WASHINGTON, June 16 (Xinhua) -- U.S. Federal Reserve Chairman Jerome Powell said on Tuesday that significant "uncertainty" remains about the timing and strength of the recovery, warning that a prolonged downturn could further widen gaps in economic well-being.
Despite the economic bounceback, most forecasters think "that will leave us well short of where we were in February, full employment with the economy really working broadly across all of its areas," Powell said in a virtual hearing before the Senate Committee on Banking, Housing and Urban Affairs.
"There are parts of the economy that will struggle to return to their old ways of activity, because they involve getting people together closely in large groups," said the Fed chairman. "It's going to take some time to rebuild confidence."
At the hearing entitled "The Semiannual Monetary Policy Report to the Congress," Powell said in his opening remarks that beginning in mid-March, economic activity fell at an "unprecedented" speed in response to the COVID-19 outbreak and the measures taken to control its spread.
"Even after the unexpectedly positive May employment report, nearly 20 million jobs have been lost on net since February," he said, noting that the reported unemployment rate has risen about 10 percentage points, to 13.3 percent.
The decline in real gross domestic product (GDP) this quarter is "likely to be the most severe on record," Powell said.
The central bank chief reiterated that the burden of the downturn has not fallen equally on all Americans, saying that "those least able to withstand the downturn have been affected most."
"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," 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," said the Fed chair.
The Congressional hearing came shortly after the U.S. Commerce Department reported that retail sales increased by 17.7 percent in May following a record plunge in the prior month, as businesses continue to reopen across the nation.
Noting that the retail sales number was evidence that the economy was bouncing back, the Fed chair said, "the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery."
"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it," he said. "Until the public is confident that the disease is contained, a full recovery is unlikely."
As reopening efforts continue across the nation and employment starts to pick up, Powell said that "we have a long road ahead of us to get those people back to work," especially those who work in the service industries.
ECONOMIC SUPPORT IN NEED
Noting that the unemployed will be hard pressed to find work, Powell said they're going to "need support," without making specific suggestions for Congress on future fiscal policy actions.
Also on Tuesday, more than 100 economists, including two former chairs of the Federal Reserve, three former chairs of the Council of Economic Advisers, and two Nobel laureates implored Congress to immediately pass a "multifaceted relief bill of a magnitude commensurate with the challenges our economy faces."
The economists said Congress must pass another economic recovery package before most of the support in the 2.2-trillion-dollar CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act, expires this summer.
"If Congress fails to act, state and local governments face potentially disastrous budget shortfalls," the statement read, noting that the Congressional Budget Office (CBO) estimates the unemployment rate will likely be more than 11 percent at the end of the year.
At the hearing, Powell highlighted the importance to support state and local governments, saying that if the states are in tight financial straits, they will cut essential services, and lay people off, which will "weigh on the economy."
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