The COVID-19 Economic Tsunami: A Business Forecast You Can Use (5.1.2020)
Well. Good morning my name is Taylor, and all and I'm Dean of the David Eccles School of Business it's my pleasure to welcome you to this installment, of our, series on how to navigate Kovac, 19, today. We're taking a bit of a pivot we're focusing, on, how you're going to rebuild your business and reactivate. Our community. We're, coming to you from the Mariner s Eckles Institute, of economics, and quantitative, analysis, for, those of you that don't know Marriner, Eccles was, a historic, figure in the economic, development of our country, as he led the. Federal Reserve as we, moved our way out of the Great Depression we're. Thrilled to be broadcasting. This to the businesses, in the state of Utah and beyond thanks to a generous donation from, the George S & Dolores story Eccles foundation, what. You're gonna hear today is an, intellectual collaboration. Between Levitt, Partners the, sinus your group and the faculty, here at the University of Utah we're. Also very very, grateful for, the collaboration, and partnership, of the Salt Lake Chamber of Commerce and the economic, task force headed by the governor of this state, today. I'd like we're gonna talk about an economic forecast. That, you can actually do something with and we've got some great experts, our panel. Today will be moderated. By the former, governor of the state of Utah Mike, Leavitt Mike also, led Health, and Human Services and, has planned for pandemics, like these so, Mike why. Don't you take the screen. Well. Thank, you Taylor and welcome to everyone to how, to rebuild, your business, and how to rebuild our. Community. As the, Dean mentioned we, have a very interesting conversation, today, and it's going to be led by, a discussion, with, an esteemed economist. Mark Zandi who. Is, with Moody's Analytics I'll, introduce, him in just a moment, but. Also we're going to hear from Natalie Gartner, who is director. Of the Kalman. Policy. Institute at, the University of Utah, but. I want, to remind you that this is an interactive conversation and, there will be lots of opportunity, for questions. And the way you ask a question is to look at the bottom of your screen and you. Will see a. Chat. Function. And we'd, like you to use. The chat, to, list your questions, and we'll get to them toward. The end of our hour. So. I'd now like to formally. Introduce our, speaker, joining us today is Mark. Zandi. Who is, the chief economist. At Moody's Analytics. Where. He directs. An. Economic. Research for, a very esteemed, institution. His. Firm Moody's. Analytics also, provides, economic, forecasting. For. The state of Utah so, impacts, our lives and, for, Utah's, government. Leaders he. Has authored two books, on. Recovery. And he is a guest, on many. Television, shows than you have undoubtedly. Seen him mark. We're delighted that our. Audience. Today can that. You can join us and we've got some questions for you welcome. Thanks. Governor it's a pleasure to be with thank, you I want to thank Nathalie and everyone. At the University, of Utah for the opportunity, to be with you today thank you so much so. Mark, like the rest of us it looks like you're, working. From home where, is home for you well. I'm actually, in my bedroom in, the suburbs of Philadelphia I live very close to, maybe, folks know Villanova, Villanova, won, the national. Basketball championship. A couple times so I grew up a mile from there I teased my kids I've three kids that. I have, always sheltered. In place. You. Have been advising, the state of Utah a long time I recall, during that period I was governor that we depended. On your your. Instincts. And your forecasts. And your analysis, and so, it's a pleasure to see you again and, I'm delighted for a chance to talk with you obviously. We're in a period of great, both. Local and national and. International. Disruption, with with, the pandemic that kovat 19 pandemic, I'd love, to just hear your basic, thoughts on the pandemic. And the economic. Fallout that's, become a big part of our lives. Sure, well it's a huge blow, to the economy. Unprecedented. You. Know there's really no historical. Analog. To this. It's. Really to blow the. First is a blow, on the supply, side of the economy that's business shutdowns, that we've, experienced, throughout much of the nation and we're, just now starting to reopen because for, the last six weeks.
