U.S. economic growth is moderating as the coronavirus spreads and fiscal help fades, and some workers whose jobs are permanently eliminated will face an especially tough recovery, Philadelphia Federal Reserve Bank President Patrick Harker said on Wednesday.
Harker said he is expecting “moderate growth for the rest of this year and the first quarter of 2021” and for the economy to stay below pre-pandemic levels.
“Indeed, we are currently seeing signs of plateauing in the economy,” Harker said during remarks prepared for a virtual discussion. “That’s attributable both to COVID-19′s continued circulation and to the evaporation of fiscal support.”
The policymaker forecasts that growth will pick up in the second half of next year if there is a vaccine widely available by next spring or summer. Harker said more fiscal support is needed to get the economy to that point and to support low-income households.
He also repeated his view that many of the jobs lost during the pandemic will not return as companies use technology to reduce staff. He gave the examples of toll workers who were laid off and jobs at meat packing plants that are being automated.
Speaking about the actions the Fed took to support the economy during the pandemic, Harker said he thought the central bank’s emergency lending programs should be extended beyond year end.
The facilities, which support lending to small and medium sized businesses, state and local governments and backstop the corporate bond market, are set to end by Dec. 31 after Treasury Secretary Steven Mnuchin asked the Fed to return unused funds.
“In my opinion, those facilities should stay open past the end of this year,” Harker said. “Until we get through this pandemic, the economy needs to be supported.”
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