(Reuters) - The recovery from the coronavirus crisis will be “long and drawn out’ and with the true U.S. jobless rate already at 24% or 25%, Congress needs to do more to help those without work cover their basic bills for food and housing, Minneapolis Federal Reserve Bank President Neel Kashkari said on Thursday.
“We are in the equivalent of an economic war,” Kashkari said in a webinar sponsored by the Economic Club of Minnesota. “Money in the pockets of people who have lost their jobs is what we need right now.”
Some 36.5 million people have filed claims for unemployment benefits since mid-March, when states began restricting businesses and asking people to stay at home to slow the spread of the coronavirus. April’s unemployment rate, reported Friday, was officially 14.7%, but Kashkari and others believe that’s an undercount because millions of laid-off Americans weren’t able to look for a new job - a condition of being counted as unemployed - because of orders keeping them at home.
Now a majority of states, including Minnesota where Kashkari makes his home, are beginning to allow more businesses to reopen. But with no vaccine or effective therapy available, people may not risk a return to normal activities, slowing the recovery, Kashkari said.
Congress has committed almost $3 trillion to pandemic rescue efforts, and lawmakers are currently tangling over the size and scope of yet another fiscal package. On Wednesday Fed Chair Jerome Powell urged more emergency money be made available, saying it could help avert a worse economic outcome.
Kashkari said the federal government’s rescue programs have helped avert bankruptcies. But when the two-month reprieve that millions of small businesses got through the new $660 billion paycheck protection program runs out, Kashkari warned, there could be a wave of bankruptcies that depletes U.S. productive capacity and slows recovery even further.
Congress also authorized emergency payments of $600 weekly to those who lose their jobs in the pandemic, but only until July.
“I personally feel like Congress has a little bit of time, because those extra unemployment checks are still out there,” he said. “But we can’t let there be a gap.”
Reporting by Ann Saphir; Editing by Chris Reese and Andrea Ricci