"We need to work on the recovery rate of the economy" after the crisis, Fed President Richmond Thomas Barkin said, noting that companies may operate less efficiently under social distancing rules, business investment may be hampered by undermining confidence, and workers may withdraw from the labor market by rethinking how to care for children and elderly parents in an era when day care facilities are in place.
In the midst of a patchwork, Barkin spoke to the coronavirus-spurred lockdowns that some states have already seen their economies open and others have restrictions, while companies and their employees are struggling to find the right balance. Workers remaining on the job face risks-meat processing plants were forced offline due to worker outbreaks-while businesses reopening are likely to face higher costs and fewer customers.
"We will be returning to somewhat normal operations-at a gradual pace," Barkin said in a webcast to the Maryland Chamber of Commerce. But "I'm worried about the landing spot-how strong the economy will be at the end of this." St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan expressed similar concerns about how slow and complex the path out of the crisis may be.
Not only in the coming months, for example, will the unemployment rate spike to catastrophic levels as high as 20 percent, but it will likely remain high until the end of the year or longer, Kaplan said in an interview on Fox Business Network.
"We're probably going to end the year with an unemployment rate as high as 8 to 10 per cent," Kaplan said, a figure that might mean 10 million more unemployed over the next few months compared to the beginning of the year. "We're going to need stimulus to go into the rest of the year and into next year so we're growing faster, so we're working down this unemployment rate." That's in contrast to the initial hopes of an economic recovery as fast and historic as the decline of the last few weeks.
This week, the Fed reaffirmed a commitment to keep interest rates low and continue to offer trillions of dollars in credit across the economy as long as it is needed to stabilize it during the fight against a pandemic that has killed over 62,000 people across the country.
But that may just be the beginning of a struggle that will require critical policy choices on how and what to reopen, what health protections are needed to keep the virus contained, and how to offset whatever financial or other wounds arise.
Bullard, in an interview with the Wall Street Journal, said he was concerned about the prospect of an economic depression if both the shutdown proceeds too long and the reopening is not handled well.
"I think we're taking the risk of depression here if we're not careful and if we're not executing this properly over the next few months," Bullard said, suggesting a "far more granular, far more risk-based" approach to the timing of returning states or industries online.
"You can hit the pause button on the U.S. economy, but if you try to keep it paused for too long, too many other problems will begin to accumulate and you'll start getting lots of bankruptcies and business failures," Bullard said.