Certain parts of the US economy may never fully recover from the effect of the coronavirus pandemic, the president of the San Francisco Federal Reserve has warned, saying gyms and cinemas are of particular concern.
Mary Daly told reporters on Wednesday that she was worried about the long-term impacts on some of the more badly-hit sectors even after the economy begins to rebound.
“It is certainly possible that we don’t come back, at least in certain sectors, in the same way as before . . . That will mean a large number of workers are not able to go back to the same jobs they had before the pandemic.”
Her comments reflect rising concern at the Fed about the implications for the long-run health of the US economy in the wake of its deepest recession in decades. Earlier on Wednesday, the presidents of the Boston and Dallas Federal Reserve banks warned of a prolonged period of economic underperformance as the US struggles to keep coronavirus under control.
The central bank has kept interest rates around zero since early March, and its chairman Jay Powell sounded a dovish note last month when he warned of “a long tail where a large number of people are going to be struggling to get back to work”.
Ms Daly echoed that sentiment on Wednesday, warning that the long-term effect was likely to be felt most by those with less education. “This is going to have a really uneven impact,” she said.
Her conversations with business contacts had led her to worry especially about what was likely to happen to gyms and cinemas, she said.
Congress agreed in March to provide an extra $600 per week in unemployment support. But that funding ran out last month without agreement between Republicans and Democrats on how to continue to support the economy while large parts of it remain shuttered.
Ms Daly said she was concerned about the affect the lapse in additional funding would have on the wider economy. “That creates the potential for a little bit of a hole in consumer spending,” she warned.
But she added she was optimistic Congress would soon reach an agreement on a fresh stimulus package.
“I’m confident and hopeful that they will get to something,” she said. “We needed to build a bridge to help people get over this. Congress will have to build a bigger bridge, now that we know Covid is not behind us.”
Eric Rosengren, president of the Boston Fed, told an online conference on Wednesday that mis-steps in dealing with the virus had affected the economic rebound.
“Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death, but are also likely to prolong the economic downturn,” he said.
Robert Kaplan of the Dallas Fed said the speed of the recovery was “muted” and threatened by people’s failure to follow guidelines such as wearing masks. “If we don’t follow that, while people may feel freer, the economy will grow slower,” he told a webcast event in Texas.