MNI BRIEF: Bullard Sees Much Better Than Expected Recovery

A back-of-the-envelope calculation from the St. Louis Fed suggests that there is room for a "substantial decline" in the unemployment rate in the months ahead, despite "substantial downside risk" in managing the Covid-19 pandemic, bank president James Bullard said Friday.

If all those unemployed identifying as "on temporary layoff" are simply recalled and nothing else changes, the unemployment rate would decline to 4.9%, he said. If the "on temporary layoff" category returns to a "normal" value of around 1 million and nothing else changes, the unemployment rate would still decline to 5.5%.

"Employment has rebounded more rapidly than expected, supporting the idea that many layoffs were temporary as firms adjusted to the pandemic," he said.