U.S. unemployment rates might drop to “Great Depression-era” levels because of the coronavirus, according to former Federal Reserve chair Janet Yellen.
Yellen said told CNBC on Monday morning the current situation “is a huge, unprecedented, devastating hit, and my hope is that we will get back to business as quickly as possible.”
She said right now, the economy is experiencing an “absolutely shocking” decline that has yet to be reflected in data.
“If we had a timely unemployment statistic, the unemployment rate probably would be up to 12 or 13 percent at this point and moving higher,” she said.
Yellen, who served as the Federal Chair from 2014 to 2018, added the gross domestic product is down “at least 30 percent and I’ve seen far higher numbers.”
She said such numbers are depression-level, but were “in very different form” from the Great Depression, which took place mostly in the 1930s.
On Friday, a jobs report from the Labor Department showed 701,000 jobs were lost, ending nearly a decade of uninterrupted job growth — the longest such streak on record.
The unemployment rate surged in March from a 50-year low of 3.5 percent to 4.4 percent, which was the sharpest one-month jump in the jobless rate since 1975.
Nearly 10 million Americans applied for unemployment benefits in the final two weeks of March, which exceeds any corresponding period on record.
Those layoffs will be reflected in the Labor Department’s jobs report for April.
“This was an ugly jobs report, showing that the pain in the economy started in early March, well before the spike in the weekly initial jobless claims data,” Joseph Song, an economist at Bank of America Securities, told The Associated Press.
“It is going to get much worse in coming reports.”
During the Great Depression years, unemployment peaked at 25 percent, while U.S. economic output plunged nearly 30 percent.
Thousands of banks and businesses had failed and millions of homeowners faced foreclosure.
No one knows how this recession may unfold or how effectively the government’s rescue programs might help.
James Bullard, president of the Federal Reserve Bank of St. Louis, has gone so far as to warn that unemployment could reach 30 percent within months — and that economic output could shrink 50 percent.
Some economists say the fact that the government possesses more potent tools to stabilize the economy than it did in the 1930s, some of them created in response to the Depression, is heartening.
Last month, the White House and Congress worked together to create the most expensive economic rescue package in U.S. history worth $2.2 trillion.
The package, signed by President Donald Trump, includes Americans receiving $1,200 checks as monetary relief amid the coronavirus pandemic.
The IRS is expected to make about 60 million payments via direct deposit in mid-April, but others without direct deposit information may not get their funds until mid-August or later.
Trump on Sunday said he'd be open to the "concept" of the government pushing out a second batch of checks.
The first set of stimulus money should be sent out within two weeks, Trump told reporters.
Source: Read Full Article