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U.S. gains 49k jobs in January, jobless rate lower at 6.3%

TS Lombard US Economist Steven Blitz joined Yahoo Finance Live to break down job losses during COVID-19 and if these job losses are permanent.

Video Transcript

ADAM SHAPIRO: We're going to bring into the stream right now to discuss the jobs report and how markets are going to look at all of this, Steven Blitz. He's a US economist at TS Lombard. It's good to have you here. Something in the report that I wanted to read to people because the 49,000 jobs created is a headline unto itself. But the revisions for December, I mean, they revised down by 87,000. And we had had negative 140, is now negative 227,000. Plus, November was revised down. We're facing permanent job loss, which is what scares the Fed. How do you interpret this?

STEVEN BLITZ: Yeah, well, I think the way-- tying this into COVID-- well, the COVID relief package-- what this does is really confirm the swoosh. Remember, everybody last summer was trying to figure out, is it an L, a V, a U? And everyone was so settled in on this swoosh. That's what we've got. And that means we have a permanent high level of unemployment. The small gains that are being made from month to month-- and it may be up a little bit more next month.

But you know, when you're gaining 100,000 or something like that, just netting out the immediate COVID impact, what you end up with is a growth in hiring that doesn't come close to filling the hole that was created last spring. And that means you've got this large permanent-- or permanent until COVID lifts activity. But until then, you have to ring fence the income impact from those lost jobs. Otherwise, it'll seep into the broader economy and make things a lot worse than they are right now.

So this flattening of employment growth is telling government that you've got to do this. And you're going to have to keep doing this until vaccines, herd immunity, summer weather, whatever it is, or a combination--

ADAM SHAPIRO: Right.

STEVEN BLITZ: --lifts the lid on economic activity.

SEANA SMITH: Well, Steven, I wanted to ask you about that because we heard from President Biden earlier today. He was saying it makes it very clear that the economy is still in trouble. So you're saying that the government still needs to act. Is the $1.9 trillion package, is that enough? Or do we need to be talking about an even bigger package or just another package somewhere down the line?

STEVEN BLITZ: Well, I think it's probably more than enough for now. And it's a very difficult question to answer, simply because, look, a lot of this $1.9 trillion is allocated for extending, for example, unemployment insurance past mid-March. Now if we're sitting here in June and everything opens up, and everyone's back to work and we can all go to restaurants and bars like we did before and travel to Disneyland, you know, then, all that-- a lot of that unemployment just shrinks very rapidly. And that allocated expense in the budget never gets spent.

So I think it-- because we don't know the course of the virus, and we don't really know-- we guess, right? We're all thinking the second half of the year. We're all pretty much in line with that from the Fed to mean everybody else. But we really don't know, right? And if it happens sooner, if it happens stronger, you don't have to spend that money.

If the flipside is that not enough people are vaccinated, the variants hurt growth, you don't really get back, it's a lot less, then this thing's going to keep rolling forward. So if-- think of it as a rolling thing until we get to the point where the virus is considered beaten back, and the economic lid on activity is lifted.

ADAM SHAPIRO: And when you talk about it rolling, though, what about those folk who, right now, need assistance, but are only getting forbearance perhaps, regarding their mortgages or the moratorium on evictions? Eventually, they've got to pay that back or catch up. Or will the government be asked to come to their assistance in the future?

STEVEN BLITZ: That's a great question. And I'm not in policy, so I can't really answer that. You'd like to think that eventually, that forbearance gets, you know, gets going. My guess is that, especially with the Democratic Congress and a Democratic president, that if it comes to pass that that becomes a very deep hole, how can the government not pay that off, and at the same time, for example, wipe out student debt, right?

I mean, there's a sense of, well, you got to do something to help people because you don't want that burden to slow growth going forward because everyone's got to pay all that rent back. So I think you bring up a good point. It's a policy question. But it is a policy question that you have to table at the moment until we see, you know, what happens next in terms of the virus. And--

SEANA SMITH: Yeah.

STEVEN BLITZ: And it does have a lid on activity lift, and--

ADAM SHAPIRO: Right.

STEVEN BLITZ: --we could all go back to the movies in July.

SEANA SMITH: Well, Steven, I know you're going to say that a lot of this-- the answer to my next question probably depends on what happens with the virus over the next several months. But when we talk about full employment and how long it's going to take to get there, what's your best guess, I guess, at this point from what we know and what our expectations are, for getting the American public vaccinated?

STEVEN BLITZ: Well, I think we're going to be a long way. You know, full employment's changed in terms of the definition, right? There was a time when 6%, 6 and 1/2% was considered full employment. But if we go to the 3 and 1/2%, 4% number as the target, I'm thinking you're probably there towards the end of next year. And I think that the growth will be strong enough and the bringing back of employment comes back.

But I think, though, that more critical than getting back or perhaps as critical to getting back to that low number is, what does unemployment look like, right? We've made a big point about-- Biden made this big point about scarring. And, you know, the scarring of the labor force really began many years ago, but let's just date it to 2008 when manufacturing, construction, office administration work really was way below-- it was actually negative as a group, you know, in the last 10 years.

Now do you rush back and have high income with a lot of excess income that hires back leisure and hospitality workers. Then you're back to the same imbalanced growth path. And I think that the next bill, the infrastructure, the thing that he's going to talk to Congress, I guess-- he being Biden-- that's what you really want to address. It's not just about stimulus, but can you create a more balanced economic growth than what we've had? And I would argue that that's as important as just being back to 3 and 1/2%, 4%. I'm sorry, I know you want to talk.

ADAM SHAPIRO: No, it's OK. When you said and it came to pass, I was thinking we really are writing a New Testament when it comes to fiscal policy. But got to let you go. Steven Blitz, US economist at TS Lombard, thank you very much for joining us.