September 28, 2020 — Fed’s Bullard Optimistic for the Rest of 2020


James Bullard, the president of the Federal Reserve Bank of St. Louis, spoke at a webinar last week, where he said he expects “outsized growth” in the third quarter of this year and a “full recovery” in the US is possible by year end.

He believes monetary and fiscal policies have been effective and have offset the some of the shock, but it is important to not let up on health policies to maintain economic progress. With daily fatalities declining worldwide, he thinks the worst has passed. Employment has recovered faster than expected, and many layoffs were temporary, and Bullard thinks “there is room for a substantial decline in the official unemployment rate in the months ahead.” With Q3 GDP expected to rise rapidly, Bullard thinks a full recovery is possible by the end of 2020.  But this means GDP will rise 35 percent in Q3 and another 10.3 percent in Q4.

Backing Bullard’s outlook, durable goods orders; a proxy for business investment; increased for the fourth consecutive month in August, up 0.4% from July said the Commerce Department Friday.  The pace of durable goods orders can signal demand for manufactured products and the volume of forthcoming factory production. Factory activity has grown in August with gains in output and improvements in employment levels.  But new unemployment claims remained steady last week at 870,000.  The pace of job gains slowed in September, indicating a cooling job market.