Treasury Secretary Steven Mnuchin. | Mark Makela/Getty Images
Treasury Secretary Steven Mnuchin acknowledged Thursday the U.S. faces months of economic contraction, but predicted a “gigantic fourth quarter” as Americans release “pent up demand” and return to “a normal world.”
In an interview with Fox Business Network, Mnuchin said he believes the economy will see its largest decline in this year’s second quarter, from April through June, followed by a third-quarter recovery as advancements in viral treatments and vaccines eventually halt the spread of the virus.
"I think you’re going to see a lot of pent-up demand," Mnuchin told Maria Bartiromo. "When we get through the next few months and Americans see what’s happening, and we have killed this virus, people are going to be comfortable going back to work."
Mnuchin continued: "We're going to be opening back business and people are going to continue what they do. They are going to live. They are going to shop. They are going to eat out. They are going to enjoy restaurants and travel and entertainment and we will go back to a normal world.”
Bartiromo pressed Mnuchin on company bailouts — a term he continues to push against. He emphasized Thursday that many of these companies will ultimately pay back any loans.
“This isn’t about bailing out bad businesses. This isn’t about banks that made bad loans," Mnuchin said. "These are about very, very good companies that have been instructed to shut down, so they need liquidity. That’s what they need."
"In most cases, my expectation is they will be able to pay back these loans. In the case of small businesses, if they can’t afford to pay back those loans, we’ll forgive them," he continued. "I don’t consider that a bailout. I consider that an incentive to keep workers hired.”
Mnuchin also clarified his reported warning to Republican senators on Tuesday that unemployment could spike to 20 percent if action is not taken. “What I said is that 40 percent of our workforce is in small business," he explained. "And I said, if half of them were let go, mathematically, we’d be at 20 percent unemployment.”
Mnuchin’s upbeat outlook comes alongside grim new data emerging from the federal government. The Labor Department on Thursday reported 281,000 new claims for unemployment insurance last week, a one-third increase over the previous week, a jump it attributed to the pandemic. It was the highest number of claims since September 2017, and economists expect that figure to soar in the coming weeks.
Asked whether economic data should be ignored in this volatile environment, Mnuchin replied, “The statistics in the short run of economics are obviously not relevant. This is an unprecedented situation where, at the government’s direction, we shut down parts of the economy and now is the time that we provide government support.”
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