Businesses. And much of the country have been, on. Lockdown and of course that you, know there's nothing that comes close to that the only way I can think of perhaps is 9/11. When. The economy, was disrupted, but, that was for a day or two you know this is going on for weeks, and, then there's also a demand-side shock and that is of course people are losing their jobs millions tens of millions of people are losing their jobs or our or, wages. And that's. Making. It difficult for them to. Go out and spend businesses, are very uncertain so. They pulled back they're. Not investing. And. Of. Course international trade has been disrupted so we've got both, the supply-side shock, and in demand-side shock and, the numbers, are, nationwide. They're, just on, just, off the charts I mean I'll get to give you a sense of the numbers and then I'll stop in. April, which which I guess if there's good news I think April will. Be the apex of the shock this will be the very, worst of it we, lost nationwide. Twenty to twenty-five million, jobs. Now. That will wipe out all of the job gains that we experienced. During this, long, previous, economic expansion. Record long expansion, expansion and, unemployment. Will, be somewhere between 15. And 20, percent we'll get these data points next week but somewhere between fifteen and twenty percent and. You have to go all the way back, to the Depression. Of the 1930s to. Find unemployment, that high and again. I don't know that that does justice to the financial. Pain and suffering so this. Is a. Body. Blow to the economy that is just unprecedented. From. Every perspective. Mark. I'm. Assuming, your thought that this is the apex, that April is the apex. Of this body. Blow. That. Must assume then that you, see the. Economy, beginning. To get better that. If. We. We, start now into this opening. Reopening. Business, goes back and if there's a suddenly. The surge. Of. Viruses. The. Virus. Surge isn't a surge, of illnesses, and, things get worse I'm. Assuming that your, forecast. Of an apex, in April is assuming, that that's kept the things are going to get better yeah. I mean the key, is the, business reopening, switch it's, a process so, this will take, place over the next two. To three months, and. The. Economy, will come back to life now I will say it's. Not going to get back to where it was anytime soon it's gonna this is a this is going to be a long process it's. Gonna be a bit of a slog and. I don't think the economy, is gonna kick into any kind of gear until we have some kind of vaccine. That's widely distributed. So. This will take some time but, I do think the worst of the shock will be this month and then by. July. 4th going, into the. End of the summer I would, expect that business, conditions would be better a lot. Does depend, on the, epidemiology. Of the virus you know if we have a second wave or a third wave I do, think if that happens, and we might I think a prudent planner would probably, plan for that possibility, because that seems very likely. It. Will do damage so again. And I'm not thinking this economy's, gonna come roaring back but I don't think we're gonna shut, down again I would, be surprised, to be coming down that route we'll probably, we'll probably try to navigate through you know make sure that the, the most, vulnerable are, sheltering. In place that, we've, got all that we need in terms of hospital. Capacity. And all the equipment we need and then we'll just try to do.
Our Very best to navigate through, without a shutdown, so. I don't think this is going to be a straight line but, I think, you know the very, worst of unemployment their very worst of the job, that's. The profitability, to, hit the stock prices, that all happened, in the month of April. What. You thought about a job. Creation. When are we going to start seeing some positive job, numbers, a little. Nasty begin, but just flatten out essentially. For a while or will we actually start to see job gains at some point and if so when, yeah. We'll see job yes so once business is reopened, they'll start to rehire that. Probably, won't be the. Month of May because. That'll. The survey, that the Bureau of Labor Statistics conducts. To, calculate, employment, is includes. The week of the 12th of the month so by you, know next. Week or the next couple of weeks we're not businesses aren't going to be back hiring, so May will probably see some further job loss but, by June July. August, going. Into September I would expect to see. Significant. Job gains now remember. I said we're gonna lose twenty twenty-five million in April or probably, there's another couple, million in May so, if. You told me by, the, Election, Day November we got half those jobs back that sounds about right to me but we're not gonna get all the those. Jobs back that's, gonna take a while to get there that's going to take at least two, three four years before we get all those jobs back. Could. You put this in some historic. Perspective, I mean we've all read about the. Great. Depression. Many. Of us will very. Freshly. Remember. The. Liquidity. Crisis. Where. Does this line up in terms of. Economic. Events and in the last hundred years sure yeah so. Let's, let's. Look at unemployment so. Let's, say the unemployment rate Peaks somewhere between 15, and 20 percent for. Context. The in, the financial, crisis, that was the, Great Recession we, went through a little over 10 years ago Peak. Unemployment, rate nationwide was 10 percent on the nose that, was in early 2000, excuse me early. 2010. We. Hit 10 percent in the early 1980s. That, was a time of very high inflation that's. When Paul Volcker was chairman, of the reserve and to wring out that inflation, he raised, interest rates aggressively, and that hit the economy, so we saw tempers unemployment, then briefly and, then, you had to go all the way back into the 30s before, World, War 2 and. For that entire decade, of the 30s unemployment, was double-digit, that's why we call that a depression, so there's.
