More and more states are lifting stay-at-home orders. However, don’t expect a quick economic turnaround. This is a warning that a Federal Reserve official made on Friday. He said we are in for a “slow, long recovery.”
Neel Kashkari, the President of the Minneapolis Federal Reserve bank, says that his initial optimism has given way to the reality of what he says will be a long recovery process.
“A couple months ago I was optimistic, I was hopeful, that maybe we would have a V-shaped recovery — shut things down, clamp down on the virus, and then have a quick recovery,” he said during an interview on the PBS Newshour.
It appears that a vaccine or effective treatment for the coronavirus at least a year or two away. With this, Kashkari says “I think we’re in for, unfortunately, a slow, long recovery, rather than an immediate bounce-back.”
Should We Be Optimistic?
Kashkari’s view clashes with that of President Trump. Trump, after all, is much more optimistic about our nation’s ability to recover job losses quickly.
“Next year, we’re going to have one of the best years we’ve ever had,” the President said during an interview with Fox and Friends. “We created the best economy in the history of the world. We were blowing away China, we were blowing away everyone. Those jobs will all be back and be back very soon. People are ready to go.”
Larry Kudlow, the Director of the National Economic Council also believes that we’ll see a quick recovery. During an interview on ABC’s “This Week,” Kudlow said “We’re preparing to reopen the economy. And when we do, I think, according to the Congressional Budget Office and a bunch of private surveys, we’re going to see a very strong second half of the year, probably 20 percent economic growth… Next year, 2021 could be a tremendous snapback in the U.S. economy.”
When asked about the prospects of a quick recovery, Kashkari countered. He adds: “I would love to see a robust recovery but that would require a breakthrough in vaccines, a breakthrough in widespread testing, a breakthrough in therapies to give all of us confidence that it is safe to go back. I don’t know when we’re going to have that confidence, Ultimately, the American people are going to decide how long the shutdown is.”
Looking Forward to Recovery
Kashkari’s colleague, San Francisco Fed President Mary Daly, believes the unprecedented steps taken by the Federal Reserve helps. She thinks those steps will lead to a steady recovery by 2021. These include the stimulus packages worth nearly $2.5 trillion.
“What I’m hoping for in the baseline is we can come back safely, we listen to public health officials, we take it slow but gradual … if we do those things and we reenter safely, then I expect us to have positive growth in 2021.” Daly said.
Daly also said she is working “day and night” to make sure it doesn’t take 10 or more years to regain all the jobs the country just lost. A similar scenario happened, following the 2007-2009 financial crisis.
“When the coronavirus is behind us, we can reengage fully,” Daly said, noting. “It won’t be quick; in my opinion, it won’t be ‘V’-shaped, it will be gradual.”