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Fed Chair Warns This Is a ‘Downturn Without Modern Precedent’


Jerome H. Powell, the chair of the Federal Reserve, said the United States economy was in a “downturn without modern precedent,” one that had upended ordinary life and created “great uncertainty” about its future.

“It has already erased the job gains of the past decade and has inflicted acute pain across the country,” Mr. Powell said in remarks prepared for delivery at a virtual Fed forum. “And while the burden is widespread, it is not evenly spread. Those taking the brunt of the fallout are those least able to bear it.”

The Fed chief’s comments underscored a point his colleagues made consistently across a series of speaking engagements on Thursday: As the economy experiences a severe and unusual shock from the coronavirus, the path to recovery is wildly unclear.

“In the best of times, predicting the path of the economy with any certainty is difficult,” Mr. Powell said. “We are now experiencing a whole new level of uncertainty, as questions only the virus can answer complicate the outlook.”

The United States economy is confronting its worst downturn in generations, with another 2.4 million people filing new unemployment claims last week. As the Fed tries to cushion that blow and figure out how long it will last, officials have stressed repeatedly that the future will hinge on how the path of infection plays out, and when people feel comfortable resuming normal activity, like dining out or going to a sporting event.

Lael Brainard, a Fed governor, called the current moment an “emergency unprecedented in modern times,” speaking at the same webcast event as Mr. Powell. She noted that the strong labor market the United States enjoyed last year had quickly given way to the highest unemployment rate since the Great Depression — 14.7 percent in April.

“We are really in just an uncharted situation right now, and my own sense is that we’ll begin to get a better sense of the scenario and the trajectory that the economy is on in the early fall,” Richard Clarida, the Fed’s vice chair, said while speaking Thursday on a webcast with the New York Association for Business Economics.

“The coronavirus pandemic poses the most serious threat to maximum employment and, potentially, to price stability that the United States has faced in our lifetimes,” he said.

John C. Williams, the president of the Federal Reserve Bank of New York, said earlier in the day that the pandemic put “a large question mark” over how industries would fare going forward.

“The cause of this recession — a global pandemic — means that our economic future will be determined in large part by the path of the virus,” he said at an event held by several upstate New York business groups. “It’s impossible to know exactly how and when workers and businesses will be fully back to work and when consumers will return to the businesses that are open.”

Several of the speakers stressed that policy would need to be nimble in an environment colored by stark unknowns.

While the Fed has cut rates to near-zero and announced a suite of emergency lending programs to keep credit flowing, central bank officials have signaled that more government support may be needed to get the economy through this challenging period.

Mr. Clarida pointed out on Thursday that the Fed’s policies — like rate cuts and lending programs meant to provide a backup credit option for businesses and governments — could not fill all of the needs created by the pandemic, which has already tossed millions out of work.

“The Fed is not authorized to grant money to particular beneficiaries, to meet the payroll expenses of small businesses, or to underwrite the unemployment benefits of displaced workers,” he said.

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