As unemployment claims in the U.S. mount due to business closures related to the novel coronavirus, former Federal Reserve Chair Janet Yellen offered her perspective on the direction the economy may be heading in the coming months, and warned that job losses could continue to worsen.
“This is completely unprecedented,” said Yellen in an interview with PBS NewsHour anchor and managing editor Judy Woodruff on Thursday. “It’s a devastating blow, we’ve never seen anything like it.
Yellen noted that job losses continued to multiply last week with more than 6.6 million Americans filing for unemployment insurance, close to the record number of claims filed the week prior. This brings the total number of Americans who have lost their jobs in recent weeks to 17 million. She predicted the unemployment rate will reach levels not seen since the Great Depression.
But unlike the Depression, Yellen notes that in the current downturn, there are no underlying problems with the economy. This recession was driven by a public health crisis, and the economy was relatively healthy just a few months ago. “This is a terrible situation. But the hope is that if we can get the pandemic under control and deal with the public health crisis, that the economy will recover much more speedily than it did from any past downturn,” the former Fed chair said.
Despite issues with the rollout of these expansive programs, Yellen remains optimistic that relief will come to Americans who need it.
More highlights from the interview:
On the government’s efforts to keep people afloat: “It’s simply essential to support households and businesses through an incredibly difficult period in which they’re facing losses of jobs and incomes. They’re struggling to meet everyday expenses for food and rent and utilities. And this is due to no fault of their own and no problems with the job market,” Yellen said.
Asked about the government’s response to the economic downturn, she said she was impressed by what the fiscal authorities and Federal Reserve have done thus far to keep the economy afloat.
Congress passed a $2.2 trillion economic stimulus bill at the end of March that extends unemployment benefits to more workers and provides loans for small businesses to keep their employees on payroll. Most Americans will receive a direct payment of $1,200 from the stimulus, as well. Lawmakers are pushing to pass another spending package to provide additional funding to small businesses, hospitals, and state and local governments, in particular.
Yellen said the stimulus would provide “very meaningful support” to Americans, particularly because it broadens eligibility requirements for unemployment insurance and allocates an additional $600 per week to those who qualify. She noted that if shutdowns related to the coronavirus continue, Congress will likely have to pass another economic rescue package. Already, the fiscal response is slightly larger than the one lawmakers negotiated in response to the 2008 recession.
The Federal Reserve Bank announced on Thursday that it would expand lending programs to aid small and mid-size businesses, as well as state and local governments, by $2.3 trillion. This exceeds the entire scope of its response to the 2008 financial collapse. Yellen called the Fed’s response “utterly heroic,” adding, “My hat is off to my successor, chair Powell and his colleagues, for what they have announced and the creativity of what they’re doing.”
On the rollout of financial relief to Americans: Since millions of Americans began applying for unemployment, state websites have been overwhelmed with the demand, causing delays, glitches and error messages. Yellen acknowledged there have been procedural problems with the rollout of the expanded benefits: “I know how frustrating it must be. Someone’s been laid off. They need to buy groceries and pay the rent and they can’t get through to the unemployment office.”
Nevertheless, the former Fed chair expressed optimism that “money should be flowing” to Americans in the coming weeks.
Yellen also acknowledged that there have been similar issues with the rollout of loans that were promised to small businesses as part of the economic stimulus in the wake of the pandemic. Banks have been overloaded with requests, and loans were held up for some business owners when the Small Business Administration’s processing system stopped working earlier this week.
“There are start-up problems with very big programs,” Yellen said. “The banks are absolutely swamped. The program is probably going to require further appropriations and it’s probably going to be pretty frustrating to get the money in hand, but it’s there and it’s coming. And it should be available to a wide range of businesses.”