St Louis Fed President James Bullard Friday offered a sunny view of the economic outlook, saying the economy continues to rebound as businesses adapt to the pandemic, and unemployment is headed down to 6.5% by December.
Bullard said much of the rise in unemployment has been due to temporary layoffs, and most workers in this category expect to return to their jobs.
“I’ve penciled in 6.5%” for the unemployment rate at year end, he said during an online interview sponsored by the Boeing Center at Washington University.
Bullard said growth has been rebounding, with the expansion rate in the third quarter “way off the charts”, following its plunge in the second quarter.
Asked about the potential impact when there is an effective vaccine, Bullard said there is a chance the economy may boom, and strong growth need not wait until the vaccine is available to everyone. The vaccine will initially be made available to those most vulnerable, and others can continue risk mitigation, he said.
Businesses have been investing in the expectation of recovery, and as demand comes back online, the rebound “could happen quickly”, Bullard said.
Asked about the likelihood the Fed’s new flexible inflation targeting regime would yield results, Bullard said, “I think it will be quite successful”, and price pressures are likely to build in response to fiscal and monetary stimulus. Business contacts are reporting bottlenecks in the economy as growth recovers, and they are having trouble finding workers; all factors likely to boost inflation, Bullard said.
Bullard said businesses have been adapting successfully to new circumstances, including taking effective steps to limit risk of infection for customers and employees. He predicted the economy can recover to where it was pre-pandemic, and all the same goods and services can be produced.