Federal Reserve Chairman Jerome Powell said Thursday that the flood of fiscal and monetary support provided to fight the coronavirus recession could help the U.S. economy recover to its pre-pandemic strength "much sooner" than expected.
Powell said during a Thursday virtual interview that the unprecedented amount of stimulus approved by Congress and the White House, along with the Fed’s aggressive intervention, has likely prevented the U.S. from suffering deeper long-term economic damage.
The Fed chief stressed that the U.S. economy would not fully recover until the raging coronavirus pandemic is under control. Powell, however, said that a rebound to the historically low unemployment seen before COVID-19 derailed the economy could return quicker than many expected when the pandemic hit.
“The thing that we're most focused on is getting back to a strong labor market quickly enough that people's lives can get back to where they want to be,” Powell said. “We were in a good place in February of 2020, and we think we can get back there, I would say, much sooner than we had feared.”
The coronavirus pandemic caused the steepest and quickest economic decline in the U.S. since the Great Depression. More than 20 million jobs were wiped out by pandemic-related shutdowns and closures in March and April, spiking the unemployment rate from a 50-year low of 3.5 percent in February to a post-Depression record of 14.7 percent.
President TrumpDonald TrumpCapitol fencing starts coming down after 'Justice for J6' rally Netanyahu suggests Biden fell asleep in meeting with Israeli PM Aides try to keep Biden away from unscripted events or long interviews, book claims MORE and Congress have approved more than $4 trillion in direct fiscal aid and coronavirus response since the pandemic began, primarily through the $2.2 trillion CARES Act passed last March and a $908 billion follow-up signed in December.
The Fed also slashed its baseline interest rate range to near zero, has purchased at least $120 billion in Treasury and mortgage bonds each month, and deployed more than a dozen emergency lending facilities backed up by billions in credit protection.
The U.S. has since recovered roughly 10 million of those jobs and the unemployment rate was 6.7 percent, well below the 9.3 percent median December unemployment rate projected by Fed officials in June. Labor force participation, however, has dropped since the pandemic and many of those unable to find jobs are not included in the traditional unemployment rate.
While Powell acknowledged that millions of Americans were still struggling to get by, he said the robust fiscal and monetary response will likely reduce the length of time it takes for a full recovery. He also praised both fiscal and monetary policymakers for learning the lessons of the 2007-08 financial crisis and recession.
Former President Obama signed a bill in 2009 that provided $831 billion in stimulus, but some economists blame a lack of a follow-up package and spending cuts that occurred later in his presidency for slowing the pace of the recovery.
“There was a response at the beginning, but it ended too quickly and wasn't sustained,” Powell said, referring to the 2008 recession.
“Not only did everyone — fiscal and monetary — act quickly and strongly at the beginning [of the pandemic], but we've seen follow up from the fiscal authorities, and I think that's been part of the story,” he said.