November 12, 2020
- The US economy won’t return to the exact same state it was in before the pandemic, Federal Reserve Chair Jerome Powell said Thursday.
- The health crisis is accelerating digitization throughout the economy, and Americans already slammed by the virus’s fallout are at the highest risk of losing their jobs, he said at a virtual conferencehosted by the European Central Bank.
- “We’re not going to the same economy,” he said, adding that “relatively low-paid, public-facing workers in the service sector” could be swiftly displaced.
- “There’s going to be a substantial group of workers who are going to need support” as they look to return to their old jobs or find entirely new work, Powell said.
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A full US recovery will yield a vastly different economy than was seen before the pandemic, Federal Reserve Chair Jerome Powell said Thursday.
While the economy continues to heal at a moderate pace, soaring COVID-19 infections present an increasingly large risk. The next few months “could be challenging,” the central bank chief said, but long-term trends driven by the pandemic can also hinder a complete rebound.
The pandemic is accelerating several preexisting shifts to technology as Americans adapt to telecommuting. While a more digitized economy will bring some benefits, it endangers some populations already disproportionately harmed by the coronavirus recession, Powell said.
“We’re not going back to the same economy,” Powell said at a virtual conference hosted by the European Central Bank. “It’s relatively low-paid, public-facing workers in the service sector who are bearing the brunt.”
Minorities and women face the greatest risk from such a shift, as they’re the populations most likely to struggle to return to their old service jobs or find new ones, he added. Those two groups are among those that were hit hardest by the pandemic and still face higher unemployment rates than the broader population. An acceleration of automation could permanently replace the roles and create long-lasting economic scarring, Powell said.
“Even after the unemployment rate goes down and there’s a vaccine, there’s going to be a substantial group of workers who are going to need support as they find their way in a post-pandemic economy,” he added.
That support so far seems unlikely to materialize soon.
Congress failed to reach a stimulus agreement ahead of the election, and the likelihood that Republicans maintain control of the Senate blocks hopes for a massive, front-loaded deal. Senate Majority Leader Mitch McConnell now leads negotiations between parties on a new aid package. Though he had indicated he wants to pass a bill before the new year, the size of a new stimulus package remains a sticking point.
Powell again avoided making an explicit call for more fiscal support, but pointedly noted that, while Congress is the only body that can handle the particulars, “it’s likely that more will need to be done in time.”
When asked of his biggest fear for the future, the central bank chief cited “longer-run damage” to the US’s productive capacity and Americans’ lives. Prolonged unemployment among women, a lack of education for children, and permanent closure of small businesses can all worsen the pandemic’s already historic fallout, Powell said.
Workers “losing their connection to the labor force and really losing the life they had” presents a frightening risk to the nation’s recovery, he added.