'Gyeonggi W-shape' VS 'Faster-than-expected Improvement'... Divergent Outlooks from US Fed Leaders

"Downside Risks to Economy Still Dominant"
"Severe Economic Outlook Leads to Corporate Layoffs"
"Economic Indicators Bottomed in April, Employment Situation Rapidly Improves"

[Asia Economy Reporter Naju-seok] As the second wave of the novel coronavirus infection (COVID-19) becomes a reality, economic forecasts from the U.S. Federal Reserve (Fed) and Federal Reserve Bank leaders are diverging. While concerns have been raised that the economy could fall into a double-dip recession (a double recession where the economy temporarily recovers and then falls back into recession) due to the significant impact of the COVID-19 resurgence, there are also predictions that the U.S. economy will rebound sharply and employment conditions will improve rapidly in the second half of this year.

On the 14th (local time), Lael Brainard, a Fed Board member, emphasized the possibility of a double-dip recession. At the National Association for Business Economics held online, she said, "COVID-19 remains the key driver shaping the direction of the economy," adding, "A thick fog of uncertainty surrounds us. Downside risks to the economy still dominate." This means that as COVID-19 resurges, the economy is also affected.

Brainard attributed the recent U.S. economic recovery to "rapid and substantial fiscal support," evaluating that government spending has been more effective than private sector efforts. She also said, "The strength of the recovery will continue to depend on fiscal support." She mentioned the risk that the job growth trend may not continue. For this reason, she emphasized that monetary and fiscal policy support must continue after the COVID-19-related economic stimulus measures expire at the end of this month. She stated, "It is important to recognize that the economy will face headwinds for a long time," and "A continuously comprehensive and accommodative framework is required."

Thomas Barkin, President of the Richmond Fed, also expressed concerns that the U.S. employment situation could worsen and supported Brainard's remarks by emphasizing the need for ongoing fiscal policy support. He said, "Large and small businesses understand that this situation is not an issue that will end in about two months, so they can revise their business plans accordingly." He stressed that the U.S. government should continue the Paycheck Protection Program (PPP), which provides unsecured loans of up to $10 million (approximately 1.2 billion KRW) to help small businesses maintain employment. If the program expires, companies may resort to layoffs.

Patrick Harker, President of the Philadelphia Fed, warned about the recent sharp increase in COVID-19 cases in the U.S., saying, "The U.S. economy has entered a painful recession that will last a long time," and "The recent rise in COVID-19 cases has further damaged the economy and put consumer confidence at risk."

On the other hand, James Bullard, President of the St. Louis Fed, attracted attention by offering a relatively optimistic outlook. At an economic club event held in New York, Bullard analyzed, "Looking at macroeconomic indicators for May and June, April was the bottom," and "The negative impact of COVID-19 on the U.S. economy in the second quarter is less severe, and the labor market is improving faster than initially expected."

He particularly predicted that the U.S. employment situation could improve rapidly. Bullard said, "The unemployment rate could drop sharply within the next few months," adding, "If those temporarily laid off return to work within the next six months, the unemployment rate could fall from the current 11.1% to 4.5%." However, he noted, "Because downside risks are significant, careful and risk-considered health measures are important to prevent the economy from falling into a recession." He emphasized that controlling COVID-19 is a fundamental prerequisite for economic recovery.

This content was produced with the assistance of AI translation services.