Coronavirus Economy: Fed Chair Jerome Powell Says COVID-19 Downturn 'Unprecedented'

The Federal Reserve is committed to taking additional steps to stem the economic damage caused by the coronavirus pandemic, which has produced a downturn “without modern precedent … significantly worse than any recession since World War II,” Fed Chairman Jerome Powell says in testimony prepared for delivery Tuesday before the House Banking, Housing and Urban Affairs Committee.

Powell said Sunday in an interview on CBS “60 Minutes” he is “fully confident” the economy will recover steadily through the second half of the year if a second wave of COVID-19 cases doesn’t hit. He said he expects the second quarter to register as much as a 30% drop in gross domestic product.

Powell said last week in a presentation for the Peterson Institute for International Economics lawmakers should take further action to stem the crisis, spending now to prevent a longer, more painful recession.

“The coronavirus outbreak is, first and foremost, a public health crisis,” Powell said in his prepared House testimony.

“Many businesses remain closed, people have been advised to stay home, and basic social interactions have been greatly curtailed. People have put their lives and livelihoods on hold at significant economic and personal cost. All of us are affected, but the burdens are falling most heavily on those least able to carry them.”

He continued: “It is worth remembering that the measures taken to contain the virus represent an investment in our individual and collective health. As a society, we should do everything we can to provide relief to those who are suffering for the public good.”

Powell has predicted a significant contraction in the second quarter and said Sunday it is likely the unemployment rate will reach 20%, remaining in double digits at least through the end of the year.

“Available economic data for the current quarter show a sharp drop in output and an equally sharp rise in unemployment,” Powell said in his prepared remarks.

“By these measures and many others, the scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II. Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs, reversing nearly 10 years of job gains. This precipitous drop in economic activity has caused a level of pain that is hard to capture in words.”

To mitigate the damage, Powell noted the Fed already has taken unprecedented steps to shore up the economy and is preparing programs to bolster small business and local governments.

“The tools that the Federal Reserve is using under its … authority are for times of emergency, such as the ones we have been living through. When economic and financial conditions improve, we will put these tools back in the toolbox,” Powell said.