MINNEAPOLIS, Minn.–One Federal Reserve president is throwing some water on the hopes by many the economy will see a quick recovery from the coronavirus pandemic. On the other hand, Moody’s is offering some optimism in a new report.
Neel Kashkari, head of the Federal Reserve Bank of Minneapolis, told CBS News he doesn’t see a V-shaped recovery for the U.S. economy unless an effective vaccine or therapy for COVID-19 is developed.
Kashkari, while acknowledging the downside of what a prolonged shutdown could mean for the economy, told CBS the U.S., “barring some healthcare miracle,” is looking at an 18-month strategy of rolling shutdowns based on what has happened in other countries.
“We could have these waves of flareups, controls, flareups and controls until we actually get a therapy or a vaccine,” he said during the interview. “We need to find ways of getting the people who are healthy, who are at lower risk back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future.”
Looking ahead, Kashkari doesn’t envision a quick rebound.
“This could be a long, hard road that we have ahead of us until we get to either an effective therapy or a vaccine,” he said. “It’s hard for me to see a V-shaped recovery under that scenario.”
Moody’s Offers Some Optimism
Meanwhile, in a separate report, despite numerous pessimistic reports, ratings agency Moody’s has actually offered some optimism.
Moody's is projecting the unemployment rate will jump to 16.2% from 8.8% in the second quarter, indicating more job losses are expected over the next weeks, particularly in retail, transportation, construction and hospitality and leisure. It could climb beyond Moody's estimates if the economy remains shut down beyond June.
Unlike in previous recessions, where the impact on the labor market took some time to materialize, workers were the first to get hit this time around, noted Moody’s in its analysis. But with many layoffs expected to be temporary, jobs will return as soon as the country-wide sheltering in place ends, reported CNN on the Moody’s report.