Recurring coronavirus outbreaks will probably hold back U.S. economic growth and leave unemployment at elevated levels in the coming years, Federal Reserve Bank of Chicago President Charles Evans said.
“My forecast assumes growth is held back by the response to intermittent localized outbreaks — which might be made worse by the faster-than-expected reopenings,” Evans said Wednesday in remarks prepared for a virtual event.
“In this environment, many resources will be devoted to health and safety. I assume health solutions become widely available as we move through 2022, and I allow for a return to more normal operations by late in the year,” Evans said.
The Chicago Fed chief pointed to the median of projections published by Fed policy makers on June 10, which showed the U.S. unemployment rate may still be 5.5% by the end of 2022. It surged from 3.5% in February to 14.7% in April, before dipping back down to 13.3% in May as many localities lifted stay-at-home orders.
Now, small businesses in emerging hot spots like Texas and Arizona are beginning to see a decline in foot traffic again as cases there surge, and some bars and restaurants are closing their doors for a second time.
“Until the virus is treatable or controlled through other measures, the return of economic activity hinges on the ability of businesses to provide safe workplaces and consumer environments,” Evans said. “How much these efforts will allow activity to recover is an open question.”