When Pat Harker talks, people listen

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Hello everyone,

The President of the Federal Reserve Bank of Philadelphia gets his share of attention these days.

Patrick Harker sits on the Open Market Committee of the Federal Reserve. The panel sets monetary policy and is playing a pivotal role in the task of dealing with and recovering from the coronavirus crisis.

The news, as expected, was bad today, with the jobless rate heading toward the 15 percent mark.

The former president of the University of Delaware is scheduled to hold an update on the impact of coronavirus on Delaware in a teleconference withmembers of the Delaware State Chamber of Commerce next week.

Harker was a transformative figure at UD, orchestrating the acquisition of the former Chrysler plant during the past recession.Now known as the STAR campus, the site is one of the state’s success stories. Hewent on to lead the effort to build a state-of-the-art engineering building.

We got a glimpse into his views from Zoom speech before the Chicago Council on Global Affairs. Harker issued the usual disclaimer that his views do not represent those of the Federal Reserve.

Harker said that contrary to the popular myth, the current downturn was not entirely driven the product of government-ordered shutdowns. As the virus spread, airline traffic, as well as restaurant and store visits fell sharply.

In other words, the nation was beginning a self-quarantine.

Harker’s point is important as stores and other businesses reopen and calls grow for “flipping the switch,” among the reopen with no restrictions crowd. A sizable percentage of people will not go back to their old haunts and habits, at least for a while.

Harker sees multiple possibilities for the economy going forward. The two he outlined involve a recovery as the virus is contained through technology with no return in the fall.

The other more frightening possibility is COVID-19 not being controlled and returning to shut down businesses again in 2021.

Even under the most optimistic scenario, Harker anticipates big changes ahead.

The Philly Fed chief sees a strong possibility that “many hotels and restaurants will never reopen. There will probably be retailers, big and small, that also shutter permanently. We heard the news on that front today.

One big reason is the rise of teleconferencing and working from home. Should productivity remain at a decent level, business travel will remain on the light side and businesses will need less office space. Many of these trends were already in progress but will accelerate.

On the plus side durable goods manufacturers may spring back more rapidly since demand in this area did not collapse, Harker noted.

He ended the speech on a hopeful note, pointing to the ability of businesses to adapt to the new reality. I share that view.

Click here for Harker’sprepared remarks.

Enjoy your weekend. Our newsletter returns on Monday. – Doug Rainey, chief content officer.

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