No Official, definition of depression, but a depression, I think in most people's nomenclature, would be double-digit. Unemployment for, more than two to three years that was a depression the all-time, high in unemployment was 1933. When. We had a 25. Percent unemployment, rate so you, know we're gonna, be in that ballpark I mean particularly to include the underemployed. So, the. Under. Unemployed, you have to be out there work and you have to be actively, searching, for a job but, of course in this environment many people can't, be actively, searching, so, they won't even be counted as unemployed so, if you consider those folks in addition to the actual, unemployed, we're, looking at numbers, that are probably pretty close to 25% so, you know very consistent, with the, depths, of the Great Depression 1933. Now you. Know I don't want to overstate the case I, mean I was a whole decade, of extremely. High. Unemployment lots, of financial pain and suffering this is a brief, in. A historical, context, month or two but, it does give you a sense of the magnitudes here this is you know something just off the charts you know one day one other, year about. Again. In the context, of just perspective, we. Had a great session. With. In this series with Randy Quarles who of, course is the Supervisory, banks and Reserve. Board and great contributor, we. Talked about fiscal. Policy. And monetary, policy, the, differences, and the way both are being deployed, in, this in this moment. I'd. Like to get your reaction to the. Some there's, some total, of that I mean when you consider that we now we're, into two and a half trillion. Dollars of, fiscal stimulus we've, got another two and a half trillion dollars in in. In monetary. Policy impacts. We're. Going to have a deficit, clearly, because of lack of lack of of revenue. In the national government in states and so forth because. Of lack of spending. And economic, activity, we're going to have more expenses than we have before so the deficits, going to be startling. And it's, probably going to be a deficit, for a couple of years so we, could be talking about eight. Seven. Eight trillion. Dollars, over, time. Added. To the debt can. You just. Talk a little bit about that, and do. We have the capacity, as a country to, manage. That kind of increased. Debt, load yeah. It's a great question I'll say a couple, things first. I think it's very important. In the time of crisis, like the one we're in. For. Policymakers, and. Lawmakers Congress and the administration to. Be, very aggressive in their response, both. And. I think they have to, so. Far you. Mentioned that the reserve they've. Lowered. Interest, rates to zero they're. Buying bonds to, keep long term rates down they're eased. Requirements. On banks so that the banks continue to provide credit they've. Erected many, different credit facilities, to keep credit flowing they've. Effectively. Become a firewall, between the problems. In the economy in the financial system and. So far they've kept the financial system from being infected by what's going on in the car I mean which is very different than what happened in the financial crisis, that's very very important they succeeded, lawmakers. Have also been very muscular, in their response if you towed up all, of what they provided, in fiscal rescue, it's about three trillion dollars, so that's close.
To 15% of GDP for. Context. If you go back to the financial crisis during, the crisis in the just, following that I had all up I had, all up all of the stimulus that was 10% of GDP now. In. My view this, was absolutely, necessary because, if. Lawmakers. And. That had not responded this way we, would have suffered and would certainly reset for a depression, double-digit, unemployment for, many years they, hit to our fiscal situation would. Be even worse so we had no choice there was a Hobson's, choice there's no good choice here we, had we had we took the least bad choice and that was we had to respond, but. The second thing I'll say is to, your point now, we're left with massive. Deficits. And much. Higher debt loads just just to give you a number if. You go before the financial crisis, you know from the. 60s, 70s 80s, 90s. Into. The 2000s. The average, national. Debt to GDP ratio was 40 percent, after. The financial crisis, doubled, to 80 percent we, made no progress in, the good times back, before this crisis addressing, that we just, punted, on that a bad. Policy, but we did that now, we're looking at a debt to GDP ratio that's, going to be a hundred and twenty. Percent when it's all said and done and, to give you context, there the all-time, record high was. Immediately. After World War two we had 120 percent that's GDP, and. I don't think that's sustainable, we do need to address it on the other side of this crisis, now. Hopefully we, have the political will to do, that we have. Not shown that we. Did not show that after the financial crisis but, I'm hopeful, on the other side of this that, we, will be able to connect, the dots between deficits, debt and how how, corrosive. It is on our long-term growth prospects, now, how it makes us vulnerable to any anything, else that goes wrong I mean who's to say we're not going to have another, whatever. Pandemic. War. You. Know there's things happen as we know you, know you and I've seen plenty of bad things happen, in our lifetime and we need to be prepared for that climate, change another good example something, we need to prepare for and so. We. Need to address this and you know I'm hopeful, that on, the other side of this we will I'll say one, last thing and, that is. We, may not have any choice, because, what's. Gonna happen in all likelihood is we're gonna get on the other side of this two three four years down the road in. Financial, markets global, financial markets, are gonna focus on this because the entire world is taking on a lot of debt it's not just us in fact we're in a better fiscal situation, than almost anyone else on the planet right, so the, global investors are just going to have a very difficult time. Managing. All of this debt that, is everywhere across the globe and there's, gonna be tremendous pressure I think on, all governments, including our own to get our fiscal house in order, that's. Something - we're. Gonna have to dress down the road. They've. Been occasions, when I've had, opportunity, to ask economists, like you about, the deficit, and how ultimately, the. Political, system does. Come, to a reckoning, with this and they, often, said to me about the only way out of this is inflation, to, kind of inflate your way out would, you would. You are there other alternatives I mean obviously you can raise, taxes, you can cut government spending. But. Those have not proven to be, particularly. Viable. Options. At least not. Often. Deployed. We've. Been through one, presidential. Election, where the deficit, was not even an election, and I think we're going to go through another and I don't see it being a big, campaign. Issue for either of the parties. Long. Term where does this go yeah. I don't think trying.
