MNI POLICY: Kashkari Sees Grinding Recovery Even With Vaccine

The U.S. economy faces a "grinding" recovery even if a vaccine becomes available in the next year, Minneapolis Fed President Neel Kashkari said, citing Friday's payrolls report as an example of the disappointing backdrop amid the faster-than-expected re-opening following Covid-19.

"We are a long way from recovering the job market that we had" with at least 10 million more people out of work since the pandemic, he said.

The early gains following lockdown are a double-edged sword because they may have come with the high price of leading to more infections, he said. Speaking during a webinar on racism with the University of St. Thomas, he called it "a deeply unfair crisis" hurting the most vulnerable.

"It looks like it's going to be more of a grinding recovery," Kashkari said. "I'm not seeing any indication" of a rapid turnaround, he said.

"Let's say we have a widely available vaccine a year from now, I would expect a declining economic recovery, a slow growth, slow labor market recovery," Kashkari said. "Even then, I wouldn't imagine an immediate turnaround because there will have been a lot of damage done to the businesses that would have been the employers for all those folks."

The U.S. dollar doesn't face any immediate risk of instability from large federal deficits, because global investors remain eager to buy Treasury debt, Kashkari said. More fiscal aid is "enormously important for our recovery" and otherwise thousands of more businesses will fail and further set back the recovery, he said.