SAN FRANCISCO (Reuters) – As many parts of the world’s biggest economy begin to reopen after weeks of stay-at-home orders that slowed the spread of the coronavirus but gutted jobs, Americans should not expect a quick return to growth, U.S. Federal Reserve officials said on Friday.
FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid
“A couple months ago I was optimistic, I was hopeful, that maybe we would have a ‘V’-shaped recovery – shut things down, clamp down on the virus, and then have a quick recovery,” Minneapolis Federal Reserve Bank President Neel Kashkari said in an interview on the PBS Newshour.
The virus has continued to spread across the nation, with nearly 1.3 million people infected so far and more than 77,000 dead.
With a vaccine and effective treatment unlikely for a year or two, “we are in for unfortunately a slow, long recovery” from “devastating” job losses, Kashkari said.
The U.S. economy shed a record 20.5 million jobs in April due to the lockdowns imposed by states and local governments to curb the spread of the novel coronavirus, a Labor Department report showed Friday. (For an interactive graphic please see: here)
Interviewed by Fox News on Friday, U.S. President Donald Trump said that the jobs will be back. “They’ll be back very soon, and next year we are going to have a phenomenal year,” he said.
That’s not the dominant view at the Fed, which has slashed interest rates to zero, bought trillions of dollars of bonds and extended credit to local governments and businesses in an effort to prevent financial markets from imploding and keep the economy from even worse devastation.
San Francisco Fed President Mary Daly, who appeared on CNN an hour later, said the Fed’s unprecedented actions, along with nearly $3 trillion committed by the U.S. Congress for rescue efforts, should help.
“What I’m hoping in the baseline is we can come back safely, we listen to public health officials, we take it slow but gradual…if we do those things and we reenter safely, then I expect us to have positive growth in 2021,” Daly said.
Asked if it could take 10 or 12 years to repair the job market, as it did after the 2007-2009 financial crisis, she said, “I’m working night and day to ensure that doesn’t happen.”
But the economy can’t rev up too quickly, not as long as the virus is still loose, she said.
“When the coronavirus is behind us, we can reengage fully,” Daly said, noting. “It won’t be quick; in my opinion, it won’t be ‘V’-shaped, it will be gradual.”
Reporting by Ann Saphir; Editing by Cynthia Osterman and Sonya Hepinstall