Economy not in free fall despite 32% unemployment estimate

James Bullard

Olivia Michael | CNBC

St. Louis Federal Reserve President James Bullard said Sunday he did not believe the U.S. economy or jobs market was in “free fall” as the coronavirus sweeps the country. 

“We’re asking people to stay home to invest in national health, and we’re asking them to use the unemployment insurance program in order to get the transfers they need to be able to pay bills while they’re at home, while they’re not able to work because health authorities are trying to get the virus under control,” Bullard said on CBS’ “Face the Nation.” 

Bullard’s comments come days after the latest weekly jobs report showed 6.6 million Americans filed for unemployment, bringing the two-week total to 10 million jobless claims

The Fed’s St. Louis district in late March estimated the U.S. could see as many as 47 million people lose their jobs as a result of the coronavirus-driven shutdown. Job losses of that magnitude would bring the country’s unemployment rate to about 32%, a figure higher than what was seen during the Great Depression.

The Fed’s “back-of-the-envelope” estimate did not account for workers who potentially choose to leave the labor force, which would bring down the headline unemployment rate.

It also did not estimate the impacts of the recently passed $2 trillion coronavirus relief act that extended unemployment benefits and offered forgivable loans to small businesses that retain workers. 

Bullard argued the large increases in jobless claims must be viewed through the lens of helping people who are facing economic hardship. 

“In some ways, the uptake on the unemployment insurance program is a good thing because it means you’re getting the transfers to the people that are being disrupted by this health-ordered shutdown,” he said. 

Bullard stressed the U.S. economy “was actually doing quite well” before the coronavirus pandemic intensified. “There’s nothing wrong with the economy itself,” he said. 

Bullard has previously argued the U.S. economy will be able to bounce back strongly from the coronavirus shock

“This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine,” he told CNBC on March 25. 

Asked by CBS’ Margaret Brennan whether projections that the U.S. economy would come roaring back once the coronavirus pandemic subsides was a “perfect scenario,” Bullard reiterated that he thought a recovery of that sort was possible, but it depends on how the nation’s response is implemented.  

“I think it can be done. Whether it will be done depends on execution,” he said. “I thought Congress did a great thing in passing their bill. I thought it was appropriately sized for this situation. The object is to keep everybody whole during the period when you’re asking people to not go to their jobs and not go to the shops and basically not participate in the economy.” 

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