Northwest Arkansas Democrat-Gazette
Kudlow upbeat on virus recovery
He predicts jobs’ return, strong ’21
The U.S. economy is recovering from the “act of nature” that coronavirus shutdowns created, says White House economic director Larry Kudlow, rejecting a more cautious view of the outlook given last week by Fed Chairman Jerome Powell.
“There’s a very good chance you are going to get the V-shaped recovery,” Kudlow said on CNN’s State of the Union on Sunday.
“The unemployment rate will fall, and 2021 is going to be another solid, solid year.” Kudlow said the $600-a-week bonus payments made to some Americans laid off during the pandemic will end as planned July 31 to prevent a “disincentive” for workers to return to the jobs market.
Congress in March approved the payments as the economy reeled. Since then, it’s been reported that the U.S. officially fell into recession in March, ending a record 128-month expansion.
President Donald Trump’s chief economic adviser offered bullish forecasts on the economy.
The U.S. is on track for 20% growth in the second half of 2020, and a jobless rate below 10% by year’s end, he said on Fox News Channel’s Sunday Morning Futures.
Dallas Federal Reserve Bank President Robert Kaplan also predicted a declining jobless rate Sunday, one which he expects to finish the year at 8% or higher.
In some cases, the top-up payments plus regular unemployment checks add up to more than workers had earned at their jobs, Kudlow said on CNN, adopting a talking point used by several Republican lawmakers.
“We are on our way, we are reopening, and businesses are coming back, and therefore jobs are coming back, and we don’t want to interfere with that process,” he said. “At the margins, incentives do matter.”
Trump is looking at a measure that would be a bonus to return to work, Kudlow said, without offering specifics.
The Fed’s Powell gave a mostly downbeat assessment of the economy Wednesday, after policymakers held interest rates near zero at a twoday meeting. He suggested there would be a “long road” to full recovery. Kudlow said the comments had been “really morose.”
Kudlow also said there’s a “panoply of ideas” for another economic stimulus bill, and that work wouldn’t begin until after the congressional recess in July.
“We will have several more weeks to assess the recovery,” he said on Fox.
Kudlow defended a Trump administration decision not to disclose details about companies that received billions of dollars in taxpayer funds through a high-profile federal relief initiative.
Treasury Secretary Steven Mnuchin announced the move, which reversed earlier guidance. “I don’t think it’s necessary” to make the details public, Kudlow said on CNN.
ANOTHER PREDICTION
Although U.S. employment will increase in the coming months, the jobless rate will remain elevated through the end of the year, said Kaplan of the Dallas Fed.
“We’re on our way down right now,” Kaplan said Sunday on CBS’ Face the Nation. “We’re going to get positive job growth in June, July and from here. Even with that growth, we’re going to end the year with an elevated unemployment rate.”
The jobless rate fell to 13.3% in May, surprising economists who had widely expected it to keep rising as the effects of shutdowns continued to ripple through the labor market.
With the pandemic hitting the black community particularly hard, however, the central bank has expressed concern about the unequal nature of the economic crisis. Although white unemployment fell in May, along with the overall rate, the jobless level of black Americans rose to 16.8%.
“A more inclusive economy where everyone has an opportunity will mean faster workforce growth, faster productivity growth and we’ll grow faster, so I think we’re right to focus on this and bore in on this,” Kaplan said.
“It’s in the interest of the U.S.; the fastest-growing demographics in this country are blacks and Hispanics. If they don’t grow equally, then we’re going to grow more slowly.”
FED CHIEF AT CONGRESS
The Fed’s Powell will deliver a cautionary message about the U.S. economy and covid-19 when he appears on Capitol Hill twice this week.
His remarks to lawmakers are widely expected to echo the mostly downbeat assessment he gave Wednesday.
“I can’t see him straying from that message,” said Jennifer Lee, a senior economist at BMO Capital Markets. “If he changes his tune in any way, people are going to be jumping all over it. Democrats will accuse him of bending to the political will of others.”
Powell will testify via videoconference Tuesday before the Senate Banking Committee and Wednesday to the House Financial Services Committee. Lawmakers will pose questions after his opening remarks.
With the U.S. economy beginning to emerge from shutdowns and despite recent economic data offering some surprisingly bright points, Powell last week emphasized how many Americans are out of work and how long it may take to heal the labor market, especially for minority-group members hit hardest by layoffs.
“The May employment report, of course, was a welcome surprise,” he told reporters during a virtual news conference Wednesday. “We hope we get many more like it, but I think we have to be honest: It’s a long road. Depending on how you count it, well more than 20 million people displaced in the labor market. It’s going to take some time.”
Powell’s take represented a stark contrast to the reaction from Trump, who characterized the jobs report as the “greatest comeback in American history.” The president faces a reelection run in November, when unemployment will almost certainly remain elevated.
While Powell is being nudged by the White House to offer a brighter outlook, the Fed chairman will likely do his own nudging of Congress, carefully encouraging lawmakers to offer additional fiscal stimulus, a point on which he is much more closely aligned with Trump and his treasury secretary. Information for this article was contributed by Yueqi Yang, Ros Krasny, Catarina Saraiva and Christopher Condon of Bloomberg News.