@Financial Co-Founder Sam McElroy joins Yahoo Finance’s Seana Smith to discuss the coronavirus pandemic and how it may impact earnings season after a grim March jobs report.

Video Transcript

SEANA SMITH: Big story today is, of course, the jobs report. We have the US is shedding 701,000 jobs during the month of March alone. Here with more on this, I want to bring in Sam McElroy of @Financial. And Sam, thanks for taking the time this afternoon. Let's first get to the jobs report. What did you think of the number, because it was much worse than expected, and it really only goes through-- the data only goes through March 12th at this point.

SAM MCELROY: Yeah, that's absolutely right. I think it highlights the gravity of what the full numbers may ultimately report. You know, right now we're looking at a 4.4% unemployment is what they're kind of coming out with, but exactly like you said, that only goes through the 12th. So it's likely the way that this is calculated that in future weeks and months this is going to be revised upwards. We're going to find that it's actually a much larger problem than what we're seeing right now.

SEANA SMITH: Sam, how much worse do you think it could get from here?

SAM MCELROY: You know, we've seen a lot of analysts talking about unemployment potentially going up as high as 20% this year, and I would say that that's not necessarily outside of the realm of possibility. You know, right now we're dealing with a lot of the social and psychological implications of the social distancing and our lives being disrupted, and we're starting to see certain sectors and industries that are getting hit really hard, like hospitality, and restaurants and stuff like that. But in talking to other people, we've already started to see where corporations are doing salary reductions, hour cuts. So the further we go, the larger we're probably going to see this problem expand as businesses just aren't able to hold on to all the employees that they have.

SEANA SMITH: Sam, how deep and how long do you think this recession could potentially last?

SAM MCELROY: Yeah, that's a good question. If there is such a thing, I think this may be more of a garden variety recession as opposed to maybe a full on financial crisis. You know, I think back to 2008 and 2009, and it wasn't just the escalating defaults and mortgages and some of the other pieces that really hurt us, it was the way that banks had held together through some of the debt swaps that the whole banking system basically got glommed up. I don't necessarily see that happening this time, but I think the problem is that what depends on how deep the recession goes is how long all the social distancing and the disruption to normal life goes, and none of us know at this point what to expect there.

SEANA SMITH: Sam, there's so much uncertainty out there. I guess, what do you expect from earnings season? Because we know obviously there's been a lot of revisions to the downside, but more so, do you think it will help us gain some clarity just in terms of what we could expect at least from the corporate side here in the short term?

SAM MCELROY: Yeah, you know, I think this has actually been a building problem. You know, if you look at a lot of the reporting even last year, I would say that top line revenue growth wasn't necessarily stellar. You know, a lot of corporations were getting better price to earnings ratios, in part, because of stock buybacks, but also because of just shoring up some of their operations, trying to cut expenses, stuff like that. Now that we're moving into basically a stalling out economy in a sense, but certainly less productivity, let's say that, I think we're starting to see the implications of not having that top line revenue growth come to fruition.

So the further we get into this, I think that you're going to see a lot of corporations potentially missing their earnings, but I think this time what we're going to see is a true kind of segmentation. I think there are certain corporations and certain industries that may not skip a beat, that they're still able to deliver services and collect revenue the way that they are right now. I think that there are others that are going to be hit a little bit harder by the things that are going on right now.

SEANA SMITH: Sam, can you give us some names of some of the corporations or sectors that you don't think are-- that you don't expect to skip a beat?

SAM MCELROY: Yeah, and I haven't done the full financial workup on this to know it, but if I was just thinking about this, I would say, you know, take a corporation like AT&T. You know, one of the things that a lot of companies or a lot of investors are thinking about right now is which really good dividend paying companies are going to cut their dividend? I think about a company like AT&T or Verizon where I would say that I really don't see any reason necessarily that they're going to have to cut dividends, that they're going to be less profitable. In fact, if anything, there's probably going to be an increased demand for a lot of the services that they provide.

So you look at some of those companies, and you say that they may just be fine throughout all of this. In fact, they may come out ahead. I think what's likely to happen is certain corporations that are able to keep plowing forward without reducing dividends are really going to start to distinguish for themselves from other corporations that are going to have to cut dividends just to try to stay operational.

SEANA SMITH: Sam McElroy of @Financial, thanks so much for joining us this afternoon.

SAM MCELROY: Thanks for having me.