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Former Council of Economic Advisers Chair Austan Goolsbee joined Yahoo FInance Live to break down the February jobs report and what it means for the U.S. economy.
SEANA SMITH: But we want to talk more about this jobs report. 379,000 jobs added last month, unemployment rate ticking down to 6.2%. Austan Goolsbee, he's a professor at the University of Chicago's Booth School of Business, also the former chair of the Council of Economic Advisors under President Obama. Mr. Goolsbee, great to speak with you again. You're the perfect person to talk to about this jobs report. So certainly, this headline number a step in the right direction, but I'm curious just to get your take on this and what it really tells us just about where we are in this recovery.
AUSTAN GOOLSBEE: Well, I'd say step-- you know, baby step in the right direction. It's nice that we got a-- what would be a strong number in a normal time. But let's remember we lost 20 plus million jobs, and we only recovered about half that. We're still 10 to 12 million jobs below where we should be, where we need to be.
So to add 350,000-- a little better than expected-- is a positive development. But it's like, if you need 10 bucks to buy lunch, you got $0.35. That's a start, but you got a lot of months of $0.35 before you're going to get to $10. And we need some months that are hundreds of thousands of jobs created more than this to be feeling comfortable with where we are in recovery.
ADAM SHAPIRO: Austan, the gains came in the return of people to work in hospitality services, waiters, waitresses, restaurants. My question to you is, how do you sustain the kind of job growth we need to get to some kind of normalcy? If those restaurants and those hospitality and leisure entities that have survived the pandemic have done so with smaller staffs, why would they necessarily want to ramp up, if they can control their costs and stay in business?
AUSTAN GOOLSBEE: Well, I don't-- I think the short answer would be if the demand comes back, we get the vaccine, and people are like, I've been locked up in my house for 10 months in a row. I want to go out to the restaurant. You wouldn't be able to do that with the bare bones staff that you've had with a ghost kitchen or that kind of thing.
So I think they would have to hire people. And you saw the beginnings of that here. They'd have to hire people because the economy was returning. And so they just needed to have the bodies on the scene. I think it's a good sign that you're starting to see some recovery in this leisure and hospitality, whether it's hotels or restaurants, as well as some of the personal services, like going to the barber, going to the dentist, stuff like that.
But again, let's remember, this is a one decent month. It's just followed three pretty terrible months. And we're still way, way down from where we need to be with tens of millions of people out of work who need to get their jobs back. That's why you've got Fed Chair Powell saying that the properly accounted for unemployment, he believes is 9 and 1/2%. And that's an awful economy. So I think let's not take our eye off the ball.
SEANA SMITH: Austan, you said a couple of times that we certainly do have a long ways to go in this recovery. We have that $1.9 trillion package in the Senate right now. Looking past that, do you think we're going to need some more fiscal aid to get back to the levels that we ideally want to see?
AUSTAN GOOLSBEE: The answer to that depends 100% on what happens with the virus. If we get the vaccine out without complication, we don't get these other variants of COVID that are less susceptible to getting stuffed by the virus, if we get the good case scenario, our hope is that we could get the economy taken off. This would be enough of a relief package that we could kind of get to something more normal without more.
If the virus resurges again-- we already saw this last year. It resurged in the summer and going into the fall, and the economy stalled out immediately after. If we repeal the mask orders too soon, get these other variants, or something happens that we can't get the vaccine out quick enough, we would be looking at double dip recession. And absolutely, we would need to be contemplating another bill. But I think the answer to that one depends entirely on the virus.
ADAM SHAPIRO: So everything I hear you saying makes me question and I think others out there are wondering, how do you get the banks, which are sitting on huge amounts of capital, to start lending that to the businesses that want to create something after this pandemic destruction? Should the Fed do something to encourage them to lend the money out?
AUSTAN GOOLSBEE: Probably, but how? You know, that's been the-- if you go back to the original CARES Act, they allocated an almost unbelievable amount of money that could be leveraged by the Fed through the Main Street lending facility, that it would literally be trillions of dollars that they could have lent to regular businesses. And that entire program largely just failed. They couldn't get the money out. People-- the banks didn't want to lend.
What the Fed could do, I don't know is-- I don't know what the Fed could do. The Feds-- the rates are as low as they could be. They're trying to encourage risk taking in every way that they can. So I-- for sure, that ought to be on the minds of the policymakers when they're designing the relief package to attach to incentives to try to get banks to lend.
We're hoping that as we get on the backside of COVID, it would be in the interests of the banks to lend because they're looking and saying, hey, these are decent credits, and demand looks like it might be strong. So we want to get out front of it. But I think it's proved remarkably hard for the Fed to take direct action to force them to lend.
SEANA SMITH: Well, speaking of the Fed, I just want to get your thoughts quickly, because we only have about a minute here, just about what we heard from Fed Chair Jay Powell earlier this week. He's not worried about inflation yet. Yet we see investors very worried. We saw that reaction in the market yesterday. What's your view just on the recent spike that we've seen in yields and how big of a risk it is to equities?
AUSTAN GOOLSBEE: Well, you know, the thing that I would note is, if you look at the tips or you look at the indexes of what people's inflation expectations are, they're up to something extraordinarily modest. You know, the market is projecting that inflation's going to be less than 2 and 1/2% for the next five years. If you're the kind of investor who's really thinks the dollar's going to tank and the risk of a hyperinflation is there, A, I presume you're one of the people who's been saying that for 14 straight years. And now you're hoping the 15th time's the charm.
But, B, the rest of the market still, to my mind, looks pretty modest. I mean, we're coming up off of yields that were unprecedentedly low to something that would be normally considered well below average. So one way to look at that is look at how fast it's growing. And the other way to look at that is to say, look at how low the yields are. They're not even 2%.
SEANA SMITH: That speaks to the debate out there right now. Austan Goolsbee, always great to have you on to get your perspective--
AUSTAN GOOLSBEE: Yeah, great to see you.
SEANA SMITH: --on Yahoo Finance. We look forward to having you back again soon. Have a great weekend.