Coronavirus Economy: Federal Reserve Chairman Jerome Powell Says US May Already Be In Recession

U.S. Federal Reserve Chairman Jerome Powell said Thursday the U.S. economy may already be in recession, but this downturn is unlike any in the past because it is being caused by efforts to control the coronavirus, not by economic fundamentals.

In an interview on NBC “Today,” Powell said he expects confidence will return and businesses will reopen once COVID-19 is under control.

“This is a unique situation. This is not a typical downturn,” he said. “What's happening here is people are being asked to close their businesses, to stay home from work and to not engage in certain kinds of economic activity and so they're pulling back. And at a certain point, we will get the spread of the virus under control and at that time confidence will return, businesses will open again, people will come back to work.”

He added: “We may well be in a recession, but I would point to the difference between this and a normal recession. There’s nothing fundamentally wrong with our economy.”

The comments came just days after Morgan Stanley predicted a 30% contraction in the second quarter and followed by hours Senate passage of a massive economic rescue package designed to blunt the impact of the crisis, including putting cash in the hands of 80% of taxpayers and expanded unemployment benefits.

The Fed already has taken its own steps, lowering the federal funds rate to zero to 0.25% and injecting billions into the bond market.

Powell said the “first order of business” is to stem the spread of the virus and recommended following the advice of experts who have recommended people to keep their distance from each other, prompting governors to and mayors to order the closure of bars and restaurant dining rooms, as well as nonessential businesses. Thousands of companies have ordered employees to work from home.

President Trump has been pushing to lift the restrictions by Easter Sunday, calling the federal guidelines for stemming spread of the disease too damaging to the economy.

The shutdowns are expected to cause billions of dollars in damage, as much as $15 billion in New York state alone. New York City, the nation’s financial hub, reported at least 20,000 of the state’s 30,000 confirmed cases with at least 280 deaths.

Nationwide, there have been more than 69,000 confirmed cases and more than 1,000 deaths.

The Bureau of Labor Statistics Thursday reported a record 3.28 million initial unemployment claims were filed last week as companies began laying off people. The unemployment rate is expected to jump into double-digits from February’s 3.6%.

The Bureau of Economic Analysis Thursday reported real gross domestic product grew 2.1% in the fourth quarter, just before COVID-19 began its global spread.