To Inflate your way out is a prescription. For success long-run. I mean that's just gonna make your economy, even, more diminished, businesses, won't invest your your. Underlying growth rates will slow in. The long and you. Will lose I mean there have been economies, - clay in the emerging world have tried that, that. Road it's, a very bad. Road it ends in a very bad place so I you know hopefully, we I don't. Think the Federal Reserve will. Allow that to happen fortunately. They're an independent agency, they, work really hard to get inflation, down they're not gonna you know they may allow for a little higher inflation for, a while you, know when we're in this period of concerns, about deflation disinflation. But I don't think they're going to allow that to happen. The, only way is. The. Obvious and you mentioned, it's gonna take require, both. Tax. Increases. And spending. Restraint. You, know you can't do it any other way and the, question is how do we generate the political, will to come, to that conclusion in, the only way in my mind that happens, is if, we're. Forced, to do that and that means global investors. Are, gonna have to say enough and interest. Rates rise and say look you have to address this or you're gonna go down you're. Gonna go this. Is gonna break your. Interest payments on your debt are, gonna be larger, than your defense budget, now nobody, wants that so. We're gonna have to fix this problem by the way this has happened historically I mean this is the way it works I remember, back in. There. Are many cases bottom the number one case historically in the 1990s. Bill. Clinton was elected president his, instinct. Was to step on the accelerator. Spending, and you know attack you know he was gonna spend a lot more money Bob, Rubin was the Treasury Secretary said mr. president that's a really bad idea because deficits going to rise and interracial, rice and remember the bond market vigilantes, they, came in and they saw what Clinton was doing interest. Rates spiked, and Clinton reversed and by, the end of the 1990s, we had a surplus, remember, Greenspan. The determine. If the reserve was testifying, before Congress, saying, our biggest problem, is this is hard to believe but is our biggest problem is we're gonna run out of tritrippy bonds. So. You. Know we do City we do see other countries who are wrestling with the same issues you mentioned, Asia. And, and the European economies, having. Similar kinds of situations, and not being any in a better position than we are how do we how, do we look, I mean one of the problems is is that investors, are looking at, alternatives. Do they have alternatives. For their money what, what do yer Appiah and Asian markets look like by comparison. Well. I mean Europe's in a world of hurt I mean they you, know we, got problems their problems are overwhelming, you, know I worry, in. That and there a specific case that they're. Gonna have another problem. Was keeping the eurozone together. You know unemployment starting, to rise again each, European nation, has a political, strong. Political, party that is very a. Euroskeptic. You know much like the, British and brexit, you have those kinds of instincts. In many of the European countries so. I think Europe is going to have to fight for its life the, eurozone is gonna have to fight for its life you, know in the next few years and, they're you know they've got negative, interest rates and they've got debt loads that are much higher than ours and they're rising very rapidly because they're also responding, this so, I think Europe, is really that's. Probably, the weakest link in the global economy going for Asia. A different story you know they. Are in a much better financial. Shape you, know take. The Chinese their, federal. Debt a particular federal government debt they've got local government debt problems with the federal government that is probably, 40 to 40 to. 40 50 percent of that's, a GDP so, they still have resources, that they can use so they're, in a better financial position, and they're more competitive, you, know but of course you know they, can't they, are very export, oriented they depend on the rest of the world for, their growth and so if Europe is struggling in the, right emerging, markets are struggling, then they're gonna struggle as well so you, know they've got more room to maneuver but, they don't have a ha a lot more room so. Let's, turn, back to the, crisis. At hand here we've, been characterizing. This in our earlier, sessions, as just, being a new risk that, people. Have to learn to manage that. We're not likely to have a one-and-done solution. Here that we're, going to have to work our way through this and that, and balance this whole health.
