“But that’s kind of expected because you’re using the unemployment insurance program to provide pandemic relief,” Bullard told CNBC’s Steve Liesman. “That’s exactly what we want to do.”
Bullard’s comments came minutes before ADP reported that private payrolls shed more than 20 million jobs in April as employers slashed worker positions amid widespread shutdowns and forced government closures to help contain the spread of the coronavirus.
The decline totaled 20,236,000 and represented by far the worst loss in the survey’s 18-year history. Despite the eye-watering number, the 20.2 million wasn’t as bad as the 22 million that economists surveyed by Dow Jones had forecast.
But investors await the Labor Department’s key jobs report on Friday, when economists expect to see the U.S. unemployment rate to have rocketed to 16% in April from 4.4% in March. Dow Jones economists expect nonfarm payrolls to have declined by about 21 million last month.
Should the unemployment rate rise by the expected 11.6 percentage points, it will surpass the prior record increase of 1.3 percentage points from 1949. The decline in nonfarm payrolls in April will almost certainly set a new record since the prior one-month record drop was 1.96 million in 1945, according to data at the Bureau of Labor Statistics.
In fact, the decline in nonfarm payrolls last month will likely triple the total jobs lost over two years during the Great Recession.
“The unemployment rate is going to be extremely high,” Bullard said. “We think 20% isn’t unlikely, could even be higher than that. You’ve also got this PPP program, which has encouraged firms to keep their workers on their payrolls even though they’re not doing that much business.”
“It’s not surprising. It’s a pandemic. It’s a shutdown situation,” he continued, adding that he long maintained that the main impact from the crisis would be in the second quarter.
“We’re going to see crazy ADP numbers today and the jobs report will probably be one of the worst ever on Friday,” he said in the interview on “Squawk Box.”
Bullard, one of the Fed’s more optimistic voices, said he thinks the U.S. economy may return to speedy growth in the third quarter.
“In the third quarter, it’ll be a transition quarter, but I would expect relatively rapid growth,” he said. “And then, hopefully by the time we get to the fourth quarter, we’ll be finishing up this process.”
He said he wouldn’t be surprised to see the U.S. unemployment rate to decline back to single digits by the end of 2020 as the economy recovers from the sharp second-quarter pullback.