EDITOR NOTES: If you think the reopening of US businesses will stave the economic impact of COVID-19, ushering in a robust recovery, then think twice. Boston Federal Reserve’s Eric Rosengren deflates such hopes, stating that a reopening isn’t a “panacea.” In fact, he sees the unemployment rate remaining in double digits through the end of the year, possibly as high as 20% (Great Depression levels). What might eventually bring the economy back? Try an effective vaccine. But as of yet, such a therapy is nowhere in sight. And as soon as one gets developed, the economy may be ravaged beyond recognizable form. In other words, get ready for a rough and potentially devastating ride ahead.
(Reuters) - U.S. businesses will face weak demand as long as consumers and workers are worried about public health, and the unemployment rate is likely to still be in the double digits at the end of the year, Boston Federal Reserve Bank President Eric Rosengren said Tuesday.
The unemployment rate could peak at close to 20% as more Americans lose jobs in shutdowns to limit the spread of the coronavirus, and job losses could linger, Rosengren said in remarks prepared for a webinar hosted by the New England Council.
“Unfortunately, even by the end of the year, I expect the unemployment rate to remain at double-digit levels,” he said.
Policymakers will take action to help reduce the length of time that people are out of work and some of the Fed’s emergency lending facilities helped to ease the pressure in short-term funding markets, Rosengren said.
The Main Street Lending Facility, which aims to make credit available to small and medium sized businesses, should launch by the end of the month, Fed Chair Jerome Powell said on Tuesday.
Businesses that meet the requirements will be able to turn to their lenders for a loan, Rosengren said. However, the program will not help all businesses in need, he cautioned.
“It will not be able to assist everyone, but we expect that it will provide an important bridge for many businesses that employ much of the American workforce,” Rosengren said.
Fed officials will continue to gauge interest from businesses and would consider lowering the minimum loan amount to reach more businesses if needed, Rosengren said.
As businesses reopen, many people will be nervous about returning to the workplace and demand for many services will stay low until those concerns are lifted, he said.
“In sum, simply allowing businesses to reopen is not a panacea,” Rosengren said. “Public health solutions are paramount – without them, it will be virtually impossible to return to full employment.”
Originally posted on Reuters