Federal Reserve Chairman Jerome Powell on Wednesday warned of “downside risks” if Congress fails to pass another relief package aimed at helping the economy survive the pandemic.
“Broadly speaking, if we don’t get that, then there will certainly be downside risks,” he said.
Powell noted that roughly half of the jobs lost during the pandemic have been regained. However, many of those still looking for work come from industries hurt by the virus, and it could take them a while to find employment.
“That [long-term unemployment] will serve to show up in economic activity. It will also show up in things like evictions and foreclosures and things that will scare and damage the economy, so that’s a downside risk,” he said. “Those people may need additional support as they try to find their way through what would be a difficult time for them.”
The Trump administration and lawmakers of both parties favor enacting more relief. But Congress has struggled to pass legislation. The parties are at odds over what the cost of the bill should be. Republicans are seeking a plan costing $1 trillion, while Democrats are asking for at least twice that amount.
The parties are also in disagreement over aid for states and cities.
The March CARES Act provided roughly $150 billion to state and local governments. Senate Republicans contend that billions of the already approved aid have yet to be spent and question why more spending needs to be approved. House Democrats approved legislation in May that provided an additional $1 trillion to state and local governments.
Powell emphasized that state and local governments are experiencing drops in revenue as they incur increased spending due to the coronavirus.
“The fiscal support has been essential in the progress we see now,” he said.
Even though the political parties are at odds over providing additional relief, Powell said, some experts expect Washington will eventually provide that assistance.
“An overwhelming majority of private forecasters who project an ongoing recovery are saying there will be a substantial, additional fiscal response,” he said. “I think the real question is when and how much and what will be the contents. And no one has any certainty around that.”
