Coronavirus will cost U.S. this many jobs by this summer, report predicts

A new report by the Economic Policy Institute estimates that the economic shock of the coronavirus outbreak will likely claim 3 million jobs by this summer. Yahoo Finance’s Sibile Marcellus joins Seana Smith to discuss.

Video Transcript

SEANA SMITH: Well, we've been talking about the coronavirus, obviously how it's impact-- impacting the financial markets. But it's also an employment story as well. There is lots of speculation out there just in terms of how big of an impact the coronavirus will have on the labor market. There's a new report out from the Economic Policy Institute estimating that we could see three million jobs lost just by this summer.

And Sibile, you are still on the line. You've been looking at this study. I mean, when you take a look at these numbers, three million jobs lost-- that is just a staggering number.

SIBILE MARCELLUS: Absolutely, Seana. And this would be by this summer, by July, according to the Economic Policy Institute's estimates. And basically what they're looking at is what's been going on in the labor market, since the coronavirus crisis is basically turning into a coronavirus recession.

So public policy has basically been to tell Americans stay at home. Don't go to work. Stay home, because that is the best way to fight this illness.

But at the same time, if people stay at home, how are they supposed to earn their paycheck? Especially for low income workers, who are already living paycheck to paycheck prior to this coronavirus outbreak, how are they supposed to survive? Also, many restaurants have shut down. So that has actually put tons of people straight up out of work.

So looking at all this, this whole national picture, the EPI is basically saying, yes, 3 million people by July, and that's if the fiscal stimulus response from Washington is moderate. So long story short, we really need-- or Congress, and we really need President Trump to come up with a massive stimulus package. Because it's not just about helping workers right now who lost their paychecks. But it's also about jump starting the US economy once the coronavirus cases has peaked and starts to fall down.

Household spending has decreased significantly. That demand has plummeted. And what EPI is saying is that the government has to make up for that money. Government spending has to go up, because household spending is going down.

And they came up with a couple different suggestions-- $1,000 per Americ-- per adults for every single month this outbreak is going on, and also $500 per child. They're also saying to maximize safety nets, such as the unemployment insurance, also food stamps and Medicaid. And when it comes to states, they're saying states also need a lot of financial help, because they're dealing with the financial cost of the public health response.

So when it comes to, for example, Medicaid spending, what they're saying is that the government should take care of that-- the state's portion of that spending, so that they can focus on the public health response.

SEANA SMITH: All right, Sibile, stay with us here. I also want to bring in Joseph Minarik. He's standing by on the line, The Conference Board Chief Policy Economist. And Joe, when you take a look at, just in terms of the economic impact that the coronavirus can have, just in terms of the labor market, how much weaker it could make the labor market here in the short term, how do you see that playing out?

JOSEPH MINARIK: There's no question that there's going to be a big impact on the labor market. You know, we can see all of the hourly workers who have been asked to stay away from work, for the simple reason that we have to stop the transmission of the virus. There are a lot of things we don't know about this virus. And at the end of the day, the course of the virus is going to help to determine to a considerable degree the economic impact.

But one of the things that has been scary is the fact that people who are asymptomatic can carry and transmit the virus. And that has caused us a great deal of problem, and increases the risk at the end of the day.

SEANA SMITH: Joe, Deutsche Bank was out with a pretty severe warning. They were saying that they expect actually a severe recessions, so a dire warning there from Deutsche Bank. What are you expecting just in terms of how bad it could get if we're not proactive enough, and the coronavirus is not contained in a timely fashion?

JOSEPH MINARIK: There's no question that a recession at this point is in the cards. Whether it's 100% probability, or 90%, or 85%, the probability is very high. The longer the transmission of the virus goes on, obviously the worse it is going to be.

One of the challenges to public policy is going to be taking all of those small growing concerns that we're doing very well in January and February, and making sure that they come out of the outbreak at the end and still are put together and financed. Once this ends, there is the opportunity for an economic bounce back. But we've got to get there first. And the economic disruption that could potentially happen through the outbreak has got to be forestalled through government policy.

- Joe, when we talk about how this dislocation might affect the economy here in the US, how big of an impact do you think it might be, when we have some big companies here actively lobbying the government for-- I mean, look at Boeing, $60 billion worth of funding here to help support them. You look at the restaurant industries, they met with the president just a couple of days ago to talk about how much pain they're seeing. How much might that hurt small businesses that don't have the potential here to be lobbying government to say, hey, we need some funding here, too?

Granted, they have some small trade groups here. But what could that do to shift a trend that's already been going on in terms of consolidation for some of these bigger players in every sector?

JOSEPH MINARIK: I am not so worried about the possibility that large firms will soak up all of the essential finance for that reason. The one thing that is concerning, every member of Congress is elected at the street level. And they will be responsive to their constituencies, including the small business members.

The problem is if you're a public corporation, you've got a very easy handle for the Federal Reserve to grab to help you out, if not the Congress and the president through legislation. Small businesses are going to be harder to deal with. We need to use the existing apparatus of the Small Business Administration, but that's a lot of businesses, a lot of loan negotiations, applications.

And it's going to be harder to deal with all of those smaller businesses individually. The money will be there, I'm confident. The question is the logistical difficulty of dealing with a large number of small enterprises.

SIBILE MARCELLUS: And I just wanted to jump in here, because we're looking at New York state. There are long lines right now of people who are unemployed trying to claim benefits. So Treasury Secretary Steve Mnuchin has said that the unemployment rate could jump up to 20%.

So the crisis is only getting worse. And it seems like we need Congress to really push through what the White House is asking for. And for now, reports are of more than $1 trillion in fiscal stimulus.

JOSEPH MINARIK: We're talking about that money going into a number of different buckets. The distribution of cash I believe is important because it will go to the affected workers. It will go to a lot of other people who may very well spend that money and help to keep those smaller enterprises, particularly like restaurants, afloat, because they will get some business.

However, we need to find ways-- I know that unemployment insurance is potentially available online. So people are going to have to find ways to streamline that application process. The same thing for food stamps, the same thing for eligibility for Medicaid for those people who are losing insurance with their jobs.

Ideally, what we want to do is to keep the businesses afloat so that they can call those workers back in a timely fashion and get right back up and running. The very important part of this is going to be keeping those people connected with their jobs by providing relief to the businesses that employ them.

SEANA SMITH: All right, Joseph Minarik, The Conference Board Chief Policy Economist, thanks for joining me.