seb
Seb

This is panic. People still have no idea yet.

njbr
njbr

Just like if you don't test, the number of cases will go down....

Just stop gathering data on the economy...

That's the next step.

JohnB99
JohnB99

And JUST when the Fed was BEGINNING to see their efforts in 2009 beginning to penetrate into low and middle income neighborhoods.

Hilariously sad

Maximus_Minimus
Maximus_Minimus

60 minutes and serious TV? The last time I watched 60 minutes was in the nineties, and each broadcast had at least one segment which could be described as slander disguised as investigative journalist. The only way, the program apparently avoided litigation was by labeling itself "entertainment", and being lawyered up. However, the duped audiences never got to that point.

tokidoki
tokidoki

Anyway, Dow 400K?

Jdog1
Jdog1

The real problem with recovery is the demographics involved. The majority of discretionary spending is done by the very demographic that is most severely affected by the virus. It is the top 10% of the wealth demographic that does the majority of discretionary spending and that group is made up primarily of people over 50. Our service based economy relies on the spending of the top 10%
The fact is the over 50 age group no longer feels safe going out and doing the things they did before. The effect of that is that their spending no longer trickles down to the other 90%. Without the spending of the top 10%, the lower 90% lose a huge amount of their employment and ability to make purchases making the problem worse.
The best way to counter this issue is to begin to transform the economy back to durable goods manufacturing which has a much broader and diverse customer base.

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Webb_Caroline

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