Bullard doesn’t see economy ramping back until people feel safe

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President Donald Trump wants to re-open the U.S. economy by mid-April but Americans may take some persuading that it’s safe to emerge, said Federal Reserve Bank of St. Louis President James Bullard.

“People aren’t going to want to come out of hiding, so to speak, until you can reassure them that it’s safe,” Bullard said in a press briefing Wednesday by telephone from St. Louis. “It is a little bit different than just saying ‘it’s over, you can go back.’ You have to also win the trust of workers and firms all across the economy to reassure them it really is safe. Once they have that, they will be happy to go back to work.”

Federal Reserve Bank of St. Louis President James Bullard
Federal Reserve Bank of St. Louis President James Bullard

Trump wants to wind down “social distancing” and reopen the U.S. economy by the April 12 Easter holiday. Some public health officials have said they consider the timetable unrealistic.

U.S. unemployment is expected to soar and economic activity slow severely in the second quarter, as important parts of the economy are shuttered and workers stay home to stop the virus from spreading.

Bullard, who has called for a three-month work break to protect public health, sees the jobless rate rising around 30% during this period and GDP output halving, but that would not be the same as a normal recession because it’s a deliberate slowdown.

While he sees activity picking up in the third quarter and even booming by the end of the year, it’s hard to push Americans to re-engage with the economy while the virus remains a threat.

“Workers themselves don’t want to get sick but even more important than that I think don’t want to become a carrier and then get somebody they know very well sick because they would feel terrible if that happened,” Bullard said, comparing the health-crisis panic to something out of the movie “Jaws.”

“The analogy here is there is a shark in the water and people are at the beach and they don’t want to go in the water when there is a shark in the water,” he said. “You have to reassure people that the shark isn’t in the water anymore. Then people will go back in the water.”

Bullard said he viewed the work stoppages as an investment in public health, in which the government should ensure that workers and businesses are made whole, and that incoming economic data will be unprecedented.

Even so, the reports should be seen as a good sign as evidence of health precautions taking place.

“Unemployment insurance claims are going to skyrocket,” he said, with 46 million workers in “customer-facing-type” jobs that don’t provide essential services and can’t work from home. “Our baseline would be, gosh, all of them go get unemployment insurance. You are going to have a really high unemployment rate.”

Bloomberg News