Moneybeat – From bad to worse?


MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: That the jobs numbers for March were fully expected doesn’t make them any less dismal: Employers shed 700-thousand jobs last month. That is just the tip of the iceberg. 

The Labor Department on Friday reported that the unemployment rate leapt to 4.4 percent, almost a full percentage point higher than February and the worst single-month rise since January 1975.

Adding insult to injury, the job losses last month brought an end to a streak of jobs growth at 113 consecutive months.

Here now to bring some context and depth is David Bahnsen, financial adviser and analyst with offices in New York and California. He’s kind to join us regularly during what’s now become an economic crisis. 

David is at home this morning in Southern California. Good morning.

DAVID BAHNSEN, GUEST: Good morning, Nick.

EICHER: Well, I want to mention one other staggering number, David, and that’s the 6.6 million filings for unemployment benefits last week. Politico, The Washington Post, National Public Radio, the Associated Press, among others took that number and added it to the previous week’s 3.3 million, and so we see headlines of 10 million workers filing for unemployment.

You indicated you thought last week was the low point, but now the hole is deeper. What do you know this week that you didn’t know last week?

BAHNSEN: Well, first of all, it’s not 10 million. The 3.3 is part of the 6.6. They’re not additive. And so the unemployment claims are basically two different things that happened. You had—in the week of 3.3— an under-reporting of the numbers. We now know there were approximately a million applicants that couldn’t get through or couldn’t get processed. 

And I do believe a pretty high number, apparently, that were waiting for the stimulus bill. You recall it was not passed until Friday. And so I think you were spending a lot of that week as Pelosi and crew were kind of dinking around, with people waiting to see what was going to be exactly unveiled there. 

And then the following week, I think you ended up getting a little bit of an over-reporting because of the fact that the small business owners then got the bill and said, OK, we know it’s going to be a week or two or so until we’re able to get to the bottom of this. It’s a lot easier just to have employees go out, start taking unemployment, and we’ll figure out from there. 

But, no, my position’s exactly the same as it was. The number can say 3 million or 10 million. It is all very much in the bucket of awful. And it’s awful because we shut down the American economy. 

I think this is extremely expected in this awful but hopefully very short-lived period.

EICHER: Now April’s sure to be part of this awful period …

BAHNSEN: Of course. I mean, in March it wasn’t even shut down in most of the country until the very end of the month. And even in the peak areas of shut down, which were New York and California—which are heavy jobs states—that really sort of took place in the middle of the month. 

And so ground zero for everything will be April. 

This is exactly why they were passing a $2 trillion stimulus bill and why hopefully most of us have held up the economy and people in vulnerable job positions in our thoughts and prayers because I’m pretty sure this is what we were expecting when we shut down the American economy for what’s already been a couple weeks and we have several weeks to go.

EICHER: You’ve no doubt seen all kinds of predictive economic models, David. 

And D.C. policymakers have been looking at pandemic models that have forced the choice to shut down the economy. 

And we’re taking this bitter pill, reasoning that this terrible economic news is preferable to the kind of health news that we were warned about had we not taken drastic measures. 

But what do the economic models say about month after month of this? How much can we take?

BAHNSEN: Well, I’m not sure if it’s true necessarily that the health data forced it. It was the health data that precipitated it and caused the powers that be to make the decision. 

But I certainly believe that adjudication of whether or not the actions taken were warranted is going to have to be made in hindsight, not in the middle of everything. And I remain very uncertain as to whether or not we’re going to judge that to have been warranted or not. 

But, to your point on the economic side, this is really important. No economy is sustainable with nobody working for months on end. Nobody consuming or producing for months on end. 

The idea even from those who are most in favor of all of the government actions is that we would have to go through a brutal but very short-lived shut down plugged in with significant amount of both fiscal and monetary aid. And then be able to move forward with greater momentum and normalcy. That certainly remains the hope of policy makers. 

I suspect that what we’re facing right now is the month of April really being the lost cause and then a kind of tethered re-opening of the American economy. Certain pockets that have no risk or very little risk would be at a fuller reopening and other pockets that maybe have higher density or different demographics and different health data might have a more muted reopening. 

And so I expect to see it in waves.

EICHER: You’re pretty well politically connected. You talk with people in the White House and the economic shop. What are you hearing from your policy friends about whether things might change anytime soon?

BAHNSEN: As far as the reopening, what we do know—and this is reasonably public, the president was really leaning towards rhetorically talking about Easter as a reopening date and after last week he had pivoted to saying we’re going to go through the month of April with federal guidelines. And my belief is that the powers that be have pretty much convinced POTUS that the risk-reward of reopening too early is not in his favor. That at this point, the damage has already been done. The economy’s already been shut down, the unemployment rate has already skyrocketed. And they’ve already created the aid to try to plug that back in. 

But that if, God forbid, they reopen and then all the sudden we still get this other surge or a curve that begins to re-escalate instead of bend and flatten, then all the sudden you risk actually having to shut down for many more months. 

But I do think that not only because of logical intuition, but what policy makers are hinting and things I’m hearing from very connected sources, that what they will do is allow for a bit of, dare I say, federalism to be on the back end of this. When the federal guidelines come off you will end up seeing the governor of Indiana and the governor of California and the mayor of Los Angeles and county supervisors outside of El Paso all kind of have different stipulations and requirements. 

And that hopefully will all take place in an environment which we’re dealing with the rearview mirror of peak cases and peak deaths—most of which is indicating is going to take place here in the next 10-15 days.

EICHER: David Bahnsen, financial analyst and adviser. David, thanks.

BAHNSEN: Thank you again, Nick.


(AP Photo/Mark Lennihan, File) In this Jan. 10, 2020, file photo, the Charging Bull stands in Manhattan’s financial district in New York.

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