Economic recovery could take until the end of 2021, says the Federal Reserve 0:51
(CNN Business) -
The Covid-19 pandemic brought the economy to a sharp halt, and while it has begun its long road to recovery, the economy we knew is likely a thing of the past, Federal Reserve Chairman Jerome Powell said Thursday. .
"We are recovering, but to a different economy," Powell said during a virtual panel discussion at the Central Banking Forum of the European Central Bank.
The pandemic has accelerated existing trends in the economy and society, including the increasing use of technology, telecommuting and automation, he said.
This will have lasting effects on the way that people live and work.
While technological advancements are generally good for societies in the long term, Powell said, in the short term they create disruption, and as the market adjusts to the new normal, the pain is not shared evenly.
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For example, lower-paid workers, as well as those in jobs that require face-to-face interactions, such as retail or restaurant workers, are likely to bear most of the burden of this change.
These groups, heavily biased toward women and minorities, are already among the hardest hit by the pandemic layoffs, Powell said.
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The post-pandemic economy also runs the risk of being less productive: Women have been forced to leave their jobs due to childcare responsibilities during the crisis, and children are not getting the education they deserve, Powell said.
Generally speaking, inequality slows the economy, said the central banker.
"Even after the unemployment rate goes down and there is a vaccine, there will probably be a sizable group of workers who will need support to make their way through the post-pandemic economy, because it will be different in some fundamental ways," Powell said.
Washington has spent trillions of dollars to boost the economy after the pandemic.
But unemployed workers are still in a tough spot: some subsidies have already been cut and more are scheduled to expire at the end of the year.
Economists are hopeful that the next administration will succeed in passing another stimulus bill to help workers and businesses as the recovery continues.
More work is needed
Powell has long said the economy may need more stimulus from both the government and the central bank to overcome the crisis.
Again, this sentiment echoed on Thursday.
"My feeling is that we will have to do more and that Congress will have to do more," he said.
While the prospect of a vaccine is good news, many questions remain, including the resurgence of the virus around the world.
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"The main risk we see today […] is a further spread of the disease here in the United States," he said.
Several states have restarted their pandemic restrictions to slow the spread.
US stocks weakened after Powell's sobering comments.
Lately, the market had been rebounding in hopes of vaccines.
The Dow closed 1.1% lower, or 317 points lower, while the S&P 500 fell 1%.
The Nasdaq High-Tech Composite closed 0.7% lower.
Economy United States Federal Reserve