Yahoo Finance's Rick Newman joined Myles Udland to discuss how coronavirus is impacting GDP and President Trump's plan for the economy.

Video Transcript

MYLES UDLAND: All right, welcome back to "Yahoo Finance Live." Myles Udland here in New York.

We were just talking to Ian Shepherdson at Pantheon Macro about some of the really terrible economic data that we are about to get in the months ahead. He's looking at April and May as essentially lost causes, basically months where nothing will happen in the US economy. And, Rick Newman, that's going to lead to some pretty severe GDP data in the months ahead. We're talking maybe 30%, 40% negative GDP prints. But you're writing about how we should ignore those numbers or maybe just try to understand them a little bit more than thinking the economy went down by 50%.

RICK NEWMAN: You know, negative 30%, negative 40%-- let's make it negative 80%. Why not? I mean, those are horrifying numbers if you actually think GDP-- total GDP, total economic activity in the United States is going to decline by that much, but that's not what what's happening.

So those terrible-sounding numbers for the second quarter-- so those are negative double-digit numbers, whether it's down 20%, 30%, that's kind of a meaningless number because here's what that is. That is the decline in GDP from the first quarter to the second quarter annualized as if that was the pace for four quarters in a row. That way of analyzing data makes sense sometimes. In this instance, it does not make sense because nobody thinks we're going to have those degrees of decline for four quarters in a row.

So I talked to our Ryan Sweet at Moody's Analytics about this today. So just to illustrate this, so they think the annualized decline in GDP in the second quarter will be around 18%, but on a year-over-year basis, they think the change from the second quarter of 2020 compared with the second quarter of 2019 is only going to be around 4%. Big difference between an 18% decline and a 4% decline. They think that based on everything they know now, total GDP for the year will only decline by about 2% from 2019 to 2020.

So that tells you the economy is almost certainly going to contract this year. But when you hear numbers like 18%, 20%, 30%, and 40%-- you know, the worst year of GDP contraction we ever had was in 1932, and that was just 14%, 1-4. So these, you know, quarter-to-quarter numbers make it sound like we're worse than the Great Depression right now. And as bad as things are, they're nowhere near that bad.

MYLES UDLAND: The only thing I would say, Rick-- and I know you're right again. Like, the annualized number can get a little bit goofy. But if that's the stuff that motivates lawmakers to actually do something, then print the negative 60%, right? If lawmakers don't understand the annualizing but they act more aggressively because of the number that comes in, then maybe that's a good thing. I don't know. I'm trying-- trying to help here.

RICK NEWMAN: I would suggest that we could scare lawmakers with some other numbers that are not nearly as confusing. Job losses alone, this actually might be a much better way to think about what's happening instead of, you know, the percentage change in some number GDP we don't even understand anyway. I mean, nobody really knows what is the entire economy.

We are going to-- you know, the forecast now-- I mean, we're talking about jobless claims coming tomorrow. We just had Ian Shepherdson on to talk about that. We could possibly lose 10 million jobs during the next two or three months. If you want a comparison for that, we only lost 8 million jobs during the-- you know, from the peak to the trough of employment during the Great Recession in 2008 and 2009.

So 10 million lost jobs ought to be enough to get lawmakers to act. But sure, if you want to tell them, oh, we could also have crashing GDP, why not?

MYLES UDLAND: We'll use all the tools that are available to us, just like the Fed. You know, we just-- we take the lead from the Fed-- all tools available at all times. All right, Rick Newman, thanks for that.