WASHINGTON — Jerome H. Powell, chair of the Federal Reserve, told lawmakers on Tuesday that the economy’s nascent rebound was likely to take a long time to reach all corners of the job market — and that already-disadvantaged groups were likely to suffer the most if the downturn drags on.
While some parts of the economy are seeing a modest rebound, “levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery,” Mr. Powell told the Senate Banking Committee.
Mr. Powell suggested repeatedly that while it was good news that employers were beginning to hire workers, it could take a long time to get back to the strong labor market that prevailed before the coronavirus pandemic shut down large sectors of the economy, forcing tens of millions out of work. And he told lawmakers that more support from Congress and the Fed could be needed to get the economy back to full health.
“The shock that we received — the economy received — was the largest in living memory,” Mr. Powell said, noting that the fiscal and monetary policy response has also been the largest on record.
“The question we will all have to answer over time is: Is it enough?” he said. “I would say there’s a reasonable probability that more will be needed, both from you and from the Fed.”
The economic stakes are high. Mr. Powell stressed that the longer the pandemic went on, the longer lasting the damage from the downturn could be, particularly for lower-income workers. Time out of the work force could erode workers’ skills, he said.
“Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African-Americans, Hispanics and women have been greater than that of other groups,” Mr. Powell said. “If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing.”
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Mr. Powell began his two-day semiannual testimony before Senate and House lawmakers as communities across the United States continue to protest systemic racial inequality after George Floyd, a black man, was killed while in the custody of Minneapolis police in late May. Black Americans are often at a stark disadvantage in the labor market, and along with other minority groups, they have been hard hit by pandemic-era job losses.
Mr. Powell told lawmakers that the central bank was focused on ensuring that the labor market, which had finally begun to benefit minority workers before the virus hit, has the support it needs to recover. If it does, low- and moderate-income people may be able to make gains again.
“What we learned during the last long expansion is that a tight job market is probably the best single thing that the Fed can do to support all low- to moderate-income communities,” which are disproportionately minority, he said. “Everything we are doing is to try to get the labor market back to where it was in February of 2020,” when the jobless rate was around 3.5 percent.
The Fed chair told lawmakers that a full economic recovery was unlikely until the public was confident that the disease was contained, and he warned that an extended period of weakness could be damaging for some sectors, particularly small businesses, which face “acute risks” from the pandemic.
The Fed has already cut rates to near zero, is buying large quantities of government-backed debt, and has unveiled a series of emergency lending programs to keep the economy and credit markets functioning. At the conclusion of its two-day policy meeting last week, Fed officials signaled that they expected to keep rates unchanged through 2022.
But even with its crisis powers, the central bank has the ability only to lend via credit facilities that help municipalities and businesses, not to spend. That means that direct support for households and smaller businesses in the form of grants has fallen to Congress.
Lawmakers have enacted substantial fiscal stimulus, with Congress approving direct payments to individuals and funding for small-business loans. While the central bank noted in its Monetary Policy Report to Congress, released last week, that the fiscal policy response so far “constitutes the fastest and largest fiscal response to any postwar economic downturn,” it signaled that the path to recovery remained “extraordinarily uncertain,” and highlighted that state governments in particular were coming under stress.
Mr. Powell reiterated that while the Fed was “committed to using our full range of tools to support the economy in this challenging time,” its response to the crisis was only part of what was needed.
Legislation can “provide direct help to people, businesses and communities,” he said. “This direct support can make a critical difference not just in helping families and businesses in a time of need, but also in limiting long-lasting damage to our economy.”
He indicated that lawmakers should consider how to help service workers who have been displaced and will struggle to return to work.
“That’s something I’d be looking at, is — what kind of support will they need?” he said.
“I do think you’ll want to continue support for workers in some form. I think that there are going to be an awful lot of unemployed people for some time,” Mr. Powell said. “Even if we start putting people back to work really fast, which may happen here, there are still going to be plenty of people who don’t have jobs and that may not have them for a while because there are no jobs in travel, accommodation, various places.”
The Coronavirus Outbreak
Frequently Asked Questions and Advice
Updated June 16, 2020
What is pandemic paid leave?
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
Does asymptomatic transmission of Covid-19 happen?
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
What’s the risk of catching coronavirus from a surface?
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
How does blood type influence coronavirus?
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
How many people have lost their jobs due to coronavirus in the U.S.?
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Will protests set off a second viral wave of coronavirus?
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
My state is reopening. Is it safe to go out?
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
What are the symptoms of coronavirus?
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
How can I protect myself while flying?
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
How do I take my temperature?
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
Should I wear a mask?
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
What should I do if I feel sick?
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
How do I get tested?
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
More than 100 economists, including two former Fed chairs and three former White House economists, called on Congress to pass another coronavirus relief package before the end of the summer, warning that more needed to be done in order to support economic recovery during the pandemic.
The next legislation, the economists wrote on Tuesday, “should provide, at a minimum, continued support for the unemployed, new assistance to states and localities, investments in programs that preserve the employer-employee relationship, and additional aid to stabilize aggregate demand.”
A smaller group of prominent economists from both sides of the aisle, joined by a former Treasury secretary, Timothy F. Geithner, also detailed a proposal on Tuesday on what Congress should fund to stabilize the economy.
Their report includes a call to renew the expanded unemployment benefits, but phase them down over time, and to create a temporary new pandemic earned-income tax credit to supplement the salaries of Americans who return to work. It would continue government support for hard-hit businesses and send at least $500 billion to states and local governments to help avert cuts to public education and other services, while restricting states from using the money to address pre-existing pension shortfalls or finance new tax cuts.
Lawmakers, however, have shown varying degrees of enthusiasm for further action.
While House Democrats approved a $3 trillion stimulus law in May to further address the economic toll, Senate Republicans remain divided over what another coronavirus relief package should look like, with some voicing skepticism about whether another sweeping round of federal aid is needed as the economy slowly starts to reopen.
“As I’ve already said, we’ll be looking at July to make a decision about whether to go forward with a rescue package,” Senator Mitch McConnell of Kentucky, the majority leader, told reporters on Monday.
President Trump and his economic advisers have been deliberating over the scope of the next economic stimulus package. Mr. Trump has been advocating tax cuts and infrastructure spending while his advisers have downplayed the need for continuing expanded unemployment benefits after they expire in July.
Peter Navarro, a White House trade adviser, said last week that Mr. Trump wanted the next bill to be at least $2 trillion and include a payroll tax holiday and incentives for businesses to bring overseas manufacturing back to the United States.
Treasury Secretary Steven Mnuchin told reporters in a briefing last week that he wanted to see how the existing stimulus measures were working before pumping more money into the economy and that additional measures should be targeted to help industries that are continuing to suffer. However, he made clear that more money would be needed to support the economy.
Alan Rappeport and Emily Cochrane contributed reporting.
