At Fed Chair Jerome Powell’s policy meeting press conference six weeks ago he talked repeatedly about the possibility of second and third waves of the novel coronavirus in the months ahead and the havoc that could wreak on the U.S. economy.
FILE PHOTO: The U.S. Federal Reserve building is set against a blue sky amid the coronavirus pandemic in Washington, U.S., May 1, 2020. REUTERS/Kevin LamarqueAt Wednesday’s press conference after the Fed’s latest meeting, the central bank chief’s tone markedly shifted to a focus on the millions who may remain jobless even as the economy recovers.
Gone, it appears, was the notion that the United States could possibly shut down again to the level it did from mid-March to late April when much of the country was under stay-at-home orders and economic activity cratered.
“The decision about when to reopen the economy is one for elected officials at the state and local and federal level ... we don’t have anything special to add on that,” Powell said Wednesday in a more circumspect answer when pressed on the possibility of a second wave.
The change in focus reflects the reality that many states have begun to re-open their economies against the advice of health officials, who argued the virus had not yet been brought under control and that there weren’t sufficient systems in place to track the outbreak.
By May 19, all 50 states had begun some partial re-opening of their economies. Nationally, new infections are rising slightly after five weeks of declines, according to a Reuters analysis, only part of which is attributed to more testing.
In contrast with parts of Asia and Europe, which have waited for more consistent and sharper declines in cases before re-opening, numerous U.S. governors have repeatedly emphasized that economic growth can only take a backseat to the health crisis for a limited time.
The Fed, it seems, has now factored that in to its economic assessment to some degree. Powell said May’s surprise gain of 2.5 million jobs when economists forecast millions more losses meant it was possible the labor market had hit bottom.
“With the easing of social distancing restrictions across the country, people are increasingly moving about and many businesses are resuming operations to varying degrees,” Powell acknowledged, while cautioning the future is still highly uncertain.
The Fed, according to projections released on Wednesday, sees a recovery in the second half of the year and lasting over the next couple of years. Now the emphasis was on helping those people, likely in their millions, who will not easily find employment again.
But as to the possibility the U.S. economy could face another large-scale economic shock caused by a second wave, Powell said it was more likely local spikes would cause a setback in confidence in industries “already slow to recover” than a nation hunkering down once more.
“A series of local spikes could have the effect of undermining people’s confidence in traveling, in restaurants, entertainment,” Powell said. “It would not be a positive development and I will just leave it at that.”