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Boston Fed Bank President Fears Winter Months Could Hinder Economy's Pandemic Recovery04:09
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Eric Rosengren (Courtesy of the Federal Reserve Bank of Boston)
Eric Rosengren (Courtesy of the Federal Reserve Bank of Boston)

A summer of slow economic recovery could be in jeopardy with the coronavirus pandemic reemerging as the winter months approach.

Some states — including Massachusetts — are considering slowing down their reopening plans as positive cases and hospitalizations begin to rise.

And businesses may not be able to count on federal aid after President Trump halted negotiations on a Congressional stimulus bill.

WBUR's Morning Edition spoke with Eric Rosengren, President and CEO of the Federal Reserve Bank of Boston, to talk about the state of the economy.

Here are highlights of the interview, lightly edited for clarity.

Interview Highlights

On the future of the economic recovery

One of the concerns is that the pandemic is not under control in many parts of the country. If you look even at places like Boston and New York that had it well under control, we're now seeing some increases occurring. As long as the pandemic is a problem, there's a problem for the economy. So I am concerned that as we get into the fall, the economy is going to be weaker than we had hoped. And I was hoping that we might be able to get some fiscal policy by this time. It looks like there's not going to be agreement on fiscal policy. Fiscal policy is the appropriate tool when interest rates are already very low and the economy is very weak.

On President Trump's opposition to Congress' economic stimulus bill

If we want to have a quick recovery or any kind of robust recovery, I think it's going to require more fiscal stimulus, particularly because we did not get the public health issues correct. It's obviously much better if people wear masks socially distance and we solved the problem from the public health standpoint. But if we're not going to do that, the more that we get the public health wrong, the more it's going to cost with fiscal policy if we want to avoid a very slow recovery.

On the President's optimism about a "record" recovery

7.9% unemployment is a very high unemployment rate. More of those unemployed people have been unemployed for a long period of time. In addition, I would highlight that many people are now having to pull out of the workforce. So when you have a pandemic and there's no child care, that means that one of the parents has to stay home because their children at home and you can't leave children in a house without any kind of supervision. Unfortunately, that tends to disproportionately fall on women. So that is a lingering problem that I think is also going to be a significant headwind to the economy.

On his comments about the Boston economy's future

If you look at the epidemiological models, they indicate that the fall and winter are going to be much worse. That's going to mean that it's a longer period where restaurants, retailers, many other types of organizations that thought that they might be up and running now will not be up and running. That means more closures. That means more severing of employment. Let's say you're a hotel worker. It's going to be very hard to find another hotel that's actually interested in hiring you in the middle of a pandemic. That means you have to find a job in an area that you haven't necessarily been trained for and which you may not have the skills for at a time when there's substantial labor market slack.

On the stress banks are facing due to the pandemic

So the good news is the banks came in much better capitalized than they did in the last two recessions. So they have much more of a cushion. The supervisors have allowed forbearance so that they could work with the borrowers.

What we're seeing as we get into the fall is more of those banks are no longer going to be willing to provide forbearance. That means they're going to require that borrowers start coming up with more funds if they can't come up with more funds. There's likely to be more foreclosures. That's true for mortgages. That's also true for firms. Right now, we're basically at lending standards that were equivalent to the financial crisis.

I'm hopeful that we don't see widespread losses at banks. But I think depending on how about the pandemic guts and how about the economy is the longer this last, the more likely that we start seeing more financial fragility.

This segment aired on October 9, 2020.

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