US Federal Official Warns of 30% Unemployment in the United States

Federal Reserve Bank of St. Louis President James Bullard predicts unemployment levels will skyrocket as COVID continues to spread.

The Federal Reserve’s senior official believes unemployment could hit 30% in the months ahead as the coronavirus pandemic continues to ravage. This is as a result of the widespread business closure that has been adopted to contain its spread and this wreaks serious havoc on the U.S. economy.

James Bullard, president and chief executive officer of the Federal Reserve Bank of St. Louis, told Bloomberg in an interview that he believes unemployment could hit 30% during the next quarter of the year. This prediction comes days after government data shows that initial unemployment claims earlier this month grew faster at any point during the ‘Great Recession’. This current rate of unemployment data is one of the worst in modern history

Furthermore, Bullard says he was reluctant to characterize what the U.S. economy is suffering as a recession because they are planning to do this, and trying to do this in order to meet up with the challenging health objectives.” In fact, he said it would be “good” if the unemployment rate goes as high as he expects it will during the ongoing pandemic.

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He further went on to say ‘That might be the right thing to do, because you want to keep everybody whole during the shutdown period, so you want to transfer income to the households that are the most impacted. Bullard also suggests unemployment insurance may offer welcome and necessary support for many Americans.

The Federal Reserve has returned to crisis-era monetary policy in the recent past, thereby dropping federal fund rates to zero levels, committing hundreds billions of dollars to asset purchases, and setting up paper funding mechanism in a bid to inject liquidity into the commercial market, keep credit flowing and ensure that the ongoing coronavirus strain does not cripple America’s financial system.

 The Federal Reserve Bank unveiled new lending programs and committed to buying Treasury securities and mortgage-backed securities “in the quantities needed to support smooth market functioning and effective transmission of monetary policy to a broader financial condition. The announcement has widely been interpreted as unlimited monetary policy support.

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Stocks in the U.S did not immediately rebound in the heat of the news, this is so because, the fate of future financial policy support is still uncertain on Capitol Hill. But the federal bank is pulling out all of the stops to keep the economy from being completely drained by COVID.

Businesses remain shut across the country as some governors and local officials have embraced lockdown orders to slow down the spread of this dreaded disease. Bullard said U.S. gross domestic product {GDP} growth may drop as much as 50% during the coming months. He is one of several economists who notes that the U.S. will see a significant GDP downturn during the coming quarter. Many experts believe the U.S. has already fallen into recession, despite Bullard’s reluctance to use the term.

U.S. lawmakers have signed off already on two coronavirus aid packages, although progress is stalling on a third stimulus bill that Republicans say is economically vital but Democrats argue would grant bailout money to corporations without enough restrictions on how those federal funds are spent.