Federal Reserve Chairman Jerome Powell warned Thursday that the U.S. economy could experience a “false start” if governors reopen non-essential businesses while the threat of coronavirus is still looming, but predicted a “robust” recovery if states wait to reopen until the threat has abated.
“When the spread of the virus is under control, businesses will reopen, and people will come back to work. There is every reason to believe that the economic rebound, when it comes, can be robust,” Powell said at a virtual webinar event with the Brookings Institution.
The Fed chairman declined to be “precise” about when that will happen, but said he thinks most people expect it “in the second half of this year after the second quarter.”
Powell added that the U.S. must have a national plan for restarting economic activity, which has effectively ground to a halt as states have issued stay-at-home orders for residents and closed all non-essential businesses, forcing many to furlough or lay off workers.
“I do think it’s time to have a serious public conversation and a lot of analysis” about reopening the economy, he said. “While we all want it to happen as quickly as possible, we all want to avoid a false start, where we partially reopen and that results in a spike in coronavirus cases and then we have to go back again to square one.”
In the meantime, the Fed is committed to keeping families and businesses afloat by undertaking a series of emergency relief measures, including lowering interest rates to near zero. The Fed also announced a series of measures on Thursday that will pump $2.3 trillion into the flagging economy.
Initial unemployment claims reached 6.6 million last week, just below the previous week’s record. More than 16 million Americans have lost their jobs over the past three weeks, about a tenth of the workforce that was employed according to last month’s jobs report.