US will ‘start to recover this year’

FEDERAL RESERVE: MUCH SHORTER DOWNTURN

There will not be another Great Depression like in the 1930s – chairman.

Washington

The US is facing a severe economic downturn amid the global pandemic, but will not suffer another Great Depression and will see a recovery begin later this year, Federal Reserve chair Jerome Powell said on Sunday.

The world’s top economy was strong before the Covid-19 outbreak hit, causing nationwide business shutdowns, Powell said. And the banking system had been rebuilt stronger since the global financial crisis.

Data shows more than 30 million jobs were destroyed in the US, as businesses were shuttered nationwide amid the efforts to stop the spread of the virus.

For the April-June period, the economic data “will be very, very bad. There’ll be a big decline in economic activity, big increase in unemployment”, Powell told the CBS programme 60 Minutes.

But “there’re some very fundamental differences” between the current crisis and the Great Depression of the last century, he said.

The US economy could “easily” collapse by 20 to 30% this quarter, and unemployment could peak at 20 to 25%, but, “it should be a much shorter downturn than you would associate with the 1930s”.

The other key difference is, rather than raising interest rates, the Fed slashed lending rates to zero and is prepared to come up with new ways to support growth, Powell said.

“There’s a good chance that there’ll be positive growth in the third quarter.” But he warned it might take time to return to normal and the US may not see a full recovery without a vaccine to treat Covid-19.

“I think you’ll see the economy recover steadily through the second half of this year,” Powell said. But “it’s going to take a while for us to get back. It could stretch through the end of next year. We really don’t know.”

Powell stressed the importance of consumers to the economy. “For the economy to fully recover, people will have to be fully confident, and that may have to await the arrival of a vaccine,” he said.

The Fed rushed in even before the economic lockdowns were fully in place, slashing the benchmark lending rate and pumping trillions of dollars into the financial system and into lending programmes. –

Economy will recover steadily through second half

Picture: AFP A medical staffer holds a thermometer used to take the temperature of people entering a community health centre in Banda Aceh yesterday, amid the coronavirus pandemic.