Federal Reserve officials indicated they expected the economic recovery from the pandemic-induced recession to be a slow one, with rates near zero for years.
The head of the Federal Reserve on Wednesday offered a grim assessment of how quickly the U. S. economy will recover from its pandemic-induced recession, suggesting that millions of people could remain out of work for an extended period as central bank officials estimated unemployment will be at 9.3 percent by the end of 2020.
The Fed chair, Jerome H. Powell, said the labor market might have “hit bottom” after recording a 14.7 percent unemployment rate in April, but made clear that it was too soon to know for certain.
“This is the biggest economic shock, in the U. S. and the world, really, in living memory,” Mr. Powell said at a news conference after the Fed’s two-day policy meeting, during which it left rates unchanged. “We went from the lowest level of unemployment in 50 years to the highest level in close to 90 years, and we did it in two months.”
The sober projections, the Fed’s first estimates of 2020, depicted a very different economic path from the quick “V-shaped recovery” that President Trump has suggested is underway as he pushes states to reopen and remove the stay-at-home orders that have contributed to bringing business activity to a halt.
Mr. Trump has pointed to the stock market rally and the May jobs report, in which the unemployment rate fell to 13.3 percent, as evidence that the economy is “back.”
“I think you’re going to have a V. I think it’s going to be terrific,” Mr. Trump said last month, referring to kind of economic rebound that can occur after a sharp decline. He has continually called for states to reopen, suggesting that officials who do not lift quarantines are artificially holding back the recovery.
But Mr. Powell did not suggest a rapid return to the type of economic growth and low joblessness that defined the 11-year expansion, even as states allow restaurants, offices and salons to reopen. Instead, he said, “there is great uncertainty” about the future given unknowns about the coronavirus and whether people will feel comfortable resuming their previous day-to-day activities absent a vaccine.
“My assumption is that there will be a significant chunk, well into the millions,” Mr. Powell said, referring to workers “who don’t get to go back to their old job, and, in fact, there may not be a job in that industry for them for some time.”
The Fed will do “whatever we can, and for as long as it takes,” to support the recovery, he said, including buying large quantities of bonds and leaving interest rates near zero for a long time.
