Millions who joined the unemployment rolls beginning in March as a result of the COVID-19 pandemic could remain jobless through the end of 2020, according to a Federal Reserve Board statement.
The Fed predicts that roughly 15 million Americans may remain without work going into 2021 — far more than Trump Administration has forecast, CBS News recently reported.
Although the Fed expects the jobless rate to decline from 13.3 percent to 9 percent by the end of this year, that’s still a significant increase over the six million unemployed in January.
At a virtual news conference, Federal Reserve Chair Jerome Powell suggested that comments made by Treasury Secretary Steven Mnuchin – who said the country was well on its way to a “strong reopening” – might be premature. Powell said that the Fed would not overreact to a single data point, even though they were surprised by the decline in U.S. unemployment in May.
“We’re not thinking about raising rates,” Powell said. “We’re not even thinking about thinking about raising rates.”
The Federal Reserve plans to continue buying bonds and keep borrowing rates low. There is currently no rate hike forecasted through 2022.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent," the Federal Reserve Board of Governorwrote in their June 10 statement. "The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Powell’s remarks initially encouraged a June 10 stock market rally, although by the end of the day several market averages dropped into negative territory, with the S&P falling half a percentage point.
The economic recovery from coronavirus-related damage could include slack in the labor market through the end of 2022, predicts Steven Friedman, senior macroeconomist at investment adviser MacKay Shields.