US economic recovery being slowed by 'uneven' public health responses, Dallas Fed president warns

• An uncoordinated effort to contain the coronavirus can impede the US recovery from economic recession, Robert Kaplan, president of the Federal Reserve Bank of Dallas, said.
• Precautions such as wearing a mask and testing for new cases are "critical" to reviving economic activity, he added in a CBS interview aired Sunday.
• "We'll grow faster if we do those things well. And right now, it's relatively uneven," Kaplan said.
• The Fed president estimates unemployment to continue falling to roughly 8% by the end of the year. While he stopped short of calling for additional fiscal aid, Kaplan deemed such spending "critical from here" to ensuring a full rebound.

Recent spikes in coronavirus cases point to a bumpy road to containment, and Robert Kaplan, president of the Federal Reserve Bank of Dallas, fears new outbreaks can stymie an economic rebound.

A full recovery from recession is just as contingent on the US public health response as it is on fiscal and monetary stimulus, Kaplan told CBS's "Face the Nation" in an interview aired Sunday. Precautions such as wearing a mask and expanding testing services are "critical" to reviving consumer confidence. If different regions employ different containment strategies, the US could face smaller downturns well into the future, the president cautioned.

"We'll grow faster if we do those things well. And right now, it's relatively uneven," Kaplan said.

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The Fed president holds a more positive outlook toward labor market performance, saying the unemployment rate won't reverse course and leap to 20% after May's surprise decline. The metric will fall to roughly 8% by the end of the year, with much of the improvement hinging on a service-industry rebound, he said.

When asked whether additional fiscal relief from Congress is needed to facilitate a complete recovery, Kaplan maintained the cloudy messaging exemplified by other central bank policymakers. Key elements of the CARES Act, including a $600 per week boost to unemployment insurance, are set to expire as soon as July unless lawmakers extend their deadlines. Such stimulus is a "critical element of the recovery," he noted before stopping at an explicit call to action.

"I'm being careful as a central banker not to tell the fiscal authorities what to do," he said. "But I would say fiscal policy is going to be critical from here."

Kaplan also addressed growing pressure for the Fed to work toward economic equality. Continued nationwide protests against police brutality have revived calls for socioeconomic equality. Fed Chairman Jerome Powell said in a Wednesday press conference that there is "no place" for racism at the central bank. The Atlanta Fed president elevated the call in a Friday essay, saying he stands with protesters and that committing to an inclusive society means "commitment to an inclusive economy."

The Dallas president continued the commentary Sunday, adding that a strengthened focus on economic equality can aid the US in bouncing out of its slump.

"A more inclusive economy where everyone has opportunity will mean faster workforce growth, faster productivity growth, and we'll grow faster. We're right to focus on this and bore in on this. It's in the interests of the US," he said.

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