Jeffrey Sachs, Economist, Senior UN Advisor and Professor at Columbia University, joins Yahoo Finance’s Zack Guzman to break down the latest market action another 840,000 Americans file for unemployment claims, and a second stimulus plan remains undecided.
ZACK GUZMAN: But first, want to start with the update we got on the unemployment front, with unemployment claims coming in from the Department of Labor. Want to highlight the headline numbers we saw there. Initial jobless claims for last week came in at 840,000 versus the 820,000 that was expected by economists. It was also down from the 849,000 we saw the prior week. Continuing claims, which lag a week, showed a total of 10.976 million versus the 11.4 million expected, so better on that front as well.
But at 840,000 in terms of initial claims, that's still a level quite handedly above the pre-pandemic highs that we've seen before all this dating back to 1982, a high of 695,000. So it just bears repeating here that we are still running historic highs on a weekly basis for Americans filing for unemployment benefits. And that's important to keep note of.
And when you look at the map-- we like breaking this out-- still the same trends state by state there. Hawaii is still leading the nation when it comes to insured unemployment rates here in the US. Of course, that would be the measurement of Americans on unemployment insurance versus those in the labor force. And Hawaii, topping the nation at more than 20%. California falling, and Nevada in third at 13.7%. Puerto Rico and the Virgin Islands round out the top five worst hit regions on that measure as we like to break out here.
So let's break it down a little bit further here in terms of where this recovery is headed after that update we got on the unemployment front. And joining us now for more on that is Jeffrey Sachs, economist and senior UN advisor and professor at Columbia University. Professor Sachs, thanks again for coming back on here. First off, just your take on the unemployment numbers we got today and what it might mean for you gauging the state of the recovery right now.
JEFFREY SACHS: We know the recovery is in a pause, and it's going to be a pause until next year. And what's going to happen after that is going to depend a lot on what happens in the election next month. But we've kind of stalled because the pandemic has not been suppressed successfully. We are still running with an open pandemic in the United States.
Many jobs also will never come back in the sectors that have lost those jobs or shed those jobs. Office work is not going to come back the same way. Retail sector is not going to come back the same way. So we're going to need a recovery based on a new approach to the economy, a structural approach-- building infrastructure, public-investment-led growth. And this is what Biden is calling for, what he says makes sense. With Trump, you never know from minute to minute.
ZACK GUZMAN: I mean, we saw that too when-- in kind of the immediate reversal of pulling the plug on negotiations with Democrats saying, look, you know, we don't want to bail out blue states here-- poorly run blue states. And then also reversing that and saying, well maybe we can do piecemeal bills to address the $1,200 stimulus checks, another wave of those. Piecemeal be all-- piecemeal bill for airlines, and we heard from House Speaker Nancy Pelosi saying that she doesn't want to go for some of those things without a larger package.
So what are your thoughts on maybe, I guess, the most important things right now? If that's the way the president wants to go, it remains to be seen if Democrats will go that way. But what do you think are the most important pieces to address here in this stalling recovery?
JEFFREY SACHS: Well, there is a cruelty and a deliberate cruelty to Trump's approach. He does not want to help cities. And this is unbelievable because all over the country, city budgets are broken by the collapse of the economy, and cities need to provide more services, not less services.
But Trump is a nasty, mean-spirited individual. And what's really going on is the Democrats have said we've got to help our states and cities, and Trump has said no. And this has been a bottleneck for months. It has been one of the reasons why the cities haven't been able to get the epidemic properly under control because they're shedding workforce of frontline workers at the time that they need to provide more services, not less.
So I don't think-- I have no idea whether they'll make any kind of agreement. But the basis of the disagreement is just the Trumpian nastiness. And that's what's really going on, and it's just horrific to see. Never seen this from a president before.
ZACK GUZMAN: Yeah and I-- you know, I have to push back. It's my job to push back on these things and say, all right. If you're going to say it's nastiness, let's talk about why it might be nastiness. Because we think about what kind of chips are being played when we think about the political battle going on in Washington around why a president who is sitting in the office would want to cut free money to Americans making less than $100,000 and say, look, I don't want to go through with that stimulus bill.
But when you dig into the strategy around this too, I wonder if you as an economist and really a professor who has studied these trends before, would point to the idea that, you know, we've seen maybe poorer Republicans not vote in their economic interests? And maybe that could be one of the reasons why he might be leaning onto the social side, talking about getting the Supreme Court justice nomination through here and putting that ahead of what could happen on the stimulus front. Because it's as if to him no risk to the downside in losing support in that base when you think about poorer Republicans in more rural areas maybe not being so impacted by voting along economic lines. What would you say to that?