And Economic. Impact, thing we've been talking about it as though, you walk. Out on an. Icy, lake not knowing for sure how. Thick. The ice is and if we just do it a step at a time is that or is that an analysis, you agree, with is that the right approach yeah. I totally agree I mean I I don't think this is going to go away you. Know virus is not. We. Could get lucky we, could get a vaccine early we could get treatment that. Reduces. The health, risks. But, a prudent plan. You. Know the folks in Utah are great planners. Would. Not plan on that and they would prepare, for the, eventualities. That, this is, a problem. That's going to be, with us for the. Foreseeable, future and, as such it, does require that people. Learn how to adjust we have to learn our health care, systems need to adjust our, are in our businesses, need to adjust and. That's gonna be trial, and error we, got to figure it out you know exactly in each industry each business is gonna be different you know they've got different circumstances. And they propose different risks, and so to, mitigate those risks will, require different approaches. I do, think, it would be useful for all of us to really look at Asia as a guidepost because, the Asians are 2 months ahead of us in many cases, and they've. Got many different stories I mean I've got an office in Singapore, Singapore. Just shut down again they had a second wave they shut down again they're not gonna open up until June whereas. You go up to Taiwan or into, Korea. You, know they've they've been very aggressive in in the lockdowns and that's worked quite well and they've been able to manage, through much better but, every. Case, study is a good case study for us to examine, to, help us understand, what kinds, of things we should be doing and what. Kinds of things we not we should not be doing one thing I'll say I want, to say about Utah. Utah. Is probably, as well positioned, in each state in the country to manage, this in fact we at Moody's, do. Analysis of which economies. Across the country we're, going to hit get hit hardest by this, virus into. Which economies, across the country are going to be least. Affected, and of, all the 50 states Utah. Is the, second, least affected, New Hampshire being the, least affected and you, know we look at a lot of different measures.
We Look at you. Know how exposed to tourism travel how exposed to the virus poverty. Rates. Travel. Airline. Industry. Demographics. Relies, some people, moving in and moving out and all based on all those factors you thought I was doing very well and if you look across the state. Uh st., George is the most exposed, as you can imagine because of the travel, industry. Salt, lake and just to give a sense of that there's, 400 metropolitan, areas across the country roughly. St.. George is ranked, being, one as being the most affected, and that's let's say New York City. St.. George is ranked. 100, Salt. Lake is. 250. 300, and Provo. Is, very. Much near the bottom it's there's, only five or six other metropolitan area countries in the country that are better metropolitan. Areas their better position, to handle through so I I think, one encouraging, thing to take away from this is that, your state is is a, well positioned, to navigate. You through particularly, given, you know how careful. You've been in your planning to, prepare, for. The possibility, that this virus is gonna be with us for some time that. Is very good news thank you and a high compliment to, our state it's in its culture, to. Five questions. The first if you were a small businessperson, in this state and you were doing some planning. What. Would you count, what would you do and, then, secondly maybe you can meet, the theme of our gathering. Today which is a forecast, you can use what. Would be your forecast, be okay. So I. Think as a small business person you. Need to be very, proactive. In. Many. Regards but two key regards, the first is to, make sure you completely, understand. And avail. Yourself, of all of the resources that are available to, you and they're. Changing all the time there's recent there's coming from the federal government, I'm sure from the state and local governments, it's. It's a bit of a mess just, because things are being invented on the fly in changing. You know literally, in real time because, policymakers. Are trying to figure out what works best and how to implement it most effectively, but, you need to be on top of that and it's, also very. Viable to. Be. In close contact with. Your your banker your friendly banker figure out who that is if that banker isn't friendly enough go find another one and what, I have found that you know generally, smaller. Bankers, community, bankers. Are the most effective, in trying, to help small, business Nava gate through the blizzard of government. Policies. That are available to the businesses you also have to be incredibly, persistent, meaning, don't, give up you know yeah. The website, crashed yeah you're, not getting the phone call back just, keep at it you just got to keep doing. That the. Second thing I would suggest is. You very, proactive. In really. Thinking, about how, your business can be, hardened. To manage through this period exactly you, know depends on the business or your restaurant, or your movie theater know, are your barbers job you, know are you, are.
