Powell: Lack of stimulus imperils recovery

WASHINGTON — Federal Reserve Chair Jerome Powell warned Tuesday that a tentative recovery from the pandemic recession could falter unless the federal government supplies additional economic support.

Powell said that government support — including expanded unemployment insurance payments, direct payments to most U.S. households and financial support for small businesses — has so far prevented a recessionary “downward spiral” in which job losses would reduce spending, forcing businesses to cut even more jobs.

But the U.S. economy still faces threats, and without further aid, those downward trends could still derail the recovery, the chairman said.

On Tuesday afternoon, though, President Donald Trump tweeted that he had “instructed my representatives to stop negotiating until after the election.” Trump’s tweet immediately sent stock prices falling.

In his speech earlier in the day to the National Association for Business Economics, a group of corporate and academic economists, Powell said:

“The expansion is still far from complete. Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”

Powell noted that the economic recovery has slowed in recent months compared with its rapid improvement in May and June. Incomes fell in August. And job growth weakened in September, slowing to just 661,000, less than half the gains of 1.5 million in August and 1.8 million in July. The economy has recovered only slightly more than half the 22 million jobs that were lost in March and April.