Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin testified before the Senate Banking Committee on Tuesday as part of their quarterly report on the CARES Act to Congress. Powell and Mnuchin summed up their views on the economy at the start of the hearing — and there was a clear disconnect.
If you looked at Powell and Mnuchin’s testimony — and I know you did — you would think they were talking about two different economies.
First, Mnuchin said, “The October jobs report showed the economy has recovered 12 million jobs since April.”
And Powell went on to say, “While we welcome this progress, we will not lose sight of the millions of Americans who remain out of work.”
Powell looks at the big picture. Mnuchin focuses on the letter of the law. And the CARES Act clarified that some pandemic aid ends at the end of the year as the economy recovers.
Mnuchin acknowledges that more help is needed. But it also highlights the drop in the unemployment rate.
“He’ll look at where we are this quarter versus last quarter and say, ‘Look at the rate of improvement! said Kathryn Judge, a law professor at Columbia University.
The unemployment rate fell to 6.9% in October. But that’s still nearly double the rate before the pandemic hit the United States.
Adam Ozimek, chief economist at jobs website UpWork, said Powell considers the glass half empty, while Mnuchin says it’s half full. And Mnuchin’s optimism could make it harder to persuade wavering members of Congress to vote for another relief package.
“You can’t really rally the troops until you portray the glass as half full,” Ozimek said.
If Congress doesn’t pass another relief bill, said Williams College economist Ken Kuttner, the Fed will say, “Look, if you can’t pull yourself together and pass fiscal stimulus, it’s It will be up to the Fed to try to take over as best we can. “
But Kuttner said the Fed’s tools aren’t ideal for that. Powell has repeatedly said the Fed is providing loans, not the grants that struggling businesses and unemployed workers need right now.