Former Federal Reserve Chair Janet Yellen told CNBC on Monday the economy is in the throes of an “absolutely shocking” downturn that is not reflected yet in the current data.
If it were, she said, the unemployment rate probably would be as high as 13% while the overall economic contraction would be about 30%.
“If we had a timely unemployment statistic, the unemployment rate probably would be up to 12 or 13% at this point and moving higher,” Yellen told CNBC’s Sara Eisen during a “Squawk on the Street” interview. She said gross domestic product is down “at least 30% and I’ve seen far higher numbers.”
Those numbers, she said, look like a depression though they were “in very different form” from the Great Depression.
“This is a huge, unprecedented, devastating hit, and my hope is that we will get back to business as quickly as possible,” she added.
However, the former central bank leader expressed some doubt as to whether the U.S. recovery will look like a “V,” where the sharp and sudden downturn will be followed by an aggressive upturn once the economy is reopened after dealing with the coronavirus.
“I think a ‘V’ is possible, but I am worried that the outcome will be worse and it really depends to my mind on just how much damage is down during the time that the economy is shut down in the way it is now,” Yellen said.
That will be determined by whether employers can bring workers back quickly and if consumers aren’t too badly damaged to return to spending once social distancing associated with the coronavirus is rolled back.
Economic data of late already has looked pretty bleak.
A record 10 million Americans filed first-time unemployment claims in the past two weeks. Nonfarm payrolls decreased by 701,000 in the period through March 12. The unemployment rate including workers outside the labor force and the underemployed rose to 8.7% for the period, rising from 7% in the biggest one-month gain on record.
“The more damage of that sort is done, the more likely we are to see a ‘U,’ and there are worse letters like ‘L’ and I hope we don’t see something like that,” Yellen said.