You A local bank are you who are you and what are you doing and how do you relate, and interact with your customer, and how should, you organize yourself so, that you mitigate any risk that, your customers, might get sick if they come into your establishment and really. Think, no kind of think how can I help my customer, without having them actually cut into where I. Oh doing, my work is there a way I can deliver my service, to them without, you know having to have that interaction that might put you and, them at some kind of risk and there's, a lot of creative ways of doing that and you just need to be out. There looking at what other people doing, and how they're out there thinking about this because that you know lots of really interesting ideas and by the way I'll say this the other thing is gonna happen if you don't do that you will be left behind because what's happening, is people, are. Figuring out different ways of living in working, and, on the other side of this we are all going to be changed fundamentally and, if you don't change your business model to be consistent. With those longer-term changes that are occurring and there are many of them you're toast so if you're not toast now you're going to toast then so you need to begin to think about how am I going to DAP my business, not only to this near-term problem we got but. To what. Will likely. Be a significant. Change in the business. Landscape going, forward. Well. You, all heard it some great, advice from, esteemed economist. Mark. Zandi and Mark we're delighted, that you're with us today I think you're going, to stay with us for a few men there as we listen, to a good friend of yours and a person that I know, you've. Worked with for a long time I'm, very pleased, to bring into our conversation. Natalie. Gartner, who is director. Of the Kim C, Gardner, Policy. Institute, natalie. Is a trained, economist. And has been instrumental, in a lot of Utah's. Economic, recovery, and Natalie I just want to thank you very much, for joining us today and, IIIi. Would, I'd like to just build, on what we've talked about, you've. Heard Mark's economic. Outlook I'd like you to maybe, localize. It a little bit, what, makes Utah's. Economic. Forecast, similar what what makes it different. Happy. To do that governor, Leavitt thank you for having me on the program I. Will just mention that, Utah. Is different, and similar, the way we're similar is that our economic structure is much like the nation's our. Employment. Structure mirrors, the nation's and so, that means that these impacts, hit us very similar, to the nation how. We're different is that we entered, this, what. Mark characterized, as a body blow to the economy, Utah, entered it very, well-positioned, our. Unemployment rate going into this was two and a half percent that's. The lowest in our history, and then. We also, have. Really prepared well in the sense that we have an unemployment insurance trust, fund that is great, you, know over a over a billion dollars at historic, levels our, state has rainy day funds that have been fortified through, this expansion and so, yeah. It's been a really, tough hit to the Utah kana me but, we entered it in good shape. Well. I was. I'm sure you were delighted as I am, I to as. Was I to hear Marc talk about Utah comparison, with the rest of the country, and for that matter the United States in, comparison.
To The rest of the world, we've. Talked about this event. However as an economic, tsunami that, that, hit Utah, at, the beginning of mid-march. How. Does it from your vantage point how does it compare to what's happened in the rest of the country, you. Know governor I'd like to put up a couple of slides to walk through that, we. Like to look at unemployment insurance claims. When, you go into a downturn they're kind of like a canary, in a coal mine they tell you very quickly what's going on and. Utah's. Unemployment, insurance, claims. Just, skyrocketed. We, now have, about a hundred, and thirty-seven. Thousand. Unemployed you Tong's it represents, about eight percent of our workforce. Mark. Mentioned that in the US the, unemployment. Claims have wiped out the whole expansion. A long expansion. In the u.s. in Utah. We wiped out three, years of job, growth in our unemployment, claims so. That's been a real troubling. To us, I have, characterized, this hit as being, very sudden, it's a shock as very. Acute, in terms of how significant. The hit was and. Then it's also concentrated. It's concentrated, in certain industries whether, it be tourism. Or fine, dining and, and, others that we know well, it's. Also been concentrated. In areas, you, know places that are tourism dependent, feel, this more acutely. The. Last thing I'll mention if we can just go to the next slide if we look at unemployment. Claims. By. We. Since. The start of this in roughly mid March we, have actually peaked and our unemployment claims have now dropped for three consecutive weeks and, this, goes in line with what mark says and, that, is that I think the worst of times for. The Utah, economy, will, be will go down in history as being April, twenty, twenty and I, expect, in the next sixty. To ninety days will actually start to see job increases again. That's. Really encouraging, I think for for, all of us to. Hear I I, know, that you've helped lead. The. Creation. Of Utah's, economic. Response we refer to it as Utah leads. Together, how. Does, that help, us as we begin to walk on to what we've referred to earlier is this, this. Icy. Lake that we are not sure how thick the ice is yeah. Well. I think the, most, important. Thing is it provided, for our state a plan and under governor Herbert's leadership and with legislative, contributions. We, actually have not only a plan but we have a nomenclature. A language, for how we think about this, mark.
