Fed officials said on Thursday that “recession is here” and the economy’s recovery relies on U.S. government aid and its effectiveness in combating the impact of millions of lost jobs.
The Fed added that the duration of the recession was dependent on the course of the pandemic, noting that it could still kill a huge number of Americans amid imposed lockdowns aimed at containing the outbreak.
Echoing the 2008 economic recession, Minneapolis Federal Reserve Bank President Neel Kashkari said that millions of Americans losing their jobs meant a decade of putting back the labor market. He added that the federal and state government’s actions aimed at keeping workers in their jobs were pleasing.
The program that Kashkari referred to was the $350 billion Paycheck Protection Program to be released on Friday. It aims to provide small businesses with grants so they can pay their workers despite the lockdown. The economic stimulus is a major part of the $2.2 trillion coronavirus emergency package passed by Congress.
In the last two weeks, 10 million Americans have filed for unemployment insurance. Kashkari said that economic recovery may be quicker if employees still had their jobs to allow companies to reopen much faster.
He added that a spike of business bankruptcies meant a long and more shallow economic recovery.
Dallas Fed President Robert Kaplan also said that the economy is already in a “severe contraction.”
A 15% unemployment rate equals 24 million jobless Americans. In February, unemployment was at 3.5% and peaked at 10% during the Great Recession.
Rescue efforts to support the economy, such as the $2.2 trillion emergency package are essential, but more fiscal action is also necessary, Kaplan said.