Powell says US economy 'well short' of pre-pandemic level despite reopening

The US economy may be entering a phase of bouncing back, with the easing of social distancing measures and resumption of business activities, but employment and output will be "well short" of the pre-pandemic level, Federal Reserve Chairman Jerome Powell said on Tuesday.

Despite the reopening, most forecasters think "that will leave us well short of where we were in February, full employment with the economy really working broadly across all of its areas," Powell said in a virtual hearing before the Senate Committee on Banking, Housing and Urban Affairs.

"There are parts of the economy that will struggle to return to their old ways of activity, because they involve getting people together closely in large groups," said the Fed chairman. "And so it's going to take some time to rebuild confidence."

At the hearing entitled "The Semiannual Monetary Policy Report to the Congress," Powell said in his opening remarks that beginning in mid-March, economic activity fell at an "unprecedented" speed in response to the COVID-19 outbreak and the measures taken to control its spread.

"Even after the unexpectedly positive May employment report, nearly 20 million jobs have been lost on net since February," he said, noting that the reported unemployment rate has risen about 10 percentage points, to 13.3 percent.

The decline in real gross domestic product this quarter is "likely to be the most severe on record," Powell said.

The central bank chief reiterated that the burden of the downturn has not fallen equally on all Americans, saying that "those least able to withstand the downturn have been affected most."

"Low-income households have experienced, by far, the sharpest drop in employment, while job losses of African Americans, Hispanics, and women have been greater than that of other groups," Powell said.

"If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing," he said.

Powell said some indicators recently have pointed to a stabilization, and in some areas a modest rebound, in economic activity.

"That said, the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery," he added.

"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it," said the central bank chief. "Until the public is confident that the disease is contained, a full recovery is unlikely."

As reopening efforts continue across the nation and employment starts to pick up, the Fed chair said that "we have a long road ahead of us to get those people back to work."