The U.S. economy could start to recover in the second half of the year after what is shaping up to be the worst recession in decades, but growth is likely to be slow and uneven, several top Federal Reserve policymakers indicated on Tuesday.
Their less-than-sanguine assessments came as a majority of U.S. states began or moved toward reopening their economies, locked down for weeks to slow the spread of the coronavirus.
More than 30 million Americans have filed for unemployment claims in the last six weeks, and U.S. President Donald Trump has pushed for a reboot to economic activity to mend household and corporate balance sheets, even though the coronavirus has continued to spread and U.S. deaths from COVID-19, the disease it causes, have topped 70,000.
“We’re living through the most severe contraction in activity and surge in unemployment that we’ve seen in our lifetimes,” Federal Reserve Vice Chair Richard Clarida said in an interview with CNBC. “Unfortunately, the unemployment rate is going to surge to numbers that we’ve not seen probably since the 1940s.”
Economists polled by Reuters estimate unemployment last month rose to 16%. Researchers at the Chicago Fed earlier Tuesday estimated a “U-Cov” jobless rate – a measure they created to capture unemployment in the COVID-19 era that takes account of people not counted in the official numbers, such as those skipping job hunts because of stay-at-home orders – of between 25.1% and 34.6% for April.
Still, Clarida said he was hopeful the Fed could limit lasting damage to the economy, adding that it was “in the range of possibility” for the economic recovery to start in the second half of the year once businesses reopen and people return to work.
Stocks pulled back sharply after his comments, which were not the only dour ones from Fed policymakers on Tuesday.
“There are lots of different possibilities,” Atlanta Fed President Raphael Bostic said of the shape of any recovery, noting that in the first instance it hinges on stabilizing the rate of infections. “In many communities the ‘V’ recovery is going to be very difficult to achieve,” Bostic said, referring to a scenario with a swift economic rebound.
U.S. coronavirus infections have continued to mount, topping 1.1 million so far, and some epidemiologists forecast more than 130,000 dead by early August.
“Across the country there has been a fair amount of diversity of experiences, diversity of vulnerability and that will translate into diversity of recoveries,” Bostic said.
U.S. Vice President Mike Pence, meanwhile, said on Tuesday the White House could disband its coronavirus task force by month’s end.