Jerome Powell believes that growth should resume more quickly, despite very high unemployment and a deep recession.
This is a very voice heard, especially in times of economic crisis. For Jerome Powell, the head of the u.s. central Bank, the current period presents the “fundamental differences” with the Great Depression. According to him, the growth is expected to resume more quickly in spite of very high unemployment and a deep recession.
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“I do not believe that this is a likely outcome,” said Jerome Powell, in an interview on CBS about a Great Depression similar to the 1930s. He cited a thriving economy prior to the pandemic, of strong banks and an adequate reaction of the authorities. So far, it is estimated that a peak in the unemployment rate to 20% or 25% is likely, and the fall of the Usa’s GDP in the second quarter in the United States will be “easily in the 20, 30%”.
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The u.s. economy slowed down
The american economy has been severely slowed by the containment measures imposed on the majority of the population of the country to try to stop the epidemic that has already done nearly 90,000 deaths in the country and has infected nearly a million and a half, according to available data compiled by the Johns Hopkins university. The United States hosts the largest number of deaths in the world.
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The boss of the central bank has felt that it was impossible “to find the words to express the suffering inflicted by the disease, but wanted to be optimistic for the economy in the long term. “Over the long term and even the medium term, I would advise against really bet against the american economy. This economy will recover,” quipped Jerome Powell. However, “it will probably take a bit of time, or even a certain time, this could go until the end of next year, in fact I don’t know”.
In total, nearly 36.5 million persons have pointed to the unemployment, since the sudden stop of economic activity in mid-march, and the unemployment rate rose jumped 3.5% in February to 14.7% in April. All indicators are down, the growth (-4,8% annual rate in the 1st quarter) consumption, traditional engine of the american economy, including the production manufacturing.
indicators of Health will be the key
But beyond the economic indicators that the central Bank compiles and tries to anticipate, Jerome Powell stressed that time was mostly in control of the pandemic, in the absence of a vaccine or treatment proven therapeutic. The debate rages in the United States between the supporters of a rapid reopening of the economy and a slow opening and reasoned in an attempt to avoid a second wave of infections.
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“You know, the thing that matters more than any other for the time being this are the indicators of health. It is the spread of the virus. What are all these things that are associated with it” such as the measures of social distancing, explained Jerome Powell. For him, it is a sine qua non condition for the economy to restart. The boss of the Fed also estimated on Sunday that the first economy of the world could recover completely from the shock caused by the pandemic with a vaccine.
Japan accuses him also kick
The recession is back in Japan, which has experienced between January and the end of march a second quarter of contraction in a row of its gross domestic product (GDP), while the crisis of the coronavirus began to strike. This is the first time since 2015 as Japan falls back into recession, “technical”, which is defined by a contraction of the national wealth, on at least two quarters.
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The GDP fell 0.9% in the first quarter of 2020 compared to the fourth quarter of 2019, where he was already contracted by 1.9% (against 1.8% like-announced on a previous estimate in early march), according to preliminary data released Monday by the government.