I Don't know how much you've looked at it but we classified. Utah's having an urgent, phase, today's, May first our governor has basically. Announced. That we're now in the stabilization. Phase we. Expect that to go on for several weeks as, we figure, out again. Walking, on the thin ice what. We're dealing with and then ultimately we, will progress to a recovery, phase but. I'm, in, in sync, with what Moody's, Analytics and, and Mark Zandi says this is going to take time and I would encourage people to have a two-year, plan if we work through this. Well. I'd like to ask. You Natalie the. Same question I asked. Mark our the theme here is a forecast. You can use let's, hear your version. Happy. To do that I'm gonna go to the last of my slides, that's, called, Utah economic forecast and I just made, points there the, first is that, we. Have reached the peak job loss and I, think that's encouraging it's, not going to feel like it felt last month moving forward, but. I do think that we will have what I'll call an employment, drag moving. Forward that, means that people are going to return to a different, economy some jobs are not going to be there the economy, has changed and, so we'll have an employment, drag until we get a treatment or vaccine for this the. Second point is we've characterized, this as a dial not, a switch so, the reactivation, will be gradual, and that's, something. People need to plan for the urgent, phase lasted, about you. Know eight weeks six to eight weeks, I expect, the stabilization, phase to last longer, than that I, do believe the impacts will be unequal. Obviously. By industry, and even by geography. Our, county, that has been the hardest hit is Grand County where Moab is and and. Then, also Garfield. County where our national parks are and it's because of the tourism exposure, to. Final points I think it's wise for Utah. Businesses, to plan for some unevenness. In the economic forecast, so we're entered, the entered the stabilization. Phase but. We should be prepared, for fits, and starts as, this, virus, picks, its timeframe, and does what it's going to do we, try to manage it so, we could have some flare-ups, where we're gonna have to lock down the economy in a smaller area I don't think we'll see the blunt impacts, we've seen of a statewide, you. Know stay. Home stay safe kind of order but we. Will have some, unevenness, and then, ultimately, we'll enter. The recovery phase and I'm. Just encouraging, people to, think of that as a two-year, endeavor if we, get a vaccine, by Christmas, like some people are saying that would be you. Know that would be a very fortunate, vent but, I think it's wise for businesses right now to think, more in terms of, a of a two-year, time frame that, you reassess, regularly. Very. Straightforward. I'd. Like to bring. Both of you together but, before I do and. Ask, a couple of questions I want, to remind our participants today. That this is a participatory. Interact. And you have the chat function. That's right in the middle and the bottom of your screen and if. You click, on it and put questions, in we're, going to move to questions in just a moment so if you have questions for or.
Of Mark or, Natalie. Please. Put. Them there and we'll be with, you in just a moment I would. Like to just ask. Both, of you a question. There. Is this national, dialogue, that's, going on right now, involving. The. This, tension between. Economics. And health. And. If. You are healthy. But. You're being hurt economically. You tend to see it one. Way on, the, other hand if you're unhealthy, or. Feeling. Insecure, about your health and you're. Not being hurt, economically, you see health, as a priority, can. You help. Us square, these what what, ultimately, do we have to accomplish in order to move forward, mark, would you mind giving. Me some thoughts on that and then Natalie. Yeah. I don't view them as separate, things I, think, they're intimately, tied together I think. That. If. We. Don't address. The, health issues, if. We don't. Do. Do. Things that limit, the, damage, to our collective. Health then. That will undermine our economy you know there's, no. Wait new - no two ways about it I mean if we if. We. Stop. Sheltering, in place open. Up too quickly and, the. Virus comes. Back even stronger. We've, got an economic problem even if we don't shut down because. Think about that for a second, I think people will, in. In place. You know self quarantine because, they'll they'll. Stop, spending they'll stop going to stores, though, the. Businesses will be effectively shut down even if they're not required. To shut down so. It's, I think it's critical, that we. We make sure that we. Address those health. Serves, issues and we don't make the mistake of, opening. Up too quickly and allowing this virus to gain traction now, and I'll say. Asia, is a pretty good case study here. You, know those countries, that remain, vigilant. With regard to their lockdowns have. Navigated, through well. You, know Taiwan career, Rio those, economies are actually doing quite well because they don't have the same health issues that new, places in Southeast, Asia have go to Singapore, and. Singapore, is a is a very. Concerning. Case because that's 7 million people that. Strict. Control. By