Payden & Rygel Chief Economist Jeffrey Cleveland joins Yahoo Finance’s Kristin Myers to discuss the July jobs report and the outlook on U.S. economic recovery.

Video Transcript

KRISTIN MYERS: So we have a better-than-expected jobs report but with no stimulus deal in sight. Of course, today, markets right now are in the red. So for more on this, we're joined now by Jeffrey Cleveland. He's a Payden & Rygel chief economist. Jeffrey, thank you so much for joining us.

First, wondering what your thoughts are on the report. I mean, were you encouraged about where we might be headed, in terms of this economic recovery, given that it was better than expected?

JEFFREY CLEVELAND: Yeah, I'll take it, good news. 1.8 million jobs added, better than the Street consensus. I think, Kristin, if you go back to the March, April period, we're bouncing back much more quickly than I think most investors thought we would, so that's all good. I think we have to keep perspective, though. We have a big hole to climb out of. We lost over 22 million jobs through the month of April. We've added back just over 9 million so far.

So we've retraced roughly-- if my math is correct-- 42% of the jobs lost, which is-- so that's good. It's happening quickly. I don't expect the pace that we've seen here, though, to persist. I think we'll probably, given the reasons you've highlighted, see a lull in the unemployment-- or in the job growth in the month of August, so we'll slow down a bit. But I'm happy about how quickly things are bouncing back.

If you think of 2008 as your corollary, or as your comparison, it took 26 months to get to the low in unemployment, and then it took us a full six and a half years post-2008 to get back to the pre-recession levels of employment. So that was a long, slow bleed. So far, this is happening-- it was a much steeper, quicker downdraft, but we're bouncing back much more quickly than we saw in 2008.

KRISTIN MYERS: So to that point of 2008-- because we hear this a lot, folks drawing a lot of parallels between what we're seeing now and, you know, what happened over a decade ago. But you've actually said that we really shouldn't think back or kind of cast that from our minds that-- the economic crisis of 2008. Why shouldn't we be drawing more parallels?

JEFFREY CLEVELAND: Well, this is a unique recession and, I think, a unique recovery. It-- unlike 2008-- you know, 2008 started in a particular sector, the housing sector, and then emanated the job losses out from there and spread to the economy as a whole. And as I said, it took a long time. It was a long, slow bleed, 26 months to get to the bottom.

This time, it was a self-imposed shutdown of sorts. We shut everything down. We shut down 90% of the global economy. And then as we reopened, activity has bounced back pretty quickly. So it's hard to compare those two. I think the fear is that we will repeat this six and a half year path back to the pre-- you know, virus levels.

I don't-- I'm optimistic, Kristin. I think it'll be more quickly. It won't happen this year. It might not even happen next year, but we'll get back to the pre-virus levels of employment at some point and I think faster than the six and a half year clock time that we had in 2008.

Also, I should say, a lot of the losses in jobs in 2008 were permanent. You know, they were people-- they were in home construction and mortgage brokerage, and they had to move. They had to retool, retrain, reenter the labor force elsewhere. And this time around, a lot of the jobs early on were temporary layoffs. And still, in today's jobs report, we saw about 56% of the unemployed are on temporary layoff. So I think that's a good sign, compared to 2008, when most of the jobs lost were permanently lost.

KRISTIN MYERS: You keep rolling right into my next question, Jeffrey. I was I actually--

JEFFREY CLEVELAND: Sorry.

KRISTIN MYERS: --going to ask you about that, to dive into the report specifically. Because I was listening to and watching what Jason Furman had been saying a little bit earlier today, highlighting that very point, that the number of workers that were coming back to work were temporarily laid off, 1.3 million of the 1.8 added. He seemed to cast a little bit of a dark cloud on that figure and on the report a little bit because of that. I mean, so that doesn't dampen the report in your mind? Of the 1.8, 1.3 were just coming back from temporary layoffs?

JEFFREY CLEVELAND: Yeah, I mean, you can spin it however you want. I think the pessimist would say, oh, we have a lot of permanently unemployed workers, 2.8 million people still permanently unemployed, if you look at that. But I think it's best to step back to that March and April period where there were a lot of things-- like, people thought we'll never see restaurants return to where they will-- were before. We'll never see the type of jobs come back.

And instead, you know, a lot of those jobs have come back online. A lot of people entering the labor force in the latest month to become employed. So that's all very good. So again, spin it however you want, but I think you can take some positives here, not just negatives.

KRISTIN MYERS: So looking at the markets, they're in the red today, first time that we've seen that in several days. And the market had largely been ignoring, you know, this back and forth when it came to the stimulus negotiations it seems until today. We missed that deadline that we were supposed to be getting. Going forward, how much do you think that stimulus-- or rather, the lack thereof right now-- is going to be dragging on the market in the days forward-- the days going forward?

JEFFREY CLEVELAND: Yeah, if you look at personal income year to date, it's actually up. And a large part of that is the extra unemployment benefits that households have received and the one-time fiscal relief that was provided as well. So at least through the June data, that was very, very important. In fact, New York Fed yesterday was-- released data on delinquencies and movement into delinquencies on things like credit cards and autos and student loans and everything. And those had declined, I think due in large part to that federal relief.

So if it doesn't continue, Kristin, I would get more concerned. I do think-- I suspect, in talking to friends in Washington, that we will get some movement on this with some delay. We have the political squabbling, but I think there will be some progress there.

For markets, I think the bigger thing for me, though, for markets is the Fed. You know, at the end of the day, the Fed is more pessimistic than I am. They're, I think, more worried about the downside risks here. And that is going to bias them to, you know, keeping their foot on the easing pedal, if you will, for longer, keeping rates at zero for longer and backstopping the global financial system, which is what they're doing with their balance sheet. And so I don't think that's going to go away.

We had a similar period, you know, play out I think in the early 2010s-- 2011, 2012, 2013. Even as we had a little bit of a choppy recovery, Fed kept the rates at zero. You had negative real yields, and investors, you know, looking for income, looking for a return, looking to preserve capital and purchasing power, they still found risk assets stocks, high-yield bonds, emerging market debt even as a good destination in that period, so I think similarities I'm seeing today.

KRISTIN MYERS: All right, well, we'll have to leave that there. Jeffrey Cleveland, chief economist at Payden & Rygel. Thanks so much for joining us.

JEFFREY CLEVELAND: Thanks for having me.