Federal Reserve Chair Jerome Powell said in a speech today the economic crisis caused by Covid-19 is worse than any since World War II and the government may need to add more fiscal support.
“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II,” Powell said. “We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased. Since the pandemic arrived in force just two months ago, more than 20 million people have lost their jobs.”
He noted 40% of households making less than $40,000 per year had lost a job in March.
Powell also noted the deeper and longer a recession goes, the more damage it can leave behind.
“Avoidable household and business insolvencies can weigh on growth for years to come,” he said in the speech. “Long stretches of unemployment can damage or end workers’ careers as their skills lose value and professional networks dry up, and leave families in greater debt.”
Further fiscal support from the government could be costly, but it would be worth it if it avoids long-term economic damage and leaves the US with a stronger recovery.
“A prolonged recession and weak recovery could also discourage business investment and expansion, further limiting the resurgence of jobs as well as the growth of capital stock and the pace of technological advancement,” Powell said. “The result could be an extended period of low productivity growth and stagnant incomes.”
The full speech is available online.