'We're expecting 8 million or more jobs lost in April': S&P Global U.S. Chief Economist

U.S. Chief Economist at S&P Global Beth Ann Bovino joins Yahoo Finance’s Alexis Christoforous, Brian Sozzi and Heidi Chung to discuss what the latest jobs report reveals about the state of the economy.

Video Transcript

BRIAN SOZZI: I want to bring in Beth Ann Bovino, US Chief Economist at S&P. Beth Ann, good to see you here. You know, not a good month for jobs. Down about 700,1000 jobs in the month of March. In your view, what is that consistent with in terms of US GDP?

BETH ANN BOVINO: So we're expecting, first I can say that it's only going to get worse with the jobs market, given that we've seen initial claims already surging to about 10 million and that's with another week to go before we see the April numbers. Yeah, the March numbers were a bit of a surprise. We thought-- we thought that would get a little-- bit be spared and this would be a little bit later.

But what does that mean for GDP? We're expecting GDP to drop, the recession to be on par with the Great Recession. We're looking at a cumulative drop of close to 4% and that's going to be in such a short period. We're talking over just largely done in just one quarter, the second quarter. And of course, it can be much worse and that's the big concern.

ALEXIS CHRISTOFOROUS: And Beth Ann, what about how high the unemployment rate may go before all is said and done? How high do you think that's going to be in and on the back end, how long might it take to bring these jobs back into the economy?

BETH ANN BOVINO: Yeah, so what we have been expecting, so that the-- right now we expect in April jobs number to be far worse. We're looking at well over 8 million jobs lost in April. It could be worse. And we are expecting for in total about 16.8 million jobs lost up through May.

That brings the unemployment rate, with those numbers, are about over 13%. The highest on record, we're going back to 1948. So a huge mess. How we can expect this recovery? That's a big question. We think the fiscal stimulus that's been put in place and what the Fed is doing is helping to provide some cushion. But that fiscal stimulus, the question is, will it be effective and that's the worry. Right now we expect a U shaped recovery, but it could be far worse.

BRIAN SOZZI: Beth Ann, so April potential job loss, 8 million. I've seen forecasts of nearly 15 million. Do you think April represents a peak in terms of job loss or do you see an acceleration in job loss for May?

BETH ANN BOVINO: We think, again, we have on total we're looking for a close to 17 million jobs lost. About 16.5 million. So we don't think it's going to end in April. We're wondering, you know, we're wondering whether basically, you know, the United States employers or basically the-- kind of-- in a sense kind of ripped off the Band-Aid much sooner and maybe May won't be as bad. But I would not be surprised, given how extreme these conditions are, I would not be surprised to see 15 million for April. It wouldn't shock me in the least.

HEIDI CHUNG: Hi, Beth Ann, it's Heidi Chung here. So we just actually got the ISM non-manufacturing index reading for the month of March and it came out to 52.5, so well in expansion territory. I want to get your thoughts on that. Do you think it's going to get a lot worse from here? Yeah, just your thought there.

BETH ANN BOVINO: I [LAUGHS] those-- that service, the sentiment indicator, has been up now through since-- it's been above expansion since 2010, early 2010, I believe. So I'm, you know, God bless them. [LAUGHS] But I am expecting to see that go down. If you take a look at those jobs numbers, I think might have been mentioned already, about I think 65,000-- I think 650,000 jobs were off, or more, in that March number and we saw in those initial claims readings who's getting hit. Basically restaurants, bars, leisure, hotels and so it's very hard to see that go, that stay up like that.

ALEXIS CHRISTOFOROUS: Yeah you make a great point, Beth Ann. I just want to run through some of those numbers. Retail lost 46,000 jobs, manufacturing, 18,000 and perhaps no surprise here, restaurants, hospitality industry, 417,000 jobs lost in the month of March alone. But Beth Ann you brought up earlier how the stimulus program from the government and the Fed is going to provide some cushion. But at the end of the day, when Americans get these checks, is it going to have the intended consequence? Meaning are they really going to go out and spend in an environment like this, especially when the country is on lockdown. Will provide sort of the stimulus that the government is hoping for?

BETH ANN BOVINO: I think the-- I think what this stimulus package, if it is indeed effective, will do is at least stop homes from falling further down. Again, we know that when we, if we even take a-- decide to take a risk and go outside in the streets, most of the restaurants, everything's largely closed except for essential services. So it's hard to see people spending that much. And I know for one, it's hard when I'm wearing sweat pants all the time in my house, hard to see by buying that nice spring outfit for the big season.

I do think what it's going to do is going to help with households to pay rent, to pay their electric bills, to pay all the things that keep them in their home. One worry there with that fiscal stimulus is those checks aren't going to get out soon enough.

BRIAN SOZZI: Yeah, Beth Ann. Interesting point there, sweatpants. I'm wearing my professional joggers right now, obviously the camera is not seeing that.

BETH ANN BOVINO: The worst kind.

[LAUGHTER]

BRIAN SOZZI: The new normal for working from home. You know, but I'm sure you're a student of history here. What is the recovery path look like for consumer confidence after a true black swan event like this?

BETH ANN BOVINO: We have, right now we're expecting-- there's two there's two hits to both consumers confidence and also to consumer spending. You have first that lingering fear that the virus is still out there. What's going to happen in November, for example. I there going to be a relapse? We're seeing some talk about that in other countries and that could be a worry. Keeping people from deciding to not go to the movies. Maybe do pay per view instead or maybe that ordering out makes a lot more sense than going down to that restaurant. Oh, I think everybody will want to go to the bar after this.

So I think that one factor that's going to keep spending very slow. In terms of the confidence levels, how long will it take people to get their jobs back? Is that kind of that linkage still there? Are we going to see businesses, if they're still in operation after this damaging experience-- events, are they willing to hire back the workers or are they going to be cleaning up their balance sheets instead? So that means consumers might not be out there as one would hope.

ALEXIS CHRISTOFOROUS: You know, Beth Ann, it looks like the tech bubble is popping, right, but not in the way that a lot of people expected. We see tech layoffs accelerating, the New York Times dubbed it The Great Unwinding. Do you think that, I mean, it's not the dot com era of course, and the bubble bursting after that. But has this pandemic in essence popped the tech bubble?

BETH ANN BOVINO: Well I'm not an equity strategist, however, you know, almost anybody could look and see how high the prices were. And so in some ways was this in a sense that needle on the haystack that caused conditions like this for the tech bubble to finally appear. I do want to say that the other thing the US has going against it is basically that huge drop in oil prices. Also another drag on energy related business investment. And I know that there's some talk with the Saudis and Russians to maybe try and stabilize that but that is another hit for GDP going forward.

BRIAN SOZZI: Let's leave it there. Beth Ann Bovino, US Chief Economist at S&P. Appreciate your thoughts this morning.

BETH ANN BOVINO: Thank you.