Feds Rosengren Says Failure to Contain Virus Hurting Recovery

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Eric Rosengren

Photographer: Andrew Harrer/Bloomberg

Photographer: Andrew Harrer/Bloomberg

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Federal Reserve Bank of Boston President Eric Rosengren offered a downbeat outlook for the U.S. economy, emphasizing that recovery depends on controlling the coronavirus and that many states are failing in this mission.

“Limited or inconsistent efforts by states to control the virus based on public-health guidance are not only placing citizens at unnecessary risk of severe illness and possible death, but are also likely to prolong the economic downturn,” Rosengren said in the text of a speech hes scheduled to deliver Wednesday via video conference to the South Shore Chamber of Commerce in Massachusetts.

Rosengren said resurgences of the virus have led to a slowdown measured by high-frequency economic data. That slowdown, he said, is likely to continue, causing him to worry that an increasing number of temporary layoffs may turn into permanent job losses despite significant fiscal and monetary policy intervention.

Deaths caused by Covid-19 topped 164,000 as of Aug. 12 with confirmed cases rising 4.1% in the past week, according data collected by Johns Hopkins University and Bloomberg News. The U.S. labor market continued to improve in July as employers added 1.76 million jobs, but Rosengren pointed to fresh data on consumer activity showing retail spending was falling again in areas where the virus was spreading most rapidly.

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Main Street

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Rosengren also defended the central banks Main Street Lending Program, a set of emergency facilities being administered by the Boston Fed. Designed to deliver as much as $600 billion in loans to small- and mid-sized companies damaged by the pandemic, the program has been criticized for its slow uptake and red tape.

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“Some seem eager to suggest that the Main Street programs modest initial activity is evidence of failure. I completely disagree,” Rosengren said. “As borrowers and banks have become more familiar with the program, we have seen a steady increase in banks submitting loans to our portal.”

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He said more than $856 million in loans were “active in the portal, with more than $250 million in loans committed or settled.”

“Should the fall bring a resurgence of the virus as many epidemiological models predict, this program may become even more essential,” he added.

— With assistance by Catarina Saraiva