WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell says the U. S. economy faces a deep downturn with “significant uncertainty” about the timing and…
WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell warned Tuesday that the U. S. economy faces a deep downturn with “significant uncertainty” about the timing and strength of a recovery. He cautioned that the longer the recession lasts, the worse the damage that would be inflicted on the job market and businesses.
In testimony to Congress, Powell stressed that the Fed is committed to using all its financial tools to cushion the economic damage from the coronavirus. But he said that until the public is confident the disease has been contained, “a full recovery is unlikely.” The chairman warned that a prolonged downturn could inflict severe harm especially to low-income workers who have been hit hardest.
Powell delivered the first of two days of semi-annual congressional testimony, on Tuesday to the Senate Banking Committee before addressing the House Financial Services Committee on Wednesday.
“The longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures,” Powell said. “Long periods of unemployment can erode workers’ skills and hurt their job prospects.”
He noted that the pandemic poses “acute risks” for small businesses.
“If a small or medium-sized business becomes insolvent because the economy recovers too slow, we lose more than just that business,” he said. “These businesses are the heart of our economy and often embody the work of generations.”
Several Democratic senators used their questions to Powell to press for a new congressional rescue bill that would provide increased aid for state and local governments, which face the prospect of mass layoffs because of diminished tax revenue, as well as an extension of enhanced unemployment benefits.
Powell agreed that while both Congress and the Fed have supplied record-high support, the severity of the downturn may require more.
“The shock that the economy received was the largest in memory,” Powell said, noting that the congressional response and the Fed’s response were also the largest on record.
