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Joe Brusuelas on October jobs report, election results

RSM chief economist Joe Brusuelas joins Yahoo Finance to discuss the October jobs report, election results and the state of the U.S. economy.

Video Transcript

MYLES UDLAND: All right, let's turn our attention back to that jobs report we got out just about 30 minutes ago. US economy adding 638,000 non-farm payrolls in the month of October. The unemployment rate falling to 6.9%. For more on this, we are joined now by Joe Brusuelas. He is the chief economist at RSM US.

And Joe, it is great to talk with you on this jobs day morning. Of course, a lot is going on outside of the economy. But let's just kind of go through what you saw in the jobs report today. Does it change your view on how you're seeing this recovery play out?

JOE BRUSUELAS: Well, I think that the jobs report was incredibly strong. If anything, the ending of the 2020 US census masked the real underlying strength of the recall of workers by the private sector, which increased at a 906,000 rate. We only had 638 on the top line. You know what, even more impressive is you dig into the data, you saw that unemployment rate decline to 6.9%.

And that was despite a 724,000 person-- or 27 or 24,000 people who re-entered the workforce in the month of October. So, you know, it really does look very strong here on a day when it's unfortunate we're going to be looking at something else rather than this very strong economic data we got.

JULIE HYMAN: Joe, two questions about the data that are sort of related. You know, I've been watching that permanent jobless number, you know, because we've all been asking, how permanent is the damage that has been done by this pandemic? And on a related note, as we also learned that there were a record number of coronavirus cases reported yesterday, 120,000.

You know, that would seem to raise the specter of re-closures, right? Which would then spiral and circle back to the jobs report. So how are you thinking about that picture?

JOE BRUSUELAS: All right, so when I'm looking at permanent job losses, they inched down a little bit in the data. But there's still way too high. We're still in that 4.4 to 4.5 million range. And when I look at our global business, right, we have businesses in UK and Europe, we've seen the lockdowns.

And you can't help but think, as you look at the evolution of the pandemic data, that we're going to have some very difficult decisions that are going to have to be made here very quickly. Unfortunately, my sense is, because of the election, we're likely not to see the strong national leadership that we need to have right now with respect to the pandemic. That may await the outcome of the election.

And what that really means is we're all going to be our own here for the next couple months until we get that election resolved.

BRIAN SOZZI: Joe, simple question for me. Is a President Joe Biden, is he bullish for the US labor market?

JOE BRUSUELAS: Well, I would think that-- look, right now, the US economy is operating around an 80% capacity. That means 20% of a $21 trillion economy is impaired. As we move forward, we get closer to therapeutics and a vaccine. And I'm always careful to say this, no vaccine, no recovery, right? Or no meaningful recovery.

Once we begin to unlock that 4 trillion in economic activity that's impaired, you're not-- you're going to see growth rates unlike anything you've seen since the late 1980s. So if there is a President Biden who presides over the discovery of a vaccine and the unlocking of that 4 trillion in impaired activity, it's going to be positive for the labor market.

MYLES UDLAND: And Joe, I want to ask you about government employment and even backing out the census. You look at losses in the local government, that's down almost 100,000. State government and education down 60,000. We saw the government sector, the public sector, serve as a drag during the 2010s as the labor market healed. And we saw that huge stimulus push.

But I think there are certainly fears that we go back to an austerity stance before we ought to coming out of this recession again. Is that something that concerns you as you look out not just next year, but over the next, maybe, five or 10?

JOE BRUSUELAS: Well, outside of the evolution of the pandemic, that's my number one concern, is we can't go back to the new austerity policies of the 2010s. Look, we need another round of fiscal aid. And there's going to have to be money to help-- directly help state and local governments, or you're going to see very well-paid civil servants, teachers, firemen, and police officers laid off.

This is not a picture we want to repeat. We know what to do, we just have to summon the will to do that. Look, I actually think now, based on what I've seen, there's a slightly improved probability we may get a lame duck fiscal aid program. It won't certainly be the $2 trillion that was bandied about just before the election. But we'll get something.

And hey, look, I want to put something positive out there. You know, we've been talking to our friends in and around DC. I really think that there is now a possible confluence of events where we might get an infrastructure bill, say, by July 4 next year. Things are moving quickly. It's early, but based on who we're talking to and what we're hearing, I'm beginning to get a little bit more confident that once we get through the current unpleasantness, the underlying forces of the economy, as we come out of this pandemic, will reassert themselves, and things are going to look a lot better than they look now.

JULIE HYMAN: Joe, you say the magic words, infrastructure, which has become, you know, a bit of a joke, right?

JOE BRUSUELAS: Right? Yeah, yeah.

JULIE HYMAN: [? And there have been ?] promises on that for so long. Joe, I got to ask, though, whether it's infrastructure, this big fiscal package, paying our firefighters and teachers who just so desperately need it. What are the repercussions of paying for all of that?

And, you know, I don't want to go down the MMT rabbit hole, but I'm more, you know, are we going to eventually have negative rates, for example? What are the, sort of, knock-on effects of these big spending programs?

JOE BRUSUELAS: OK, they're going to be, in part, deficit finance. We should just put that on the table and set it aside. That's going to happen. They're not going to be 100% paid for. The gas tax is probably going to go up. You'll start hearing talks about that in January. OK, my sense here is, though, we don't need negative interest rates, nominal negative interest rates.

If you just look at where the rate structure is and adjust it for inflation, we have negative real interest rates now, which means if you're going to borrow money to pay for an infrastructure program, you're going to pay less back than what you borrowed because of the negative [? handle ?] on the real interest rate. This is exactly the time to do an infrastructure project.

I mean, one of the things that I will never get over in my life is during the era of Obama and Ben Bernanke, if we didn't get it done, there's a lot of reasons why we didn't get it done, but we have this incredible chance with the 10-year trading, you know, between 0.75 and 0.80 today to do something extraordinary for all Americans. You know, infrastructure isn't a Democratic thing, it's not a Republican thing. It's an American thing.

Modernizing our infrastructure, whether it's the big I, the roads, bridges, and ports; the little i of broadband; or even the E, right, of environmental, smart green infrastructure. My idea is what I call I squared E, right? Big eye, little eye, and that big E. We can do all these things. And I think that I'm quite optimistic about what the second half of 2021 is likely to look like.

MYLES UDLAND: All right, Joe Brusuelas, chief economist at RSM US. Joe, great to get your thoughts on this jobs day. And I know we'll be in touch soon.

JOE BRUSUELAS: You got it. Bye bye, everybody.