scorecardJanet Yellen warns coronavirus-hit US economy could contract 30% next quarter, says unemployment might already be 13%
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Janet Yellen warns coronavirus-hit US economy could contract 30% next quarter, says unemployment might already be 13%

Carmen Reinicke   

Janet Yellen warns coronavirus-hit US economy could contract 30% next quarter, says unemployment might already be 13%
Stock Market2 min read
Janet Yellen
  • Former Federal Reserve Chair Janet Yellen said that US GDP could slump 30% in the second quarter amid coronavirus in a Monday interview with CNBC.
  • In addition, the unemployment rate might currently be 12% or 13% and moving higher, Yellen said.
  • A V-shaped recovery is still possible, but Yellen worries that the outcome will be worse.
  • Visit Business Insider's homepage for more stories.

Former Federal Reserve Chair Janet Yellen said that the US is experiencing a "huge unprecedented, devastating" hit from the coronavirus pandemic in a Monday morning interview with CNBC.

The US economy could slump 30% in the second quarter, Yellen told CNBC's Sarah Eisen. She also said that the unemployment rate is likely much higher than the 4.4% shown in Friday's March jobs report.

"If we had a timely unemployment statistic, the unemployment rate would probably be up to 12 or 13% at this point and moving higher," Yellen said.

Economic data continues to show damage from the coronavirus pandemic in the US. In the last two weeks of March, a record 10 million Americans filed for unemployment insurance after losing their jobs due to the virus. And, the March jobs report showed that employers slashed 701,000 jobs in the month, much worse than economists expected.

Yellen said that she was "heartened" by the number of workers in Friday's report who indicated they were out of work only temporarily, she said. In addition, she said that a "V-shaped" recovery is possible, but she's worried that the outcome will be worse.

Read more: 14 Wall Street experts told us the single metric they're each watching to assess coronavirus market fallout - and give their portfolios a leg up

"My hope is that we get back to business as usual as quickly as possible," she said.

Yellen also discussed the possibility that banks and other companies are asked to suspend stock buybacks and dividend payments amid the coronavirus crisis.

"I would be in favor of asking banks to suspend dividends and stock buybacks," she said, adding that banks tend to be reluctant to stop both as they worry it will make them look as though they are vulnerable.

Still, what's most important is that banks are "able to meet the credit needs of the economy," she said.

In his annual letter to shareholders Monday, JPMorgan CEO Jamie Dimon said that the bank will cease stock buybacks, but would not yet consider cutting its dividend.

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