The economic crisis caused by the pandemic presents “Fundamental differences” with the Great Depression and growth should resume faster despite very high unemployment and a deep recession, said Sunday May 17, the boss of the American Central Bank, Jerome Powell.
“I do not at all believe that this is a probable result”said Powell in a CBS interview about a 1930s-style Great Depression, citing a booming economy before the pandemic, strong banks and an adequate response from the authorities.
20 to 25% unemployment
However, he believes that a peak in the unemployment rate at 20 or 25% is likely, and that the fall in US GDP in the second quarter will be “Easily within 20, 30%”.
The American economy has been severely slowed down by containment measures imposed on the majority of the country’s population in an attempt to stem the epidemic which has already killed nearly 90,000 people in the country and has infected nearly one and a half million, according to available data compiled by Johns Hopkins University. The United States has the highest number of deaths in the world.
The head of the central bank said it was impossible “To find the words to express suffering” inflicted by the disease, but wanted to be optimistic for the longer-term economy. “In the long term and even the medium term, I would really advise against betting against the American economy. This economy will recover ”, said Mr. Powell. However “It will probably take a little time, or even a certain time, it could go until the end of next year, so we don’t know anything about it”.
No “V recovery”
In total, almost 36.5 million people have been unemployed since the sudden cessation of economic activity in mid-March, and the unemployment rate climbed jumped from 3.5% in February to 14.7% in April. All indicators have collapsed, from growth (-4.8% year-on-year in the 1st quarter) to manufacturing, the traditional engine of the US economy.
Powell said on Wednesday that he did not believe in a recovery “V”, a sharp fall followed by a very rapid return to growth. And he called on elected officials to do everything, even if it is costly, to avoid a long recession whose harmful effects would once again hit the most vulnerable populations.
On Sunday, he reiterated his prediction of a slower recovery than he had imagined before, but nevertheless judged that the economy could restart “From the third quarter”.
Health statistics
But beyond the economic indicators that the Central Bank compiles and tries to anticipate, Mr. Powell stressed that the time was mainly to control the pandemic, in the absence of vaccine or treatment having proven therapeutic .
The debate is raging in the United States between supporters of a rapid reopening of the economy and those of a slow and reasoned opening to try to avoid a second wave of contamination. “You know, the thing that matters more than anything else at the moment is the medical indicators. It’s the spread of the virus. These are all the things associated with it, “ like social distancing, for example, said Powell.
For him, this is a sine qua non condition for the economy to restart and “We think this may be the case from the third quarter”.
A vaccine to fully recover
Powell also said on Sunday that the world’s largest economy could only fully recover from the shock of the pandemic with a vaccine. “If we assume that there will be no second wave [d’infections par le coronavirus], I think the economy will gradually heal throughout the second half of the year “said Mr. Powell. “However, for the economy to recover fully, people need to regain full confidence. We may have to wait for a vaccine to arrive. “, said Powell.
The Trump administration has selected 14 vaccine candidates and promises to be able to deliver hundreds of millions of doses to the American public by January. A too optimistic promise according to some experts.
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