Despite the widespread economic damage caused by the coronavirus pandemic, stock prices had been unexpectedly strong in recent weeks. With the unemployment rate dropping to 13.3% in May from 14.7% the previous month, many were hopeful that the labor market had already hit rock bottom. Equipped with a $1,200 stimulus check and up to $600 in additional unemployment benefits, new investors jumped into retail trading. Online brokerages have seen a record number of new accounts opened in 2020, and this swell in activity has boosted stock prices.
But in an online news conference last Wednesday, Powell rejected the notion of a rosy economic picture. He noted that many people will not get their old jobs back even after the pandemic subsides, adding that some will find it difficult to get work at all for some time.
US Federal Reserve policymakers say they will keep interest rates at near zero for at least two and a half years to support the recovery. And they say they will discuss additional measures at their upcoming July meeting.
There are several signs backing up Powell’s assertion. The Federal Reserve of Atlanta’s GDP Now indicator, a forecasting model that projects GDP growth, estimates an astonishing minus 48% rate for the April-June quarter. Furthermore, concerns of a coronavirus resurgence are also weighing on the economy. Texas, California, and Florida have all reported upticks in cases over the past few days.
President Donald Trump was quick to shrug off these worries, tweeting that “the Fed is wrong so often” and that “we will see a very good Third Quarter, a great Fourth Quarter, and one of our best years in 2021.”
But these words will do little to comfort the millions of Americans who have lost their jobs and face an uncertain future.