Although the U.S. gross domestic product could shrink upwards of 30% in the second quarter, Federal Reserve Chairman Jerome Powell told 60 Minutes Sunday that the economy will avoid a Depression-like economic plunge over the longer term.
The central bank chief conceded that unemployment numbers will look a lot like they did during the 1930s, when the rate peaked out at close to 25%. But the nature of the current distress coupled with the dynamism of the United States and the strength of its financial system should pave the way for a significant rebound.
“I think there’s a good chance that there’ll be positive growth in the third quarter,” Powell said. “And I think it’s a reasonable expectation that there’ll be growth in the second half of the year,” He noted, however, that it’s unlikely the nation’s economy will return to where it was by the end of the year.
Powell added that the reason he doesn’t see the nation entering a depression is because the cause of this downturn is not an asset bubble or another associated more fundamental reason but rather a self-induced economic freeze brought on by efforts to combat the coronavirus.
Case in point: U.S. stocks rallied Monday after drugmaker Moderna said its experimental coronavirus vaccine induced immune responses in some of the healthy volunteers who were vaccinated in a clinical study.