America’s economy is going to get a lot worse before it gets better, says James Bullard, president of the St. Louis Federal Reserve. But it will get better.
In a teleconference with reporters, Bullard tempered his previous prediction that the U.S. unemployment rate will explode to 30% — higher even than it was during the Great Depression of the 1930s — as Americans stay home to blunt the spread of the Covid-19 coronavirus pandemic.
On Wednesday, he stuck with that forecast, but said, in effect, that there will be a spoonful of economic sugar in the fall, after some bitter medicine goes down during the summer.
“Bullard said the economy was like a car on the highway that comes upon a construction zone. The car has to slow down to navigate the twists and turns, but there is nothing inherently wrong with the engine,” reports Marketwatch.
There will be a “huge spike” in unemployment in the second quarter and into summer, Bullard said, “but everyone knows exactly what that is, that’s pandemic relief that’s done on purpose. If we can get this to work right, everything will snap back to normal once this is over.”
Bullard and his Fed colleagues “have taken extraordinary steps during the crisis, pulling short-term borrowing rates to near zero, implementing a slew of programs aimed at keeping markets functional, and directing funding to businesses and institutions in need,” says CNBC.
“This [unemployment] number will be unparalleled, but don’t get discouraged,” Bullard said Wednesday.
By October, he said, “pent-up demand” by consumers and resumption of work put on hold for months will drive a “boom quarter where there’s a lot of production” — a boom that could extend into 2021.