The economic downturn from the novel coronavirus pandemic is “without modern precedent” and “significantly worse than any recession” the U.S. has experienced since World War II, U.S. Federal Reserve Chairman Jerome Powell told a Senate panel on Tuesday.
Powell proclaimed in written testimony prepared for a hearing held by the Senate Banking Committee:
Available economic data for the current quarter show a sharp drop in output and an equally sharp rise in unemployment. By these measures and many others, the scope and speed of this downturn are without modern precedent and are significantly worse than any recession since World War II.
His comments came days after he predicted the coronavirus-linked decline in economic activity might last until 2021.
U.S. Treasury Secretary Steven Mnuchin, who testified alongside Powell, warned of potential long-term devastation to the American economy, the longer the shutdown measures imposed by states remain in place.
“There is [a] risk of permanent damage,” he told the Senate panel.
Mnuchin, however, noted that he expects the economic conditions to improve as some states begin to reopen in the third and fourth quarters of this year.
Highlighting the worst unemployment rates since the Great Depression of the 1930s, currently driving the economic downturn, Mnuchin said it is essential to reopen the American economy.
“It is so important to begin bringing people back to work in a safe way,” he told lawmakers in his written testimony, adding:
As we listen to medical experts, we are optimistic about the progress being made on vaccines, antiviral therapies, and testing. Working closely with governors, we are beginning to open the economy in a way that minimizes risks to workers and customers. We expect economic conditions to improve in the third and fourth quarters.
Last week, Dr. Anthony Fauci, a member of the White House Coronavirus Task Force and the country’s top infectious disease expert, told lawmakers there could be a vaccine available by “late fall” or “early winter.”
Early this year, states imposed what the secretary described as an “unprecedented” shut down of significant parts of the economy to stem the spread of the illness (COVID-19) associated with the new virus. Some have begun to reopen as, even the mainstream media admits, conditions improve in many states.
“This precipitous drop in economic activity has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future,” Powell testified, citing the devastating unemployment rates.
“In addition to the economic disruptions, the virus has created tremendous strains in some essential financial markets and impaired the flow of credit in the economy,” the Federal Reserve chairman also said.
On Tuesday, Powell and Mnuchin provided their first assessment of the economic stimulus programs implemented as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.
During the hearing, the Trump administration officials sparred with Democrat senators over when and how to reopen the economy.
Sen. Sherrod Brown (D-OH) accused the administration of being too eager to reopen.
The senator asked, “How many workers should give their lives to increase the GDP or the Dow by 1,000 points?”
“No workers should give their lives to do that, senator, and I think your characterization is unfair,” Mnuchin proclaimed.
Mnuchin and Powell defended the Trump administration’s fiscal response to the ongoing pandemic.