'Major reallocation shock' from coronavirus will see 42% of lost jobs evaporate: Study

University of Chicago research estimates that 42% of recently unemployed workers will not return to their jobs amid the “profound” shock stemming from coronavirus lockdowns. Yahoo Finance’s Javier David joins Seana Smith to discuss.

Video Transcript

SEANA SMITH: The coronavirus outbreak has had a devastating impact on the jobs market with more than 36 million Americans filing for unemployment since the coronavirus outbreak. Well, a new study out by University of Chicago actually found that 42% of recent layoffs will become permanent job losses.

Now for more on this, I want to bring in Javier David. He is looking into this a study for us. And, Javier, this number is staggering. The major reallocation shock from coronavirus is going to see 42% of those jobs-- those lost jobs gone forever at this point. What do you think the broader implications of this is and what exactly it means for the labor market at this point?

JAVIER DAVID: Yeah, thanks for having me on, Seana, first of all. The study is really a pretty sobering look at what economists are expecting, I mean, even on Wall Street as investors are [INAUDIBLE] trying to calibrate what they think is going to be the recovery.

The University of Chicago study makes it clear that across major sectors-- they call this a major reallocation shock. So reallocation being people that have lost their jobs, either find another job or they get rehired. It's not as simple as that makes it.

So the actual finding of the report is for every 10 coronavirus-induced job losses-- this is a staggering figure. For every 10 corona-induced job losses, only three were created. So as we look at companies like Amazon or Walmart that have hired in the midst of this pandemic, we're finding it's just not enough to offset the staggering amount of losses, and that is likely to continue for several reasons.

SEANA SMITH: Yeah, and Javier, this also just begs the question as what the potential shape of this economic recovery could look like because we were initially talking about a V shaped and then went to a U shape, then a W shape. There's been talk about a potential swoosh. So it's interesting-- it's going to be interesting, I think, to see exactly how this all works out and how this plays into what the exact shape of the economic rebound is going to look like.

JAVIER DAVID: Yeah, I mean, the two questions are inextricably linked because the shape of the recovery will determine the pace of the hiring, and the pace the hiring will determine how quickly consumer spending is likely to rebound. And as you saw last week, we had that horrifying figure of retail sales plunging 16 or so percent-- 16%, 17% in April.

So now one of the terms that are being bandied about is square-root recovery. It's a hot topic on Wall Street. No one really knows.

I think that the one thing that everyone can realize now is the recovery shape-- gradually people have become more pessimistic as the fallout from this thing becomes more apparent and that there are these very dramatic shifts in consumer spending and workers hiring or, you know-- so a lot of us are working from home. Some of that may extend through the end of the year, maybe beyond. Some of those positions may not go back to offices.

So all of this has a spillover [INAUDIBLE] of these jobs that are linked to people being in major centers like New York City where there is a lot of life and people go out for lunch and they go shopping and they [INAUDIBLE] coffee on their breaks, there are all of these jobs that are connected to that. And if those jobs aren't coming back, if you and I stay working from home indefinitely, it's more than likely that those jobs either will go unfilled or those people will have to find jobs elsewhere because they have to make a livelihood for themselves.

SEANA SMITH: Yeah, certainly, and it's going to be interesting to see exactly how long it takes us-- this recovery to play out and exactly what the next steps will be.

Javier David, it's great to have you on the show. Thanks so much for joining today.

JAVIER DAVID: Thanks for having me.