The Federal Reserve officials have begun warning of potentially lasting scars to the workforce and productivity if the recovery is not handled well. In spite of rolling out trillions of dollars during the coronavirus pandemic U.S. economy might face economic scars for a long time.

The heads of three Fed regional banks said the aggressive efforts already taken to keep companies and firms afloat are only the start of what will be required to get the economy back to normal, with worker retraining, retooled social safety nets, and other steps needed once the health crisis eases.

“We need to be working on the economy’s recovery rate” after the crisis, said Richmond Fed President Thomas Barkin, noting that companies may be operating less efficiently under social distancing rules, business investment may be hampered by eroded confidence, and workers may pull back from the labor market as they rethink how to care for children and aging parents in an era when day care facilities and nursing homes pose higher risks.

Barkin spoke amid a patchwork end to the coronavirus-spurred lockdowns that has seen some states throw open their economies already and others maintain restrictions, while companies and their employees struggle to find the right balance. Workers that remain on the job face risks - meat processing plants have been forced offline due to outbreaks among workers - while companies that do reopen likely face higher costs and fewer customers.

“We will return to somewhat normal operations - at a gradual pace,” Barkin told the Maryland Chamber of Commerce in a webcast. But “I worry about the landing spot - how strong the economy will be at the end of this.”

The Fed this week restated a pledge to keep interest rates low and continue offering trillions of dollars in credit across the economy as long as is needed to keep it stable during the fight against a pandemic that has killed more than 62,000 people across the country.

Source- Reuters