New York/Washington: The U.S. jobless rate may still be in the double digits when President Donald Trump stands for re-election in November, a top White House adviser said.
While jobless data are a lagging indicator, business activity is already close to an “inflection point” toward recovery, White House aide Kevin Hassett said on CNN’s “State of the Union” on Sunday.
The job market, as shown by unemployment figures, is “probably about a month away” from that point, Hassett said. The jobless rate is likely to peak above 20%, he said.
Eric Rosengren, president of the Boston Federal Reserve Bank, said the unemployment rate would remain over 10% through 2020, risking a “severe outcome” in the labor market over time.
The insured unemployment rate, or the number of people currently receiving unemployment insurance as a share of the total eligible labor market, rose to 17.2% in the week ended May 9, according to the latest Labor Department report.
“We’re going to see more bad data,” Hassett said. If glitches that marred last week’s data are fixed, the U.S. could “end up with a number north of 20% in May.”
People’s fear of contracting the virus and the absence of a vaccine are likely to weigh on the economy into the fall, Hassett said, though he expressed confidence that it’ll “skyrocket” back in the third quarter after record-setting losses in the second quarter, citing a Congressional Budget Office forecast.
Asked if he sees the unemployment rate in the double digits in November, Hassett said: “Yes, I do.”
His view was echoed by Rosengren, currently the longest-serving Fed policy maker, who said he expects the unemployment rate to remain above 10% through 2020 at least.
“Unfortunately I think it’s likely to be double digit unemployment through the end of this year,” Rosengren said on CBS’s “Face the Nation.”
“Full employment — getting back to the low level of unemployment we saw at the end of February — probably takes either a vaccine or other innovations that make it much less risky to go out,” Rosengren said.
Like Rosengren, many economic policy-makers and health officials have said that Americans won’t have the confidence to completely resume their daily activities until a coronavirus vaccine is widely available, which could be over a year at the earliest. Until then, caution is likely to linger.
Stephen Hahn, commissioner of the U.S. Food and Drug Administration, sent a tweet Sunday morning to “remind everyone that the coronavirus is not yet contained,” even with efforts under way to normalize conditions.
The U.S. has over 1.6 million confirmed cases of Covid-19. New diagnoses have tailed off in former hot-spots like New York and New Jersey, but are still on the rise — or rising again — in several states, including North Carolina, Alabama and North Dakota.
Deaths in the U.S. attributed to the coronavirus are expected to pass 100,000 in the next few days.
“When you look across the country, you see hospitalizations going up in many states,” said Scott Gottlieb, who proceeded Hahn as leader of the FDA.
“People can start to go out again, I think, and start to enjoy some semblance of the lives that they want to enjoy over the course of the summer. But we should still be careful,” he said.
The global economy is suffering its worst slump since the 1930s, with few corners spared the impact of Covid-19 and its associated shutdowns of much of daily life.
Still, Hassett predicted that within months “all the signs of economic recovery are going to be raging everywhere,” consistent with his view of a strong rebound in the quarter that starts in July.
“The only thing we’re going to be debating as economists” is how quickly output will return to where it was before the pandemic, Hassett said.
“Unemployment will be something that moves back slower,” Hassett said. “It could be better than that, but you’re going to be starting at a number in the 20s and working your way down. So of course you could not be back to full employment by September or October. If there were a vaccine in July, I’d be way more optimistic.”
With Congress debating a possible fourth economic stimulus bill, Hassett accused Democrats of backing “absurd” requests for aid to local and state governments that he said are seeking “radically more money” than their expected budget shortfalls related to the virus crisis.
“There’s a lot of money for the states already,” and “I don’t know” whether a needs analysis will support the Democratic-led forecasts, he said.
Rosengren, though, said that a long stretch of double-digit unemployment risks “a much more severe outcome in labor markets over time” and that “additional fiscal policy” will be needed. – Bloomberg
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