Federal Reserve Board Chairman Jerome Powell warned Tuesday that the U.S. economy’s recovery from the recession triggered by the coronavirus crisis may falter if the virus is not controlled and economic growth is not sustained.
Powell called for more help for households and businesses, including expanded unemployment insurance payments, payments to households and financial aid for small businesses.
He told the National Association for Business Economics that government assistance has helped spur economic growth but added negative trends could still emerge without more government action.
“The expansion is still far from complete,” Powell said. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”
The economic recovery has slowed in recent months after rapidly improving in May and June. Incomes declined in August and job growth slowed in September to 661,000, significantly less than the 1.5 million new jobs in August and 1.8 million in July.
If the recovery slows too much, Powell warned there could be “tragic” consequences for lower income households, causing more inequality and a dynamic where “weakness feeds on weakness.”
Powell has repeatedly urged Congress to approve another economic relief package. Congress previously approved a $2 trillion financial rescue package in March, as well as previous measures he described as “truly extraordinary.”
House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continue to negotiate a rescue package of $2 trillion or more, but the chances of a deal being reached remain slim.