Fed’s Kashkari Sees ‘Devastating’ Unemployment and Long Recovery

(Bloomberg) -- Federal Reserve Bank of Minneapolis President Neel Kashkari says the coronavirus will inflict “devastating” levels of U.S. unemployment and economic recovery will be long and gradual.

“The number tomorrow will probably be something like 16%, or 17%,” he said in an interview on NBC’s “Today” show on Thursday, on the eve of the monthly U.S. employment report. “I think the real number’s probably around 23 or 24%. It’s devastating.”

Economists polled by Bloomberg forecast the U.S. jobless rate surging to 16% in April from 4.4% in March, after millions of workers were laid off and businesses shuttered across America to limit the spread of the virus.

Kashkari, who is a voter this year on the interest rate-setting Federal Open Market Committee, said the April survey will undercount those out of work because applicants have to answer a question on whether they are actively looking for another job -- which many could not do because they were sheltering in place.

He said it would take time to rebuild confidence among consumers that it was safe to go out and spend money on things like going to a movie.

“I think it’s becoming clear that we’re in for a long, gradual recovery, which is unfortunate. I wish we had a quick bounce back. But I think we’re going to avert the kind of Depression scenario, because policy makers are going to continue to be aggressive to fight that outcome,” he said. “Part of the reason the Great Depression was as bad as it was, was that policy makers in the 1930s did the wrong thing. They did things that made it worse. And I think we’ve learned from that.”

Congress in March backed a $2 trillion virus rescue package and lawmakers are talking about more help. The Fed, for its part, has slashed interest rates to nearly zero and unveiled a range of emergency lending programs to keep credit flowing and financial markets functioning.

“The Federal Reserve is acting very aggressively. We will continue to act aggressively,” Kashkari said.

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