More evidence of how the coronavirus pandemic is widening income inequality has emerged after the Federal Reserve announced 40% of households earning less than $40,000 included someone who has lost a job since February.
The Federal Reserve chairman, Jerome Powell, released the figure on Wednesday as he called on US policymakers to do more to pull the country out of the economic mire.
“The scope and speed of this downturn are without modern precedent, significantly worse than any recession since the second world war,” Powell said in prepared remarks for a webcast event with the Peterson Institute for International Economics.
The pandemic, which has already cost at least 20m jobs, has caused “a level of pain that is hard to capture in words”, he said.
On Thursday, the Fed will release a report detailing who has been hit hardest by the pandemic downturn. April’s job report showed rises across the board but minorities have been badly affected and those in low-wage work – such as hospitality and retail – have been the first to lose their jobs.
Latinos posted the highest unemployment rate in April, 18.9%, while unemployment for African Americans rose from 6.7% to 16.7%, wiping out the gains made since the last recession. Those without a college education have been particularly damaged. The unemployment rate for teenagers hit 31.9% in April, up from 14.3% in March.
Powell said: “While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks.”
Congress has already agreed $2.9tn in financial aid for households, businesses, healthcare providers and state and local governments. But the money has not slowed a tidal wave of job losses.
Powell did not specify what new measures should be taken but he said that despite the size of the funds already agreed, they “may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks”.
He said: “Additional fiscal support could be costly but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
Weekly unemployment claims – applications for benefits from those who have lost their jobs – have soared to record levels in the last two months as the pandemic has shuttered large parts of the US economy. The latest weekly figures will be released on Thursday and another 3m applications are expected – bringing the total to 36m since the pandemic hit the US.
House Democrats have unveiled a new $3tn coronavirus relief bill, a vote is expected on Friday but the bill faces opposition in the Republican-controlled Senate.
“We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased,” Powell said.