The coronavirus crisis is crashing the U.S. economy at the fastest rate since the Great Depression, the government reported Wednesday, while the Federal Reserve pledged to keep interest rates near zero as long as it takes to bolster a recovery.
President Trump said the need for people to go back to work is so urgent that he wants to see a return soon to full-capacity restaurants, sports stadiums — and campaign rallies — with or without a vaccine.
“We want it to be the way it was,” Mr. Trump said during a meeting with business leaders at the White House. “We can’t have somebody with half a restaurant. That’s not going to pay the rent.”
With more than 26 million Americans having lost their jobs in the past two months, the Commerce Department said first-quarter economic output contracted at an annual pace of 4.8%. Adjusted for inflation, the drop from the fourth-quarter GDP of 3.6% matches the quickest and biggest fall since the Depression in 1932.
Consumer spending, which accounts for two-thirds of economic activity, fell by a whopping 7.6%.
And the plunge caused by the pandemic hasn’t hit bottom. The Congressional Budget Office is forecasting that U.S. gross domestic product will collapse at an annual rate of up to 40% for the April-to-June period.
Faced with those staggering numbers, the Fed signaled Wednesday that it will keep its short-term interest rate near zero for the foreseeable future. The central bank also said it will keep buying Treasury and mortgage bonds generally to spur lending.
“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time,” the Fed said.
Fed Chairman Jerome Powell said it’s clear that the impact of the coronavirus on the economy is severe.
He also said Congress will likely need to provide more emergency aid — he called it a “hefty price tag” — beyond the $2.8 trillion already spent by lawmakers since early March.
“It may well be the case that the economy will need more support from all of us if the recovery is to be a robust one,” Mr. Powell said.
The Fed already has cut interest rates twice in March, to near zero. And it has announced nine new lending programs totaling roughly $4 trillion to pump cash into financial markets, and provide loans to large and medium-sized businesses, as well as cities and states.
Underscoring the massive shock to the global economy, Boeing said Wednesday it will cut about 10% of its workforce of about 160,000 this year.
White House economic adviser Larry Kudlow acknowledged that the second quarter will be “much worse,” but said he expects the economy to “snap back” in the second half of the year.
Mr. Trump said he senses “a tremendous feeling of optimism” about a recovery. He cited another strong day for the stock market, which reacted positively to the news of a promising drug trial to help patients recover from the COVID-19 disease. The Dow Jones Industrial Average rose 2.2%.
“I think the third quarter is transitional,” Mr. Trump told reporters during an Oval Office meeting with the governor of Louisiana. “But I think the fourth quarter is going to be fantastic.”
The president, who has been encouraging more governors to reopen their states for business, will appear in a virtual town hall at the Lincoln Memorial on Sunday night on Fox News to discuss safely reopening the country.
Presidential adviser Jared Kushner said the administration’s efforts to slow the spread of the virus and rescue the economy are “a great success story.”
“I think you’ll see by June a lot of the country should be back to normal and the hope is that by July the country’s really rocking again,” Mr. Kushner said on “Fox & Friends. “The eternal lockdown crowd can make jokes on late night television, but the reality is that the [medical] data is on our side.”
The president, in his meeting with the corporate heads including Hilton hotels, Toyota and other industry leaders, said Americans need to get back to work as soon as possible.
He expressed optimism that the virus “will be gone” with or without a vaccine.
“Now, we’re going to wait until it’s gone,” Mr. Trump said. “It’s going to go. It will be eradicated.”
But he added, “I don’t want people to get used to” social distancing.
“You’re not going to have a stadium that’s 30% of the size of what it was three months ago,” Mr. Trump said. “We want it to be the way it was.”
The president said he’ll travel to Arizona for an event at a business next week, his first excursion outside of the White House in nearly two months. And he expressed the desire to hold packed campaign rallies again before long.
“Hopefully in the not-too-distant future we’ll have some massive rallies and people will be sitting next to each other,” Mr. Trump said. “I can’t imagine a rally where you every fourth seat full. I hope that we’re going to be able to do some good old-fashioned 25,000-person rallies, where everyone’s going wild because they love our country.”
Current guidelines from the Centers for Disease Control and Prevention call for social distancing to prevent the spread of the virus, including, “Stay out of crowded places and avoid mass gatherings.”
In calling for a return to crowded restaurants and arenas, the president cited encouraging medical data showing the rates of hospitalization and infection are lowering in most areas of the country.
Asked by a reporter if people observing states’ stay-at-home orders are responsible for the encouraging data, Mr. Trump replied, “Maybe that’s it. If you stay at home, you’re not catching it.”
Then the president added, “But they want to go out now. They want to do what they have to do. Some of the facts are coming out.”
The president said his target date for states to reopen is “as soon as possible.”
“We have a number of them opening up Monday. Ultimately we want to be back to 100%,” he said.
Thirty-five states have released formal plans for reopening gradually, Vice President Mike Pence said.
Josh Bolten, president and CEO of the Business Roundtable representing 200 major employers with 15 million workers, urged a more cautious approach to reopening, saying “the big picture is very challenging.”
He said employers need more clear, coordinated guidance from the federal government and states to avoid several different sets of conflicting rules.
“No matter how good every company’s transition plan is… public confidence will be undermined and the speed of reopening will be dramatically slowed if we’re all doing different things,” Mr. Bolten told the president. “The only thing worse than an unnecessarily slow recovery is a reversed recovery.”
Chris Reynolds, chief administrative officer of Toyota, said the company is advising its 1,500 dealers and 475,000 employees on the process for a phased reopening starting on May 11 at some locations. He said the process will involve daily temperature screenings for workers, restricted areas in plants and personal protective equipment.
“We’re not date driven, we’re data driven,” he said.