Did Bullard really say 30% unemployment?

Over this past weekend, President of the Federal Reserve Bank of St. Louis, Jim Bullard, gave an interview.  The sound bite “heard ’round the world” was he mentioned the phrase “30% unemployment.”

Wow, did he really say that?  Yes!  But let’s put this in context.

Bullard mentioned the unemployment rate would skyrocket to 30% in the second quarter.  This isn’t permanent, it’s expected to be a one-time event in the second quarter according to Bullard.  He doesn’t expect it to be perpetually high unemployment rates, as they tend to be during recessions, and during the depression in the 1930’s.

He couched his comment with the following, “It’s not a recession as conventionally defined, this is an intentional, planned, partial shutdown of the economy.”  He also added “this package from Congress…it’s relief, it’s not stimulus, we’re not trying to move production into the second quarter.”

And, “the numbers in the second quarter will be unparalleled, but don’t get discouraged because this isn’t at all comparable to past events in US macroeconomic history…”

It would be inappropriate to call this a recession…”  And Bullard also added, “…GDP will be reduced to meet health objectives,”

“This number will be unparalleled, but don’t get discouraged,” Bullard said. “This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine.”

In response to a question, Bullard also said he “expects the 3rd quarter to be a ‘transition’ quarter where businesses are coming back.  Then expects “boom quarters” in the 4th quarter 2020 and the first quarter of 2021.”

Historically, stock market tends to look ahead six to twelve months.  If true, we should be looking today at business prospects nearing the end of the year.  Practically ALL the economic data we will be receiving in the coming weeks will be rear-looking, not forward-looking.  It will tell us what happened, not what is coming.  While the data about the economy will be shocking at points, it’s not an indication of a permanent state.