JEFFREY SACHS: I think that this move is costing him a lot, and that's why he quickly reversed in part. But he's not right in the mind, and so he doesn't know really what he does want. But I don't think that this is politically in any way attractive for him and much less for his party where there are a lot of senators that are just hanging on for dear life and probably won't make it through, which is going to be exacerbated by Trump's move. So it's really hard for me to figure out this other than a kind of absolute nasty contrariness that I think is ultimately the reason why he's way down in the polls.
ZACK GUZMAN: Yeah, I want to push the point further too here because when we think about guests that we've had on the show and we're talking about this recovery and what the market's going to look like in 2021, a lot of people saying, look, between Joe Biden or President Trump, whoever wins, generally the recovery is going to look similar-- maybe a little bit larger stimulus if Biden is to come into office.
But when you think on the margin, for a lot of Americans who are hurting right now, not getting the additional unemployment aid for the next couple of months here or having to wait until maybe Biden's package might go through, I mean, what does that do to demand here in the economy when we think about-- you know, we know how little savings a lot of Americans have. What does that do in the interim if you have to wait, and what could that do to upend the shaky recovery we're seeing now?
JEFFREY SACHS: We're already seeing that personal incomes have declined because of the cut-off now ending of the federal support, that consumption will go down. And we know already that across the board, what had been at least some ongoing bounce-back has stalled or at least gone into very, very slow gear. So I think that it is clearly costly. Jay Powell could not have said it more clearly. The Fed has been screaming, pass something to keep us going into 2021.
But then I would emphasize something very hard for this country-- to really recover, we need two things. One to stop the pandemic, and clearly Trump is completely uninterested and incapable of doing that. But second, we're going to need something more structural than just handing over money. We're actually going to need some longer-term investments, some infrastructure building, some transformation of the energy sector, and so on. And these are precisely the longer-term kinds of policies that the Trump administration and the Republican Party in general, I'm sorry to say, have been completely uninterested in.
So I don't think that even just somehow getting through to 2021 means merely voting another package of short-term support.
ZACK GUZMAN: Let me--
JEFFREY SACHS: Structural change in the economy, that requires some thinking. It'll be interesting to see whether the United States can start thinking again because we've not been thinking for a while, certainly not at the top.
ZACK GUZMAN: Well, it's very hard for me to push back on all of these points and try and present the other side when I think about the pandemic. You're right to raise, I--
JEFFREY SACHS: What other side?
ZACK GUZMAN: --mean, (LAUGHING) we've had some comments that just have been anti-factual. It's been labeled as disinformation from outside fact checkers. Facebook and Twitter taking a lot of what the president has put out there down. So I can't push back on those points. But I will ask about one to wrap up here because you're right.
Chair Powell has been very vocal about, look, it's impossible to overdo whatever you could do right now on the fiscal side. Just get something done. President Trump retweeted that message, seemingly confusing-- a confusing move since he basically was saying get stuff done, and you just pulled the plug on the negotiations. But when we talk about his reasoning there and saying that he doesn't want to bail out Democratic states, that has been a point that we have heard from a lot of economists saying, look, it doesn't make sense. That was a mistake made back in '08 and '09.
Even Democrats would agree that it was problematic to see states pulling back on spending when you were trying to stimulate the economy. And we've heard warnings that that's exactly what's going to be going on here if you don't fund the states to prevent job cuts. Talk to me about that.
JEFFREY SACHS: We're seeing it right now. I'm seeing it in my own city, New York City, where teachers are being laid off-- frontline workers, garbage collection-- because the city has a $8-billion deficit right now or thereabouts. And we're in crazy depression-era budget cutting at a time of high unemployment and massive social needs. I can't believe it that we're doing Herbert Hoover economics again, but we are. And it just makes absolutely no sense.
But Trump's hate for his own former, I guess, formerly his own state and city seems to be higher than rationality. And it's something obviously beyond New York. It's across the country that basic services are being cut back when we more urgently than ever need them and need to employ people for their livelihood. So it makes absolutely no sense to be cutting, slashing state and local budgets at this very moment. But that's what's happening alas.
ZACK GUZMAN: Yeah. And I mean, we're going to talk about that-- the airline stimulus bill being used as maybe a bargaining chip here to get a larger package. That seems to be the strategy from Democrats. But, Jeffrey Sachs, always love having you on to talk through all this. A former senior UN advisor and professor at Columbia University. I appreciate you taking the time to chat.
JEFFREY SACHS: Great to be with you. Thanks, Zack.