Needs to be some 'rethinking' on way the Canadian economy works: The Globe's Willis
Economic data in the U.S. could reach levels not seen since the Great Depression, but the country’s health preceding the coronavirus pandemic should place it in a good position for recovery, said former Federal Reserve Chair Janet Yellen.
Initial jobless claims reached nearly 10 million in the two weeks ended March 28, an “absolutely shocking” number that indicates the unemployment rate is probably about 12 per cent to 13 per cent and is moving higher, Yellen told CNBC in an interview on Monday. Gross domestic product could contract at least 30 per cent in the second quarter, on an annualized basis, she warned.
“This is a huge, unprecedented, devastating hit and my hope is that we will get back to business as usual as quickly as possible,” Yellen said. “Unemployment rates for a time may go to Depression levels but this is very different than the Great Depression or the recession in the U.S. economy that we experienced in 2009 and after.”
The key to a quick recovery is making sure people’s incomes remain supported and their ties to employment stay intact during the shuttering of the economy, said Yellen, who stepped down from the Fed in 2018 and is now a distinguished fellow at the Brookings Institution in Washington.
“A ‘V,’ which is what we’re all hoping for, is really a best-case scenario and if activity could begin to resume as many assume in June and maybe be back to something more normal by the summer I think a ‘V’ is possible,” she said. “But I am worried that the outcome will be worse.”
Yellen said that there are likely to be lingering effects of the crisis for years, but that the economy’s strength before the pandemic should enable the unemployment rate to return to normal more quickly. The speed of the economic recovery “depends to my mind on just how much damage is done during the time that the economy is shut down,” she said.