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The outlook for the U.S. economy is sobering and the U.S. central bank and lawmakers should be ready to act boldly, said Eric Rosengren, the president of the Boston Federal Reserve, on Tuesday.
In a speech to the New England Council, Rosengren said he expects the unemployment rate will peak at close to 20%. And unfortunately by the end of the year, the jobless rate will “remain at double-digit levels,” he said.
Rosengren said that reopening the economy was not the panacea that will end the economic downturn. Rather, it was public health policy that is the root of the solution.
“If consumer are afraid to eat out, shop, or travel, a relaxation in laws requiring business closures may do little to bring back customers, and thus jobs,” he said.
Rosengren said what the “optimal mix” of public health and economic policies should be was a complex question.
He sounded a cautious note about reopening the economy, saying it should not undo the sacrifices and progress made so far.
He noted the largest percentage declines in payroll jobs as have come in industries where social distancing is most challenging — such as recreation, entertainment, the arts and food services. If there is continued concern about community spread of the coronavirus, these activities may continue to be hurt by cautious consumers.
In addition, Americans between 50 and 79 years of age account for about 50% of purchases in spending categories affected by social distancing, Rosengren noted.
“Public health solutions are paramount — without them, it is virtually impossible to return to full employment,” he said.
U.S. equity benchmarks were mixed on Tuesday with the S&P 500 SPX, +0.07% down slightly and the Dow Jones Industrial Average DJIA, -0.32% up 79 points.
