Road to Recovery Is Long, but Powell and Mnuchin Laud Improvements

U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell share an elbow bump greeting Tuesday, prior to testifying before a House Financial Services Committee hearing on oversight of the Treasury Department’s and Federal Reserve’s coronavirus disease pandemic. (Pool photo by Joshua Roberts/Reuters)

WASHINGTON (CN) — Over half of all jobs lost in pandemic-hit America have yet to return, but Treasury Secretary Steve Mnuchin and Federal Reserve chairman Jerome Powell offered hopeful analysis on the state of economic recovery Tuesday amid stalled relief talks in Congress.

Powell told members of the House Financial Services Committee that 11 million of 22 million Americans laid off thanks to the Covid-19 pandemic have already gone back to work.

“That’s really good progress. We’ve put, fully, half of those people back to work,” he said, adding that full recovery will still require getting a handle on the virus. 

The Bureau of Labor Statistics counted roughly 15 million people unemployed in the fallout of the 2008 financial crisis. Covid-19 job loses have outstripped that significantly, but Powell reflected Tuesday that the snapback of jobs in these last six months signals “marked improvement” in overcoming pandemic-linked losses.  

“A big part of the good economic news that we have had results with is the fiscal support that came with the CARES Act,” he said of the $2 trillion bipartisan aid package passed by Congress six months ago.

The Federal Reserve reported last week the package led to a 5% increase in adults affirming they were better equipped to handle “small financial emergencies” this July than they were in April.

Notably, those surveyed also said their economic circumstances this summer were still better than they were in October 2019, long before the novel coronavirus turned everyday life on its head. But the Federal Reserve’s report paints an unsettling picture nonetheless: Most families are still receiving one or more forms of financial assistance, and attitudes among the unemployed aren’t getting better.

In April when the Fed first began its study of assistance programs launched during the pandemic, it found 7% of laid-off workers surveyed did not expect to return to their old jobs. By July, that figured more than doubled to 22 percent. 

National gains have been made recently due to growth in the real estate and manufacturing markets. But precisely when the drag on the U.S. economy will end is highly uncertain, Powell said Tuesday, because it hinges considerably on what the federal government does next. 

This month, Republicans failed to pass their pared down $500 billion Covid-19 relief bill in the Senate after Democrats balked and said it was not as comprehensive as their $3 trillion Heroes Act passed in May. The Problem Solvers Caucus introduced a middle-ground $2 trillion proposal in a bid to smooth over negotiations, but it likewise gained little traction.

Stimulus talks are now pushed even further on the backburner after Supreme Court Justice Ruth Bader Ginsburg’s death and the bitter brewing nomination fight now unfolding. Congress must approve come together on stopgap funding to keep the federal government running before a shutdown scheduled for October 1.

“We don’t really know what will happen,” Powell said of the future of the U.S. economy without another round of stimulus checks.

Treasury Secretary Mnuchin predicted an increase in economic activity for Q3 but agreed with Powell’s assertion.

“I believe a targeted package is still needed and the administration is ready to reach a bipartisan agreement,” Mnuchin said. 

The treasury secretary also said Tuesday that the White House wants the next deal to be more specific.

“It should be focused on kids and jobs,” he said.

For lawmakers complaining on Tuesday that existing aid programs aren’t expansive enough for small business owners still hamstrung by the pandemic, Mnuchin and Powell said it was outside of their purview to address. That part, they agreed, is up to Congress to address. 

The Fed’s Main Street Lending Program and its Municipal Liquidity Facility programs were meant to help business owners in need of emergency loans and state and local governments to avoid layoffs. So far, however, the programs have been a dud with the municipal program only buying up $1.7 billion in bonds, far less than the $500 billion set aside for the program by the Fed. Only $1 billion has been distributed under the Main Street Lending program.

Criticism of the programs proved bipartisan at the committee, with Republican Congressman Andy Barr saying delicately: “An argument could be made that the program isn’t performing to its full potential.”

Committee Chairwoman Maxine Waters, a California Democrat, was more blunt: “This pandemic response has fallen short,” she said.

To shore up losses, the billions of dollars in credit approved by Congress in earlier relief packages could be moved toward the private lending programs at the Fed but that, again, means direct legislative action by Congress.

“I think there’s not more we can do,” Mnuchin told the committee.

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