The St. Louis Federal Reserve Chair said Wednesday that the economy would "boom" after it recovers from the shock of the novel coronavirus pandemic.
"I think you'd see boom quarters where there is a lot of production at that point because there would be sort of a pent up demand and a lot of things that didn't get done and got delayed would all start to get done," James Bullard, the CEO of the Federal Reserve Bank of St. Louis, said Wednesday on CNBC.
The boom quarters would be the fourth quarter of this year and the first quarter of 2021, assuming the "virus proceeds roughly speaking as it does in China," Bullard said. He said the third quarter of this year should be looked at as "a transition quarter" because the businesses would just be getting online.
Bullard explained the second-quarter numbers would be the hardest hit, and should be looked at as a "national pandemic adjustment period," not to be compared to past recessions because of the unique situation. "It's not a recession as conventionally defined because this is an intentional move being made here," Bullard said. He called this economic period "an investment in public health."
The CEO added that the perspective should be that most of the second quarter is a "planned partial government shutdown" that will likely cut the usual gross domestic product in half.
"If you look at these numbers, the U.S. GDP for a quarter is about $5 trillion. So if you cut that in half, you're only talking about producing $2.5 trillion, and that means about $2.5 trillion less of household income that we would otherwise have," Bullard said.
"So I think the $2 trillion package—looks like it'll pass the Congress now—is about right. It's scaled about right for this situation. And this is relief not stimulus. We're not trying to move production into the second quarter. The whole idea is to hunker down, lie low, let the virus go away."
He added: "My point on talking about this is that the numbers will be unparalleled, but don't get discouraged because this isn't at all comparable to past events in U.S. macroeconomic history. This is a special quarter and once the virus goes away, if we play our cards right and keep everything intact, then everyone will go back to work, and everything will be fine."
Bullard also advocated for "heavy usage" of unemployment programs "to keep people whole and keep businesses whole" as millions of Americans are unable to work in an effort to slow the spread of the novel coronavirus.
The Senate early Wednesday morning came to an agreement on a record economic package that is meant to provide relief to individuals and businesses. The bill is scheduled to be voted on Wednesday and is expected to pass the Democrat-controlled House Thursday and be signed into law by President Donald Trump.
