Federal Reserve Chairman Jerome Powell urged Congress to provide another round of pandemic relief, saying its better to do too much than too little.
“Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” Powell said Tuesday in a speech to the National Association for Business Economics. “The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side by side to provide support to the economy until it is clearly out of the woods.”
Powell said that the economy had bounced back more quickly from the pandemic recession than many forecasters expected, but added that the recovery is far from complete – echoing comments he made to NPR during an interview last month.
He also warned Tuesday that without additional support, the economy could slip into a downward spiral, “as weakness feeds on weakness.”
“A long period of unnecessarily slow progress could continue to exacerbate existing disparities in our economy,” Powell said. “That would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.”
Congress passed several stimulus bills earlier in the pandemic, including the $2.2 trillion CARES Act, which provided for additional unemployment benefits of up to $600 a week for many individuals.
However, most of the aid provided by Congress has expired.
President Trump has pushed for additional relief measures in recent days. On Sunday, while recovering from the coronavirus, the president sent a tweet, saying, “OUR GREAT USA WANTS & NEEDS STIMULUS.”
Democratic House Speaker Nancy Pelosi suggested last week the president’s own illness could add newfound urgency to negotiations.
Powell credited the “extraordinary” relief measures early in the pandemic with helping to avoid a deeper recession and setting the stage for a partial rebound.
But recent indicators have shown the economic recovery is starting to slow as infections continue to spread. The labor market also remains under stress: almost half the 22 million jobs that were lost in the spring have not been replaced.
Powell said Tuesday it may be some time before people whose jobs require a lot of in-person contact can safely return to work.
“While the combined effects of fiscal and monetary policy have aided the solid recovery of the labor market so far, there is still a long way to go,” the Fed chairman said.
“The right thing to do and the smart thing to do is to continue to support those people as they return to their old jobs or find new jobs in different sectors of the economy,” Powell added.
Unemployment, which peaked at 14.7% in April, fell to 7.9% last month. But Powell cautioned the jobless rate would be closer to 11% were it not for misclassification of idle workers and for people leaving the workforce.
Powell noted that job losses in the service sector have fallen particularly hard on women and minorities. And women with children are disproportionately affected by the demands of home schooling.
As a new school year began last month, four times as many women dropped out of the workforce as men.
“The longer it goes on, the more likely there is some lasting damage,” Powell said. “For many people, and it’s a lot of women, it’s winding up being in the home with young children who really should be in school and you would much prefer to be working. So it’s a real issue.”