Fed’s Bullard calls for declaration of three-month work break

Register now

Federal Reserve Bank of St. Louis President James Bullard said the U.S. should declare the equivalent of a three-month break for nonessential businesses to fight the spread of the coronavirus.

Bullard recommended “the president and Congress declare a ‘National Pandemic Adjustment Period,’ providing a natural focal point for the expectations of policy makers and Americans at large concerning what is happening.” The three-month period could be shortened or extended depending on how the virus progressed, he wrote in a posting on the bank’s website Monday.

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

“The first goal during the NPAP is to intentionally reduce (reduce!) economic activity in order to meet public health objectives,” he wrote.

The adjustment period would call for special policies from Washington to protect households and businesses from the massive shutdown necessary to reduce the spread of the virus, the St. Louis Fed leader said.

The resulting economic decline, concentrated in the second quarter, shouldn’t be viewed as a recession because it’s an intentional strategy, and government fiscal support shouldn’t be thought of as stimulus.

“A better concept is that we should strive to ‘keep everybody whole’ during” the adjustment period, he said.

Bullard also reiterated that unemployment insurance should replace Americans’ lost pay close to or at 100%, and that the unemployment rate could reach 30% in the next quarter, while economic activity may be halved. The economic data need to be viewed in light of the public health emergency rather than as a normal period, he said.

Bloomberg News