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November jobs report: 'there's a lot of damage to be carrying into 2021: economist

Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman break down the November jobs report and economic outlook with Markus Schomer, PineBridge Investments Chief Economist.

Video Transcript

MYLES UDLAND: All right, let's stay on jobs and talk about the future of not only the US recovery, but the global recovery. Markus Schomer joins us now. He's the Chief Economist over at PineBridge Investments. Markus, great to talk with you this morning. Let's begin with your thoughts on the jobs report and if it changes at all how you are viewing the key needs for the US and global recovery as we turn the page to 2021.

MARKUS SCHOMER: Yeah, good morning. I think it was a decent jobs report. I mean, we've seen the pace of job creation slow, but that was expected as sort of converging toward something as more normal. The mechanical part of the reopening is sort of losing momentum. Most people have been rehired, so we're getting back to something that's more normal in terms of jobs numbers, and I think that's what this jobs report showed.

But on the other hand, it also, and I think your previous speaker already talked about it, it still shows that there's a lot of damage to be carrying into 2021 into the real beginning of the next business cycle. And I think that's the problem, and we need another fiscal package to extend unemployment benefits for the millions of people who may start to lose their benefit payments in the middle of December. And that number of people will start to accelerate as we go into January, and that will create I think a significant, or could create a significant downward pull on consumption.

I that's the risk that we're running right now. Congress is debating the stimulus package. There's a story out every day, but we haven't seen any action yet. So another package is necessary to get us over this fiscal income cliff.

JULIE HYMAN: And Markus, in a way, this jobs report is neither weak enough nor strong enough to push Congress over the edge it seems. Because even though it was weaker than estimated, there are a lot of areas of weakness in it. Perhaps it's not a strong enough signal to Congress, or do you think it is?

MARKUS SCHOMER: Well, I'm not sure whether anything in this report could have accelerated the process, because it's politics at the end of the day. They, both sides have to get through the political issues that are holding everything back. I think the report in its entirety was weak enough. I mean, there's enough areas you can point to labor force growth is not rebounding, labor force participation rate is not rebounding. There's a lot of damages that we can see that we're carrying into next year.

Look at yesterday's jobless claims numbers. I prefer that actually as to my favorite jobs report right now, because you can see that the number of new job claims is still over a million. That's a lot. It used to be the highest in the '80s was 665,000 I think, and now we're over a million. There's still a lot of people who are filing for unemployment benefits every week, and we need to extend that system that we have in order to catch those people at least through the middle of next year.

BRIAN SOZZI: Markus, how helpful does a stimulus really, how helpful would it be for the US economy right now? When you still see 3.7 million people classified as permanently unemployed, how does a check truly help them?

MARKUS SCHOMER: Well, I'm not sure what you mean by check. I don't think we need to send out--

BRIAN SOZZI: Like a stimulus check like--

MARKUS SCHOMER: Checks like we did before.

BRIAN SOZZI: Like a stimulus check. Like the government worked it to include that again. How does that really help them?

MARKUS SCHOMER: That doesn't. I'm not sure that helps. I think that's a hugely wasteful way of doing stimulus. It's just more-- that's more confidence, right? If you can say everybody gets a check so people feel a little bit better. If they felt really bad before, but it's a very wasteful and ineffective way of doing stimulus. It makes much more sense to look at the programs, the unemployment support programs that were created, and they were actually very good, it covers people that usually are not covered, like contract workers and the self-employed, and then it creates a program to extend to 26 weeks that states pay to at least 39 weeks.

But the 39th week will be reached in the middle of this month. The 39th week since the surge in unemployment started will be reached in the middle of this month, and that's the problem. We need to extend that 39 week program into something much larger that will carry us into the summer of next year. I think that is the most important thing. We don't need a big stimulus program in any other way. We don't need infrastructure. I've never been a fan of infrastructure that doesn't really work.

We don't need stimulus checks, very ineffective. Lots of people get it that don't need it. I don't know, help the people who are unemployed. And if the jobs numbers take over into 300 and 200,000 for the next couple of months, we're going to slowly eat away at the problem, but we need to make sure we don't fall off this fiscal income cliff, which is coming in a few weeks. That's the key right now.

MYLES UDLAND: You know, Markus, we've talked a lot about what's happening in the here and now, particularly in the US. I'd love to talk about, you know, global policy coordination over the next couple of years, particularly with Janet Yellen coming in to Treasurer. We have Yellen at Treasury. As you know, we have Christine Lagarde leading the ECB. These are veterans of the global policy coordination circle. It's kind of back to the future after after the Trump years. When you think about, you know, a G7, a G20 type meeting in 2021, 2022, what sort of steps do you see them taking? How do you see, do you see re-globalization, I guess I should ask, as we try to synchronously get out of this recession?

MARKUS SCHOMER: Well, on the one hand, it's true there will be, I think there will be more global coordination. But I mean, that's not a good word. There will be more global interaction between all the other major institutions. The G's, you know, G7, G8, G20, whatever the G's are. They will be more prominent again, and I think they will be more important again. Central banks may talk a little bit more amongst each other again. But I'm not really sure we need a lot of global coordination here. I mean, everybody's got the same problem.

It's not rocket science, right? Everybody needs to keep the foot on the accelerator for at least another year, and the US and Asia right now are quite ahead of the Europeans. The Europeans have a particular issue because they shut down their economy again in the last couple of months. So they will probably have another negative quarter in Q4 that they will have to dig out of. So I don't think a lot of coordination between countries, between central banks or between treasury departments is necessary, because we're really all facing the same problems.

JULIE HYMAN: And Markus, also just sort of a look ahead from looking at this last month's data, 42% of the jobs that were added were in transportation and warehousing because of the e-commerce boom presumably that we have seen. Does that matter? I mean, in other words, are we going to quickly see a more even distribution of job growth once we sort of move past all of this?

MARKUS SCHOMER: Probably. That's actually an interesting number. I had not been able to dig as deeply into the report as you have. I think it's more typical how we get out of a recession, right? There's certain sectors that react quicker, that come back faster, and then other sectors that are further behind that catch up as we go through the cyclical stage of the recovery. I'm not so worried or even interested, to be honest, to look at different sectors, because we know that in the early part of a recovery, it's actually very simple. It is just the fact that we have a lot of people who are unemployed who will gradually be employed again who have income and spending power, that's what drives recovery.

It's not really even fiscal spending or monetary. They help you in the very early stages. But once the economy is running, it is really the bringing down of the unemployment rate that drives the economic growth, and we have a lot of unemployment right now that can be brought down. So there's a lot of cyclical power in this recovery, and that will carry us through the first couple of years and, you know, then we're too far down the road, who knows what happens politically in the US in the next few years. And then we get to the typical mid cycle and late cycle stage of this recovery. But I think I'm getting way ahead of myself here right now.

[LAUGHTER]

MYLES UDLAND: All right, Markus I think we might all be at this point in the proceedings. Markus Schomer, Chief Economist with PineBridge Investments. Markus, it's great to get your thoughts this morning. I know we'll talk soon.

MARKUS SCHOMER: Thanks.