America’s economic output is falling by up to 30 percent

Federal Reserve Chairman Jerome Powell paints a bleak picture of America. He has hope.

A family is walking in Brooklyn, New York, at the weekend.

Dhe US Federal Reserve (Fed) is assuming a dramatic decline in American economic output by up to 30 percent in the current quarter. It is quite possible that gross domestic product (GDP) will decrease by 20 to 30 percent as a result of the corona pandemic, said Fed Director Jerome Powell in a television interview on Sunday evening (local time). However, he also expects the American economy to regain some momentum in the third quarter.

In the current quarter, the American economic data would be “very, very bad,” said the director of the Federal Reserve, the broadcaster CBS. He expects the unemployment rate to rise to 20 to 25 percent.

Mostly brought to a standstill

Economic output in the United States had already shrunk by 4.8 percent in the first quarter. However, the pandemic had not yet been fully reflected in the balance sheet for January to March. Almost 36.5 million people have now lost their jobs in the United States as a result of the crisis. The unemployment rate soared from 3.5 percent in February to 14.7 percent in April.

The virus and the exit restrictions and other measures imposed to prevent it from spreading have largely brought economic activity to a standstill in many industries in the United States. Numerous companies had to close at least temporarily.

However, Federal Reserve Chairman Powell does not expect the recession to reach similar dimensions as it did during the great economic crisis of the 1930s. Unlike then, the US economy was healthy before the current crisis and the banks were in a stable condition.

He sees a “good chance” that there will be an increase in growth again in the third quarter, the Fed director underlined. In the second half of the year, the American economy is expected to “continuously recover”. The decisive factor is that the spread of the coronavirus is decreasing, emphasized the central bank chief. In order for the economy to recover completely, it “maybe” necessary that there is a vaccine against the new pathogen.

Fed-Chef Jerome Powell
Fed-Chef Jerome Powell: Build: AP

As a measure against the economic crisis, the Fed took a drastic step in mid-March and lowered the key interest rate to a level between 0 and 0.25 percent. It had also announced massive bond purchases to pump money into the economy.

In addition, the American Congress launched several aid packages, the largest of which has a historic record volume of around two trillion dollars. The opposition Democrats also decided on Friday with their majority in the House of Representatives an additional gigantic rescue program of three trillion dollars. However, there is little chance of it being implemented, as the program is rejected by the Republicans who dominate the Senate.

The United States is by far the hardest hit country in the world by the pandemic. 1.48 million cases of infection and nearly 90,000 deaths were recorded there as of Sunday.