Richmond Fed Chair Says US Economy is "On the Brink" of Complete Recovery
However, Barkin believes that there could be some economic scarring from the pandemic that drags on growth prospects for several years. “I’m hopeful we’re on the brink of completing this recovery,” Barkin said Monday at the Credit Suisse Asian Investment Conference.
“Vaccines are rolling out, case rates and hospitalizations are falling, excess savings and fiscal stimulus should help fund pent-up demand from consumers who’re exhausted by isolation and freed up by vaccines and warmer weather, ” he said.
In 2020, the US economy contracted by 3.5 percent, according to estimates by the Bureau of Economic Analysis. The Organization for Economic Cooperation and Development or OECD anticipates the U.S. economy to grow by 6.5 percent this year and 4 percent next year.
After the Great Recession, the US labor market took almost 10 years to recover. Barkin believes this recovery won't take as long due to unemployment in areas where workers change jobs regularly. Furthermore, the increase in remote work could help the job market recover quicker. “Despite these positives, I still worry we will see scarring,” he added.
The job market has seen some recovery, but the labor force participation rate for parents who needed to take care of their children during the pandemic is an estimated 6 percent lower than before the pandemic. “If parents who left the workforce don’t return, that will have long-term negative implications for U.S. growth potential,” he said.
“Scarring, whether it be at workers or businesses or communities, should be much less in a world that’s able to return to normal or something resembling normal quickly versus one in which people are still afraid to get into an elevator,” he said. “The priority now is getting the vaccines distributed and safely reopen the economy. We’re making good progress on that.”