Minneapolis Fed President: Not Just Lockdowns Putting ‘Damper on the Economy’

Minneapolis Fed President: Not Just Lockdowns Putting 'Damper on the Economy' Minneapolis Fed President: Not Just Lockdowns Putting 'Damper on the Economy' Neel Kashkari. (Jonathan Ernst/Getty)

By Theodore Bunker | Monday, 10 May 2021 12:22 PM

The president of the Minneapolis Federal Reserve said Sunday that widespread COVID-19 lockdowns aren't solely responsible for the current economic slowdown, also blaming the actions of "each family" trying to stay safe during the pandemic, childcare shortages that are preventing parents from returning to workplaces, and generous unemployment benefits leaving little incentive for some to find a job.

Neel Kashkari said in an interview with CBS' “Face the Nation” on Sunday that people need time for their “psychology to change.”

“It wasn't simply the lockdowns from the government that put a damper on the economy," Kashkari said. "It was each of us, each of your viewers, each family taking actions to protect themselves."

He added: And so I do think that there is some truth to the unemployment benefits maybe being a disincentive. I see that in the data and I see that in anecdotes as we talk to people. I also think that childcare shortages are a big impediment to people coming back in with schools still being partially closed. And I think that fear, the risk of, ‘hey, I don't want to get back onto a crowded bus if that's what it's going to take to go to my job.’”

Kashari also suggested there may have been some overreaction to April's woeful jobs report that was released Friday, which showed employers added 266,000 jobs — well below the 1 million expected by Wall Street.

“I think we shouldn't overreact to any one report, either the really good report that came out the month prior or last week's report as well," he said "But I think the bottom line is we are still somewhere between 8 and 10 million jobs below where we were before the pandemic.

"Roughly 8 to 10 million Americans ought to be working right now if the COVID crisis had not happened. So we still are in a deep hole and we still need to do everything we can to put those folks back to work more quickly.”

He later said that “this is unlike any other economic shock in any of our lifetimes. This is very different than the financial crisis,” and he added that “a lot of this is being driven by people's own feelings of personal safety, their own health for themselves and their families…. Now we have to start to change what we've been telling people and get people to change how they feel inside. And so we can put out economic forecasts of how people are going to respond to different incentives, but it's really uncertain."