Economist says recession is likely already here

Economist says recession is likely already here

Brian Jacobsen of Wells Fargo Funds Management says it’s a “reasonable assessment” that a global recession has started due to the coronavirus.

ADRIENNE: THE CORONAVIRUSSHUTDOWN.THE GOVERNOR TELLS PEOPLE TOSTAY HOME.GOVERNOR EVERS: YOU ARE SAFER ATHOME.STAYING AT HOME WILL HELP USSAVE LIVES.ADRIENNE: I ADRIENNE PEDERSEN.AM TODAY ON “UPFRONT,”STAGGERING JOB LOSSES.AN ECONOMY IN SHOCK.NEXT, I’LL ASK AN ECONOMIST,WILL THIS GET WORSE BEFORE ITGETS BETTER?PLUS, WORKFORCE DEVELOPMENTSECRETARY CALEB FROSTMAN ON WHATPEOPLE WHO’VE LOST THEIR JOBSHOULD DO NOW.AND, THE SHUTDOWN HAMMERS THEFOOD AND BEVERAGE SECTOR.THE CREATOR OF WISCONSIN FOODIEON HOW MANY OF YOUR FAVORITERESTAURANTS MIGHT JUST GO OUT OFBUSINESS.ANNOUNCER: TAKING ON ISSUESIMPORTANT TO WISCONSIN, THIS IS"UPFRONT," WITH YOUR HOSTADRIENNE PEDERSEN.ADRIENNE: THANK YOU FOR JOININGUS.THE NUMBERS KEEP RISING.AS CORONAVIRUS CASES GROW INWISCONSIN SO, TOO, DO THE NUMBEROF DEATHS.AND NOW, ECONOMIC AND JOB LOSSESARE MOUNTING.GOVERNOR EVERS ISSUED ASAFER AT HOME DIRECTIVE,ORDERING THE CLOSURE OFNON-ESSENTIAL BUSINESSES.ABOUT HALF THE COUNTRY HASSIMILAR ORDERS IN AN EFFORT TOSLOW THE SPREAD OF THE VIRUS.BUT PRESIDENT TRUMP SIGNALEDTHAT FEDERAL OFFCIALS WANT TOEASE NATIONWIDE GUIDELINES,POSSIBLY BY EASTER.WITH MILLIONS OF AMERICANS OUTOF WORK, CONGRESS PASSED, ANDTHE PRESIDENT SIGNED, A $2.2TRILLION RELIEF PLAN.IT WOULD PROVIDE DIRECT PAYMENTSTO U.S. HOUSEHOLDS AND AID TOHARD-HIT INDUSTRIEIT HAS BEEN A LOT AND SO FAST,SO WE’RE TALKING ABOUT THE SHOCKTO THE ECONOMY TODAY WITH BRIANJACOBSEN, CHIEF PORTFOLIOSTRATEGIST FOR WELLS FARGO FUNDSMANAGEMENT.WE APPRECIATE YOUR TIME WITHTHIS COMPLEX ISSUE.THE FEDERAL RESERVE CHAIRMANSAID WE MAY WELL BE IN ARECESSION.DO YOU THINK WE ARE?MR. JACOBSEN: I THINK IT IS AREASONABLE ASSESSMENT WHEN YOUSEE THE UNEMPLOYMENT CLAIMNUMBERS JUMP TO OVER 3 MILLIONIN ONE WEEK.IT IS HARD TO BELIEVE WE ARENOT.THERE ARE OTHER INDICATORS WECAN LOOK AT AND A NUMBER OF DATAGATHERING FIRMS THAT CREATEPURCHASING MANAGER INDEXES,SURVEYING BUSINESSES AND ASKWHAT ACTIVITY IS LIKE FOR THEM.WE GOTTA READ FOR THOSE FOR PARTOF MARCH AS A FLASH READING ANDTHEN THEY WILL ADVISE THEMLATER.EVEN THAT INDICATES THAT NOTJUST THE U.S., BUT GLOBALLY, WEARE IN A RECESSION.A RECESSION IS A BROAD-BASEDDECLINE IN ECONOMIC ACTIVITYTHAT TENDS TO PERSIST.I THINK IT IS REASONABLE TO SAYTHAT IS WHAT WE ARE IN RIGHTNOW.ADRIENNE: HAS THE MARKET GONETHROUGH THE WORST YET OR WILL ITGET WORSE BEFORE IT GETS BETTER?MR. JACOBSEN: YOU NEVER KNOWUNTIL YOU GET THROUGH IT.WE KNOW THAT 2020 HINDSIGHT IS20/20, BUT WE BELIEVE THAT WEARE PROBABLY THROUGH THIS AND ITIS ALL PROBABILITIES.THE BEST YOU COULD EXPECT TO GETON YOUR INVESTMENTS WOULD BEEFFECTIVELY ON RISK AND SECURITYLIKE A TREASURY SECURITY.SO YOU HAVE TO EMBRACE THEUNCERTAINTY, WITH IT.THE WAY THAT WE ARE - MARKET WILLONG WILL IT TAKE FOR US TOSTART TO RECOVER AND THEN HOWLONG WILL IT TAKE TO COMPLETELYRECOVER?WE BELIEVE WE ARE THROUGH MOSTOF THE WORST OF IT, BUTOBVIOUSLY FACTS CAN CHANGE.ADRIENNE: MORE THAN HALF THESTATES IN THE COUNTRY HAVE SHUTDOWN NON-ESSENTIAL BUSINESS,LIKE WISCONSIN.HOW IS THAT IMPACTING THEECONOMY?A LOT OF PEOPLE ARE SCARED ABOUTTHAT NOW.MR. JACOBSEN: UNDERSTANDABLY SO.YOU SEE THE JOB LOSSES, THEFEARS OF SMALL BUSINESSES THATBANKRUPTCIES CAN HAPPEN BECAUSEOF THEIR FIXED COSTS LIKEMORTGAGE AND RENT AND OTHERITEMS.THOSE GO AWAY WHEN THE RVENUEGOES AWAY, SO IF YOU HAVE ASYNCHRONIZED SHUTDOWN OF THEECONOMY OR BROAD SWATHS, I THINKTHAT GIVES PEOPLE BUDGET AMIDREASON TO FEAR.THAT IS WHERE THE POLICYRESPONSE BECOME SO IMPORTANT.WE KNOW THE FEDERAL RESERVE HASSTEPPED IN WITH A NUMBER OFPOLICIES AND CONGRESS HASSTEPPED IN WITH POLICIES ANDECONOMIC RELIEF PACKAGE.WE BELIEVE THAT THE POLICYRESPONSE HAS BEEN PROPORTIONATETO THE PROBLEM.THAT IS REALLY IMPORTANT AS FARAS THINKING THROUGH HOW LONGTHIS WILL LAST AND WHATWILL THE RECOVERY LOOK LIKE ASWE ARE IN THIS DARK ZONE.ADRIENNE: WHEN IT COMES TO THE$2 TRILLION STIMULUS BILL, WHATIMMEDIATE CHANGES WILL PEOPLESEE?HOW LONG WILL IT TAKE TO SET IN?MR. JACOBSEN: THE NICE THINGABOUT THE DESIGN OF IT IS ITDOES SEEM LIKE IT SHOULD HAPPENVERY QUICKLY.MONETARY POLICY, SO WHAT THEFEDERAL RESERVE DOES, THAT COULDBE QUICK AS FAR AS IDENTIFYING APROBLEM IN REACTING TO THEPROBLEM AND FIXING SOME OF THEPROBLEM.THEY CANNOT FIX CORONAVIRUS, BUTTHEY CAN FIX PROBLEMS IN THECREDIT AND FINANCIAL MARKETS TOMAKE SURE CREDIT STILL FLOWS.IT SEEMS LIKE THE FED HAS BEENAGGRESSIVE WITH THAT.ON THE FISCAL SIDE OF THIS $2TRILLION STIMULUS PACKAGE, A LOTDEPENDS ON HOW QUICKLY CAN THETREASURY GET CHECKS TOHOUSEHOLDS?HOW QUICKLY WILL THEY GET OTHERSUPPORT PROGRAMS IN PLACE AS FARAS DISTRIBUTING FUNDS TO SUPPORTSTATES AND MUNICIPALITIES ANDSMALL BUSINESSES THROUGH THESEVARIOUS LOANS THEY ARE DESIGNINGAND ALSO SUPPORT OTHER LARGERBUSINESSES THROUGH THE PROGRAMTHAT THEY HAVE ESTABLISHED WITHTHE TREASURY?THERE ARE A FEW MOVING PARTS,BUT IT LOOKS LIKE THEY SHOULD BEABLE TO ACT ON IT QUICKLY.FAIRLY QUICKLY, MY BEST GUESS ISPROBABLY OVER THE COURSE OF ACOUPLE OF WEEKS, NOT MONTHS.OFTEN FISCAL POLICY, SHOVELREADY PROGRAMS WE FIND OUT ARENOT SHOVEL READY AND IT MAY TAKEYEARS, BUT THIS WILL BE A LOTFASTER WE FIND THAT ENCOURAGING.ADRIENNE: STILL A LOT OFQUESTIONS ABOUT THE CHECKS.PEOPLE ARE CALLING THE NEWSROOMEVERY DAY TO FIND OUT IF THEYARE ELIGIBLE.THAT ASIDE, I HAVE HEARDECONOMISTS SAY THEY ARECONCERNED ABOUT THE $2 TRILLIONIN TERMS OF THAT IS A LOT OFDEBT TO TAKE ON.WHAT IS YOUR TAKE ON THAT?MR. JACOBSEN: THERE CAN BE GOODAND BAD DEBT.IN MY MIND, THIS IS A TYPE OFGOOD THAT TO TAKE ON, WHERE,EFFECTIVELY, YOU ARE BORROWINGFROM THE FUTURE TO GET USTHROUGH THE PRESENT.WHY THOSE PEOPLE HAVE THOSECREDIT LINES, TO GET YOU THROUGHTHE PRESENT PROBLEMS.IN TERMS OF THE AMOUNT OF DEBT,IT IS IMPORTANT TO KEEP INPERSPECTIVE WITH A NEARLY $19TRILLION ECONOMY.THERE $2 TRILLION STIMULUS ISBIG, ABOUT 10% OF GROSS DOMESTICPRODUCTS AND THE SIZE OF THEOVERALL ECONOMY, BUT THAT DOESNOT NEED TO BE A PERMANENT STATEOF AFFAIRS BUT A ONE-TIMEPERMANENCY MEASURE -- BUT AONE-TIME MEASURE.THIS DEBT WILL CAUSE PROBLEMSAND WILL NEED TO BE EVENTUALLYPAID BACK, BUT IF YOU CAN HAVEBETTER, FASTER ECONOMIC GROWTH,THAT COULD HELP COVER OVER A LOTOF THESE DEBT PROBLEMS THATCOULD BUILD.ADRIENNE: WE APPRECIATE YOURINSIGHT.THANK YOU.MR. JACOBSEN: MY PLEASURE.ADRIENNE: COMING UP, STAGGERINGJOB LOSSES BEGIN.HOW MUCH WORSE THEY CAN GET, ANDHOW THE STATE CAN HELP.LATER, YOUR FAVORITE RESTAURANT.WILL IT SURVIVE THE CORONAVIRUSSHUTDOWN