“As long as the population is not certain that the pandemic is contained, it is unlikely that the economy will recover completely,” says the chairman of the Fed.
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The u.s. economy is recovering from the crisis caused by the pandemic COVID-19 but the strength of the recovery remains uncertain, stressed on Tuesday the head of the u.s. central Bank, shortly after the publication of indicators are encouraging.
“A good part of this uncertainty comes from the uncertainties regarding the evolution of the disease and the effectiveness of measures taken to control it,” said Jerome Powell, in front of a Senate committee.
“As long as the population is not certain that it (the pandemic) is contained, it is unlikely that the economy will recover completely,” he estimated.
His vice-president, Richard Clarida, has identified his side, “the incredible uncertainty surrounding the depth and duration of the recession.”
Two indicators have come to reinforce the idea that the recovery has yet started in may, after two months of disaster: the retail sales and industrial production.
Sales have increased dramatically from 17.7% last month, nearly double the expectations of analysts. But 485,5 billions of dollars, they are still far from their level of pre-pandemic.
“Sales are lower by approximately 8% on their level in February, indicating that consumer recovery is only partial at this stage”, have summarized the economists of Oxford Economics.
The u.s. president, however, welcomed the figures and said he expected “A GREAT DAY FOR THE STOCK market AND JOBS” on his Twitter account.
And indeed, Wall Street finished in the green: the Dow Jones Industrial Average, rose by 2.04% and the Nasdaq 1.75%.
As regards the industrial production, the u.s. central Bank has reported a rise of 1.4% in may, after a month of April, signing the worst plunge in more than a century (-12,5%).
So far, the recovery is less strong than expected by analysts who had forecast a rise of 3%.
And as for sales in retail, much lower than its level prior to the pandemic, in February (-15,4%).
In may, the employment market has certainly created the surprise by picking up colors with a surprise drop in the unemployment rate (13.3% versus 14.7 percent) and the creation of 2.5 million jobs when economists were expecting a further deterioration.
But Jerome Powell has warned that the level of employment remains well below that of February, when the unemployment rate was at its lowest in 50 years (3.5 per cent).
In addition, the first economy of the world, has lost some 20 million jobs since the month of February and the contraction inevitable in the gross domestic Product in the second quarter “will be without doubt the worst ever recorded,” said the boss of the Fed.
Common call for a new plan
For weeks, he shared his anxiety on this subject, they temper the optimism of the White House and his administration who were counting on a strong recovery in the third and fourth quarters.
Jerome Powell highlights the possibility that the health crisis continues and the fact that it aggravates inequality.
In such a context, small and medium-sized enterprises could not survive, in spite of the various emergency assistance measures implemented both by the Fed and the government.
Unemployment could well stay high for a long time.
In what seems to be a call to do more on stimulus, he emphasized that the Fed’s actions “are only a part of the broader response of the public sector”.
And, the support that only the Congress can bring “can make all the difference, not only by helping families and businesses in need, but also in limiting the deleterious long-term effects on the economy,” he explained.
Two of his predecessors, Ben Bernanke, who led the Fed during the financial crisis, and Janet Yellen, who succeeded him, were more direct in a letter sent to the Congress, to demand more stimulus measures, and signed by hundreds of economists.
“The Congress shall approve a new program of economic recovery before most of the measures in the CARE Act (a recovery plan of over 2,200 billion dollars in progress) expires this summer,” calling on the signatories.
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