US Economy ‘On Brink of Complete Recovery’ According to This Top Official
Tom Barkin, president of the Federal Reserve Bank of Richmond, said in a speech delivered on Monday that he is hopeful the U.S. is on “the brink of completing the recovery” but anticipates some “scarring.”
Barkin, speaking at the Credit Suisse Asian Investment Conference 2021, said that while a year ago the economy was on the edge of a cliff, with the help of fiscal and monetary support, the economy is moving toward recovery.
However, he noted in his remarks that despite improvements in the economy since last year, this downturn could leave lasting scars. Policymakers have the ability to limit this damage, Barkin said.
“Many primary caregivers dropped out of the labor force to care for children and elderly relatives during the pandemic. Policymakers should focus on programs that help caregivers return to work,” he said.
In addition, he said that schools need resources to safely return to teaching in person, and he noted that support to help students catch up can prevent temporary disruptions from turning into permanent scars. Barkin also noted that the pandemic has hit small businesses particularly hard, and that “policies providing support for the companies of today should take care not to hinder the creation of the companies of tomorrow.”
Barkin said that fiscal and monetary policy responded with overwhelming force, and Congress acted decisively as well.
“To put the magnitude of this fiscal response in perspective, the nearly $4 trillion in federal relief spending during this crisis is more than four times the size of the 2009 American Recovery and Reinvestment Act. And more is on the way,” he said.
“With this support, the economy has come most of the way back. GDP was down 2.4% in the fourth quarter compared to a year ago. Our recovery has outpaced the rest of the world with the exception of Asia. Despite 9.5 million job losses, the impact of policy on the economy is quite visible,” Barkin added.
Most notably, he said that the signs of the recovery can be seen in the following:
- Aggregate disposable income has gone up, not down.
- Households have increased their savings and paid down their credit cards.
- Bank portfolios have remained healthy, given all the support to individuals and businesses.
- The housing market has been strong, thanks in part to low interest rates.
- Increased savings have fueled a shift in spending from services to goods, which has helped manufacturers.
- The worst off have benefitted from stimulus checks, enhanced unemployment benefits and forbearance.
The first step toward limited lasting scarring is to get the virus under control, Barkin said. “The priority now is getting vaccines distributed and safely reopening the economy…We will see scarring from this downturn, as always. But we have in our control the ability to limit the unique damage of this one. I hope we will.”
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