WASHINGTON, D.C. – Federal Reserve Chairman Jerome Powell warned on Wednesday that the US economy faces “a long road” to recovery despite “an unexpectedly positive” jobs report for May. During a press conference, Powell said that while the US might have already reached the bottom of the coronavirus recession, it is far too soon to pull back support for the economy and the nearly 20 million Americans who’ve lost their jobs, The Hill reported.
“The key thing people need to understand is that there’s just a lot of work to do in the labor market. We’re going to stick with this and support that until the work is done,” he stated.
“I think it may require Congress to help as well,” he added.
Powell has insisted throughout the crisis that there is “no limit” to the central bank’s willingness to flood the economy with cheap money and offer trillions in emergency loans to keep businesses and local governments afloat. But he has also noted that the Fed’s rescue efforts will not be enough on their own, and it would likely require additional fiscal stimulus from Congress to stave off a deeper economic downturn.
One step available to Congress is the extension of a weekly $600 increase in unemployment benefits that is set to expire on July 31. Powell, however, declined to say whether that was needed, adding only that lawmakers were considering a number of helpful ideas to protect Americans facing financial peril.
“It’s possible that we will need to do more, and it’s possible that Congress will need to do more,” he said on Wednesday.
Powell’s remarks came shortly after the central bank announced it would hold rates near zero percent, with no plans to hike rates until at least 2022.
The 17 members of the Federal Open Market Committee also projected a median unemployment rate of 9.3 percent and a 6.5 percent decline in the gross domestic product by the end of 2020. The Fed chief’s comments were his first since Friday’s surprise jobs report. The US added 2.5 million jobs in May to drive the unemployment rate down to 13.3 percent from a record high of 14.7 percent in April.
The report stunned economists on Wall Street and in Washington, including the White House, who largely expected the economy to lose millions more jobs for the second consecutive month. The May jobs gain was almost entirely driven by the return of 2.7 million workers from temporary layoffs or furloughs as some businesses that shuttered during the start of the pandemic began to reopen last month.
The surprising reversal boosted hopes of a quicker-than-expected recovery from the lockdown-driven recession and gave President Donald Trump a positive headline amid weeks of medical crisis and widespread protests against police brutality. Congressional Republicans also pointed to May’s jobs report as a reason to hold off on advancing another fiscal stimulus bill until after the July 4 recess.
Even so, nearly 300,000 workers lost their jobs in May, and roughly 15 million more remain on temporary layoffs that could become permanent. The unprecedented scale and nature of the downturn has also skewed the unemployment rate lower than it may truly be, complicating efforts to chart a path toward recovery.
“You could see significant job growth in coming months as people return to their jobs, but you’re still going to face, probably, an extended period where it will be difficult for many people to find work,” Powell continued.
“What we’re trying to do is create an environment in which they have the best chance either to go back to their old job or to get a new job,” he added.
But Powell warned that the lockdown’s decimation of entire industries could make it significantly harder for jobless workers to find another gig through connections and contacts, closing off a crucial pathway to economic recovery for some of the most vulnerable Americans.
“If you have to go to a different industry and start over again, it’s much harder, and that’s where you start to lose people who just fall out of the labor force,” Powell said, adding, “It’s very tough on their lives.”