MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.
NICK EICHER, HOST: Talking now with financial analyst and adviser David Bahnsen, on the road today. Speaking in Nashville, Tennessee, and yet still finding some time for us. David, good morning to you.
DAVID BAHNSEN, GUEST: Good morning, Nick. Good to be with you.
EICHER: What a shocker: the president tests positive for COVID and a lot of people around him test positive for COVID. The market fell when the news broke, and, boy, uncertainty on top of uncertainty.
BAHNSEN: Yeah, I would be careful on the market side because the market futures were down about 500 points on Friday morning and the market went up in the middle of the day, the Dow did. Ended up closing down a little over 100. So, to put a 100 point down day when it had actually been 500 points around this news, I think, is tricky.
I think what it does reinforce is the uncertainty of the moment and the uncertainty is heightened by this and there’s already a ton of uncertainty. So, if the investor side of people are wondering what to take of all of it is there is a lot of uncertainty and the present situation with the president adds to that in a number of ways.
EICHER: Let’s talk about jobs. The report out Friday: 661,000 net jobs in September, but one storyline is that the jobs recovery seems to be kind of losing momentum because we’ve had five weeks in a row where new jobless claims have been between 800-to-900,000—just sticking there and not really dropping. Do you think the jobs recovery is running out of steam here?
BAHNSEN: No, I think we have steam. I think it’s slowed in its pace, though, if that’s what running out of steam means. But the 661,000 headline number is a little bit misleading because, first of all, there were 145,000 added in revisions to the past two months and also the private sector payrolls were well over 800 of new jobs, and so all of those losses coming in governmental positions, those are job losses for people. But on the productive side of the economy, things were a little bit less negative.
The main number, I think you and I have talked about it at least three or four times, that I think helps give us a trend for how things are going is the continuing claims. You get your initial jobless claim numbers which have definitely—we want to get that back to 200,000, which was pre-COVID trendline. It had been well, well, well above a million. It had come all the way down to the 800-range, but as you pointed out, it’s staying there. It’s not moving off this kind of 850-ish level. The continuing claims, though, were down almost another million. And so when you have continuing claims now down over half—they were at about 25 million at peak and they’ve now come into the 11 or 12 million range, I mean, that is optimistic.
We get to a point where we know we can’t get it much better when there’s a certain portion of hospitality jobs that are missing—food/beverage, travel/leisure, hospitality, even some retail would fit in there—those jobs simply can’t come back until the governors of those states allow more economic reopening and revitalization and so we’re getting to that point where there’s a sort of known limit to how much better the job picture can get until we have more economic reopening.
EICHER: What do you make of the report that personal income dropped—down close to 3 percent August versus July? Is that just purely a function of unemployment benefits running out?
BAHNSEN: Oh, no, no, no. That is because of more jobs coming in and this is very contrarian but it’s really important to understand. Personal income went up throughout the crisis and it went up because the jobs that were lost were lower income jobs and so it was taking out of the mix lower paying jobs, which was making average wages look higher, right? The easiest way of looking at it is if you have one person who makes $50,000 and another person who makes $25,000 and the person who makes $25,000 loses his job, the average wages have gone higher, right? But that’s not exactly what we’re looking for. And so personal income goes lower as more people are coming back into the job force, but they are coming in at a lower average wage. And so in a sense what happened before that looked good was really bad and what’s happening now that looks bad is actually somewhat good.
EICHER: Let’s come back to the president—his coming down with COVID is a vivid reminder that we’re still talking about COVID economics, not normal-conditions economics. What about the psychological impact when the president of the United States really pushing to reopen the economy, he’s now hospitalized with this virus. Does it feel like, oh, it’s not over. It’s not close to over. Now the president’s got it. How do you analyze that?
BAHNSEN: Well, I can’t analyze it because I don’t know. I do know this, though, that answer to that is going to have a lot to do with what ends up happening. Like, if he ends up having a three or four day type case and is back, it could have a total opposite effect psychologically where it really helps to reiterate the high recovery rate, the experience that most people who contract coronavirus end up with is after being sick for a few days, having a degree of normalcy return rather quickly. It also, though, because of his age and weight and other vulnerabilities, this could be more drawn out and I think that would have a psychological effect.
But regardless of the president’s posture in his present very, very unfortunate situation, the American people do know to be careful, to be cautious, and they also know what I think you and I know, which is there’s a limit to what that caution can do, but I think that the total impact to the psychology of the country will really depend on the magnitude of the president’s recovery. A speedy recovery could actually end up really helping.
EICHER: David Bahnsen, financial analyst and adviser. David, good of you to make time for us again despite the travel schedule. I’m grateful. Thank you, David.
BAHNSEN: Thanks for having me.