WASHINGTON (AP) – Strong financial support from the government and the Federal Reserve have spurred a solid recovery from the pandemic recession, but the rebound may falter without further aid, Fed Chair Jerome Powell warned Tuesday.
Powell said that government support – including expanded unemployment insurance payments, direct payments to most U.S. households and financial support for small businesses – has so far prevented a recessionary “downward spiral” in which job losses would reduce spending, forcing businesses to cut even more jobs.
But the U.S. economy still faces threats, and without further support those downward trends could still emerge, the chairman said.
“The expansion is still far from complete,” Powell said in a speech to the National Association for Business Economics, a group of corporate and academic economists. “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy, and holding back wage growth.”
Powell noted that the economic recovery has slowed in recent months compared with its rapid improvement in May and June. Incomes fell in August. And job growth weakened in September, slowing to just 661,000, less than half the gains of 1.5 million in August and 1.8 million in September.