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Moody’s Analytics says that the worst of the economic blow to the economy is over

Yahoo Finance’s Rick Newman joins the On the Move panel to discuss the latest Moody's Analytics analysis and the path to economic recovery following COVID-19.

Video Transcript

JULIE HYMAN: You're watching On the Move on Yahoo Finance. And breaking news for you, the US attorney General Bill Barr just announced that the Department of Justice and the FBI are opening an investigation into violation of civil rights-- that's civil rights laws. That's in connection with the deaths of George Floyd, so we'll keep you posted on any more headlines. The attorney general just holding a press conference in the past hour.

Well as we look at the protest that are going on around the nation, of course, a lot of people are still out of work. We learned today that unemployment numbers for last week, jobless claims rose to nearly 2 million. We've got the monthly jobs report tomorrow. And our Rick Newman is looking at a new report from Moody's that shows things on the economic front may not be getting better any time soon. Rick.

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RICK NEWMAN: Hey, Julie. Yeah. I mean, I've been paying attention to a lot of the longer term forecasts from economists, and this of course gets to the question of why in the world is the stock market surging when the economic picture is so gloomy? Here's one of the things that jumped out at me from this recent Moody's analytics report.

So Mark Zandi, the chief economist there estimates that of 8 million businesses operating in the United States, we could lose up to 1 million of those. So one million business failures.

I know that Congress has pushed some aid out to those businesses and the Fed is trying to help, but it turns out there are a lot of businesses and especially small businesses that cannot really access the Paycheck Protection Program because they don't really have a relationship with a bank. Just for other reasons, they're going to go out of business.

And this is long term structural damage to the economy. These are not businesses that we're going to replace easily. So I mean, I know the stock market looks ahead to the future and anticipates future economic activity, not current or past. But just in May, we just got numbers today, 48% increase in commercial bankruptcy filings year over year for the month of May. And I think that's just a preview of a lot more carnage coming, so the economic outlook is gloomy.

- Rick, I'm curious. We grew up listening to Republicans warn about federal government overreach, and now with control of the Senate and the administration, we're witnessing why we might want to be worried about federal government overreach. How do Republicans run in the fall on what they used to stand for?

RICK NEWMAN: They don't, honestly. What I think they try to run on is, I mean, they're going to probably try to steal some campaign points from President Trump. He hopes that by the fall, he'll be able to point to at least some data that shows improvement in the economy.

And there probably will be some data that shows improvement in the economy, but this is going to be a terrible picture for a considerable period of time. We will probably have an unemployment rate that's still close to 10% by the end of the year. That was the peak at the worst point of the last recession.

IHS Market, another forecasting firm, they're saying we're not going to get back to pre-virus employment levels until 2024. That's four years from now. The congressional budget office is saying that we will have 15.7 trillion worth of lost economic output by 2030.

What they're saying is, look, we are suffering structural damage right now that is going to be costing us jobs, businesses, and income for years.

- Hey Rick, I want to ask. You know, there's been talk of the different kinds of recoveries we might have. Every letter in the alphabet has been thrown out there. You know, we've talked about the potential for the virus coming back in the fall. Where is the bottom? We've been told that the bottom came and went. We're going to see some kind of recovery. But if that's going to happen again in the fall, have we really seen it?

RICK NEWMAN: Well I mean, if you look at the unemployment numbers, and we're going to get another batch of them tomorrow, I mean, we probably are close to the bottom. But I think that's a misleading way to think about it. Because it's almost as if, well if you're at the bottom in June then you'll be out of the bottom in July.

It's very possible that we're at the bottom and we're going to stay at the bottom. So think of it as you know like a giant swimming pool. We're at the bottom and we have to get to the others-- we have to walk to the other side and it's a long way.

You know, it's like if your house burns down, you can put out the fire but you still have no house. So I think that it just seems very possible, perhaps probable that the worst of the damage is behind us but that we just muddle along in a state of shambles for months, if not longer.

JULIE HYMAN: Right, yeah. The swimming pool is not one I've heard yet. The V, the swoosh, all of those I have heard. Rick Newman, thank you so much.