US is facing ‘higher risk of recession’ now: Economist
Economists: the American economy is already in recession
According to experts, the speed of recovery will depend on the actions of the government.
The American economy is in recession. How long it will last will depend on the development of the situation with the pandemic, which could claim hundreds of thousands of lives and which has forced most of the country to introduce severe restrictive measures aimed at curbing the spread of infection..
But the speed of economic recovery will depend on how much assistance the government gives it and how effectively this assistance will be used to save jobs, the Federal Reserve said on Thursday..
“What we know from the example of 2008: when millions and millions of Americans lost their jobs, it took more than ten years to restore the labor market,” said Neil Kashkari, head of the Federal Reserve Bank of Minneapolis. “I am very pleased that many of the actions of the federal and state governments are aimed at helping people keep jobs.”.
It is about a new $ 350 billion small business lending program, launched on Friday, to help companies pay salaries to their employees..
This program is part of the $ 2.2 trillion crisis package that Congress passed last week..
Over the past two weeks, 10 million Americans have applied for unemployment benefits, which Kashkari called “shocking and alarming”. His wife, who worked for a corporate travel agency, joined the ranks of the unemployed..
If jobs remain assigned to employees, Kashkari says recovery could be faster as companies can start over from scratch..
If companies fail to reopen and retain their employees, thousands of businesses will go bankrupt, leading to significantly longer recovery times..
The head of the Federal Reserve Bank of Dallas, Robert Kaplan, also noted in an interview with CNBC that the economy is in a “sharp contraction” and the unemployment rate could reach 10-15 percent..
At 15 percent, 24 million Americans will be unemployed. In February, the unemployment rate was 3.5 percent and the peak, 10 percent, was reached during the Great Recession..
“We know that restrictive measures will make it harder for both the service sector and the consumer,” Kaplan said, referring to decrees in most states requiring people to stay at home and close all non-essentials..
Although Kaplan expects unemployment to fall to around 8 percent by the end of the year, he warns: “It will take a lot of work to get there.”.
Anti-crisis measures, including the aid package adopted last week, play a key role in this, but more fiscal measures will be needed, he notes..