May 11 (Reuters) - While it’s “reasonable” to expect the U.S. economy to return to growth in the second half of the year after a huge decline this quarter, the revival will likely be slow and uneven across industries, a U.S. central banker said on Monday.
“Social distancing may be needed for quite some time, depending on the success of testing and tracing,” Chicago Federal Reserve Bank President Charles Evans said in remarks prepared for delivery to a virtual meeting of the Lansing Chamber of Commerce, adding that such precautions may be needed until a vaccine becomes available.
“In this environment, policymakers, business leaders, and households will need to adjust their thinking about what sustainable economic activity looks like on a quarter-by-quarter basis over this period.”
The remarks were the latest in a string of public comments from Fed officials emphasizing the risks of reopening the economy and the likelihood that recovery will be neither swift nor sure.
Indeed, Evans said, his baseline expectation for a second-half return to growth is only “a bit” more likely in his view than more pessimistic scenarios that could include a resurgence of cases and a return to economic shutdowns, or a raft of bankruptcies that could damage growth prospects.
Most U.S. states are relaxing their stay-at-home measures to some degree, with some like Georgia allowing most businesses to resume and others like California taking much smaller steps.
While there’s evidence that the Fed’s rate cuts, bond purchases and lending, and the government’s cash and loans to households and businesses, are helping to cushion the blow from the coronavirus epidemic, Evans said, more will be needed.
Firms will need to make costly investments in worker safety that will slow productivity and strain finances, making “the availability of financial resources to sustain and expand these efforts” a key factor in the recovery, Evans said. And for some business sectors like travel, leisure and hospitality, growth will likely stay far below pre-crisis levels. (Reporting by Ann Saphir; Editing by Andrea Ricci)