Before the novel coronavirus gripped the nation, the US economy made steady gains. For a period stretching back into the Obama administration, the economy grew year after year, unemployment fell, and jobs gains blossomed. Covid-19 reversed all of that.
In a matter of weeks, the US economy back pedaled. Unemployment, previously at a 50 year low, surged. More than 17 million people filed unemployment claims within the last 4 weeks. 6.6 million filed last week alone. That places the new unemployment rate, once resting below 4 percent, up to 10 percent.
While most of those classify as temporary, the length of their unemployment remains uncertain. Stay at home measures taken in most states hold nebulous end points, most suggesting the outbreak will merit an extension.
To mitigate the effects of the economic downturn, the Federal Reserve took measures to spur economic activity. Previously, in March, they cut interest rates to zero. Additionally, they purchased government loans to infuse lenders with a surplus of cash. The hope was to keep borrowing cheap to help those impacted.
Now, they unveil an additional measure to assist businesses of varying size, as well as states, through the economic crisis.
US Economy Bolstered by Multi-tiered Efforts
Officials at the federal level employed a number of tactics in March to undermine the impact of the pandemic on the US economy. In addition to passing a massive stimulus package dispersing checks directly to citizens, they approved billions in lending to various industries in need.
However, Fed Chair Jay Powell expressed concern over the direction of the economy. “We are moving with alarming speed from 50-year lows in unemployment to what will likely be very high, although temporary, levels,” he said.
The program announced Thursday seeks to add an additional $2 trillion in lending for businesses as well as states and municipalities.
They plan to spend $750 billion buying up loans from large corporations. For medium sized companies with employees up to 10,000, they will invest $600 billion buying loans ranging from $1 million up to $150 million. While greater than the loans offered by the Small Business Administration, they comes with strings. Businesses must operate domestically and be registered in the country. They amortize at 4 years, providing time to pay back.
The Fed also intends to reinforce the SBA’s lending program, which featured some hurdles since its rollout last week. It began as a $350 billion effort, but President Trump requested an additional $250 billion.
The extensive effort to prop up the US economy proceeds with uncertain results. However, Powell offered a bit of optimism. “There is every reason to believe that the economic rebound, when it comes, can be robust,” he said.