Federal Reserve Chairman Jerome Powell on Wednesday warned that millions of Americans could remain on the unemployment rolls, even as the U.S. economy starts to recover from the coronavirus pandemic and the related lockdown.
"It seems quite likely there will be a significant group that, even after strong job growth, is struggling to find jobs," Powell told reporters during a press conference following the central bank's two-day meeting.
At the meeting, Fed policymakers voted unanimously to hold interest rates near zero — and signaled they'll remain at that level until 2022 — and released their first economic forecast this year.
The central bankers projected an arduous recovery from the virus-induced recession. They said they expect unemployment to end 2020 at 9.3 percent and remain elevated for years, eventually falling to 5.5 percent in 2022. That's still well above the pre-crisis level of 3.5 percent.
In the three months since the economy came to a near standstill to slow the spread of COVID-19, more than 43 million Americans have lost their jobs, a rate unseen since the Great Depression. Just three months ago, unemployment sat at a half-century low.
But a surprisingly good May jobs report showed that U.S. employers actually added 2.5 million jobs last month and the unemployment rate fell to 13.3 percent, down from 14.7 percent in April. Consensus estimates expected the economy to shed somewhere around 9 million jobs and the jobless rate to surge to 20 percent.
Still, the headline unemployment number is almost certainly off by a few percentage points.
The Labor Department said in the report that real unemployment is likely 16.3 percent, due to a quirk in reporting. Basically, workers who were furloughed or who had their hours reduced to zero were reported as employed but not at work due to “other reasons.” If those individuals had been classified as unemployed on temporary layoff, the overall unemployment rate would be 3 percentage points higher, the agency said.
"We don't know what that means," Powell said of the report. "We're going to have to wait and see. It is clear evidence of just how uncertain things are, and how humble we have to be about our ability to really have confident predictions."
He echoed previous comments that a full recovery may not take place until consumers are confident to re-engage in a broad range of activities.
There may be a "significant chunk, well, well into the millions of people, who don't get to go back to their old job. And in fact, there may not be a job in that industry for them for some time. There will eventually be. But it could be some years before we get back to those people finding jobs," Powell said.