Another 2.98M Americans file for unemployment benefits

Wells Fargo Acting Chief Economist Jay Bryson joins Yahoo Finance’s Seana Smith to discuss how the coronavirus is impacting the economy as another 2.98 million people file for unemployment benefits.

Video Transcript

SEANA SMITH: The number of Americans filing for unemployment jumping again, with nearly 3 million more people filing for unemployment benefits last week. Now for more on this, I want to bring in Jay Bryson, acting chief economist at Wells Fargo. And Jay, thanks so much for joining the show this afternoon. Let's start with that jobless number I just mentioned.

It's in the top line of your note today. You mentioned the fact that 3 million initial jobless claims were filed last week. But you also focused on continuing claims, and the fact that they barely rose. And obviously, this points to some hiring going on this past week. But I want to get your thoughts on what this means and how this plays into the overall jobs picture for the month of May.

JAY BRYSON: Yeah. So I mean, I think we know that the month of May is gonna be another pretty bad month. It's probably not gonna be as bad as April. Back in April, 20 million people lost their jobs. In May, it's probably gonna be half of that. But still, we're talking 10 million people. So the month of May-- probably gonna be pretty bad, as well. But hopefully, we're getting to the bottom of it right now, in terms of employment. In terms of where the economy is, as well, and we'll know that in coming weeks.

SEANA SMITH: You know, Jay, going off of that, when do you expect to see the labor market begin to recover?

JAY BRYSON: You know, I would say, so in terms of months, I think June should probably be a positive month. Many states are starting to reopen right now, so you will see people called back to physicians' offices, dentists' offices, even restaurants, and some hotels, and things of that nature. And so we've lost close to 30 million jobs. It's gonna be years before we make that back up. But hopefully, June will be the beginning of a positive trend for us.

SEANA SMITH: You know, when you talk about the positive trend, going back to the fact that so many people filed for unemployment, the stat that jumped out to me was that over 20% of Americans who were in the labor force before the pandemic have now filed for unemployment in the last eight weeks. So my question to you is, just broadly speaking, what does that tell us? What are the implications here for the broader economy? And then how long it could take in order for us to regain those job losses and be back to where we were before the COVID-19 crisis?

JAY BRYSON: Right. So you know, in any other cycle, when people lose their jobs, they do receive employment benefits. Fortunately, because of the CARES Act, those unemployment benefits are being enhanced from the federal government right now. So many people are still receiving the same sort of paychecks that they received before, and that's good [AUDIO OUT] they continue to go out and spend.

But when are we gonna get back to, quote, "normal"? Again, I think that's gonna be years for that to happen. Some of these jobs are just lost for good. Some businesses have closed down for good. There are other secular changes going on, say, like in retail. Some of those people in retail are never gonna come back there, either. So you know, we've lost close to 30 million jobs in the course of two months. It's gonna take a long time to get back 30 million jobs.

SEANA SMITH: Yeah. And Jay, going off of that, the comments from Fed Chair Jerome Powell yesterday obviously struck a chord. It was what was the major mover to the downside for the markets yesterday. And he highlighted the uncertainty that we're facing right now, and some of that downside risk. But what did you think of his comments, and also when you were stressing the need for more fiscal policy at this point?

JAY BRYSON: Yeah. I mean, there's no kid gloves there, right? He was telling policymakers, look, guys. You need to do more. And what he did stress was that what the Fed has in place is lending programs. But what they really need is spending sort of programs. It was a direct call to policymakers-- fiscal policymakers-- to do more there.

I mean, what I did take out of Chairman Powell's comments, though, as it relates to the Fed, the Fed is clearly prepared to do more if it deems it necessary. It's clearly watching the economy very, very closely right now. They have put in a tremendous amount of programs in a very short period of time, but they're prepared to do more, if necessary.

SEANA SMITH: And Jay, I mean, what more could the Fed do? At least from an economic perspective, what would be helpful at this point? They've already done so much. And I know that Fed Chair Jerome Powell has said time and time again, like you were just saying, that they will do whatever it takes in order to shore up the economy. But what's left to be needed?

JAY BRYSON: Well, I think the biggest things that could probably be done here is not cutting interest rates anymore. I don't think the Fed's gonna go into negative territory. Quantitative easing only gets you so far. But I think the big thing that they could potentially do here is their Main Street Lending Program, where they are helping banks-- they're buying loans that banks make off the banks' balance sheets. They could clearly continue to expand that program.

Part of the CARES Act was about $450 billion that the Treasury Department can use as a capital injection to capitalize this program. The Fed has only used about half of that money so far. So potentially, by the Fed levering that [AUDIO OUT], the Fed could potentially expand this program by another $2 trillion or so. They haven't done that yet, but that is a potential thing that could be there, again, to get businesses across this valley that they need to get through.

SEANA SMITH: And Jay, one thing that Republicans have raised recently, and that's the fact that they're concerned about the federal debt, obviously, as it continues to climb, on track to surpass 100% of GDP-- this year, it's on track to do that. How concerned-- are you concerned about that at all? And is it something that's on economists' radars at this point?

JAY BRYSON: I am not concerned about that at all at this point. You know, the Treasury can, right now, issue 10-year notes at about 100 basis points and [AUDIO OUT] at maybe 150 basis points. It's not an issue now. Maybe further later on, it may start to become an issue. And once the economy starts to recover, we can have a conversation about how we're going to deal with that.

But trying to ramp back spending right now, at the point where the unemployment rate is approaching 20%, would be economic suicide in my view. And so I'm not concerned about the debt of the federal government at all at this point.

SEANA SMITH: And Jay, real quick, [INAUDIBLE] right now to the overall economy, the fact that many economists, including yourself, we could see this recovery begin to happen in the second half of the year. But if we do see a potential resurgence, like we heard Dr. [INAUDIBLE] talk about in the beginning of this show, how are you breeding that into your forecasting?

JAY BRYSON: You know, it really depends on what the reaction is. If it comes back and state governments lock down again, then you're looking at another serious down lag here, and the unemployment rate will go up even higher. The big question is-- and this is a political question. I have very few insights-- is what will state governors do at that point?

Will they lock it down or will they try a Sweden sort of model where they say, OK, we're gonna try to protect the most vulnerable sort of people, and the rest of us will try to get herd immunity in a natural situation? So it really depends on what the reaction is going to be if, in fact, you know, the virus does come roaring back again.

SEANA SMITH: All right. Jay Bryson, acting chief economist at Wells Fargo. Thanks for joining us.

JAY BRYSON: Thanks for having me.