the. Government, the government has. Very. Strong, ability. To. Manage. The population there and what people do yet. They have a problem they had to shut down again so, I, did I don't view, these things as separate I view them as one in the same we have to make sure that we get, the health, issues. Right and, contain. This virus, otherwise. Our economy, is, going, to be a mess and I'll say one more thing in my, view, if. We get to, a second, wave that is significant. You know comparable. To the first wave we just experienced, and, are still experiencing, I mean new cases haven't. Really started decline nationwide, you're still running twenty. Five thirty thousand, per day and that's roughly where, we've been down for the last month so, it's not like they're come down if we. Have another surge. Though my. Guess is, they. Hit - the economy will, be such that we will be calling this period, Great Depression and both Natalie and I will be wrong about. April, being the apex, of this shock it'll turn out to be something else so, I you, know I view the addressing, the health care concerns as critical. To making sure that our economy can. Continue. To, improve going forward I I would not separate a really. Important, message Thank, You Natalie your thoughts, yeah governor the link that I would make is. To. Think of. Confidence. You know so we know that economics, runs on unconfident. And what we've had in April is a crisis, of confidence and, I, really think the link between health, and here, is confidence, and if people don't feel safe they're not going to go out and so. They really are linked, but, let's be clear we. Can't go another, nine, months two, years with. A lock-down economy. We have to learn to. Work with this virus and that's why I think it is prudent that we begin to reactivate. The Utah kana me and start. To turn that dial fortunately. We have a state that has an incredible intelligence, portal that's got data both on the health of this issue. But, also the economics, and the societal, impact and we, have a legislative, Commission that's monitoring, it advising. The governor and so, I think that Utah will do a very nice job at turning up that dial I am optimistic about that. Just. A couple sort. Of practical questions mark. I opened, this the. News this morning and I'm read, with a. Headline. That said the last week has been the best market, and, the best week of the stock market in 32 years right. Can. You can, you reconcile. That. Yeah. It's, a great question a. Few. Things one I don't think the script in the stock market has been completely, written here as you know we all know stock.
Markets Go up they go down they go all around and. I. Wouldn't. Count on this being the end of the story I would not be surprised if we see another significant. Leg down in in stock prices at some point in the not-too-distant future. Second. Thing I could say is you, know course the Federal Reserve has a lot to do with the rally in the equity market and that's more fundamental, and that's very positive so I do think we've seen the bottom in stock prices because of what, the Federal Reserve has done they they, you, know when stock prices hit their low back at the end of March that. Was when there was still concerned, that the financial system was going to be taken out by what was going on in the economy unfortunately. The fed directly that firewall, that I talked about and, it insulated, the financial system and since then we've been improving so that's a fundamental reason to believe that, while stock prices probably will go back down they're, not going back down to below, that you know that previous low, and. The third thing I'd say is. You. Know people, have a problem, you know it's. A fundamental issue what do I do you, know with my money. With my cash right I mean think. About it for a second I mean, interest. Rates right zero, literally, literally. Zero. And. Do I really want to you know put, my money there I'm. Getting no return, do. I want to put it into real, estate you, know at this point you know certainly, not in this environment when people aren't making the rental payments, in, many parts of the country you, know got a lot of folks, that are on forbearance. For their mortgage and what does that mean for future default, and house prices so. That leaves you with stocks, and so people are saying okay you know I'm gonna hold my nose, you know I'm gonna keep it in stock market and, finally. I stay it's a little more cautionary, a lot, of what's driving the stock market is. More. Technical, in nature you, know you have a lot of what. I'll call momentum, players that you know push things down when they're going down and push things up when they're going up so, I wouldn't read too much into the. High stock the higher stock prices today as I wasn't gonna read too, much in the very low stock prices that I saw back. A few months ago the you know the reality is probably. Somewhere in between the fundamentals, are probably somewhere between but, I'll. Say one last thing I don't. Think anyone, should, expect. To, get high returns, anywhere, on any, asset, for. A, long time you know that's not the way you're going to be able to save or. Rainy, day or for retirement the. Only way to do that is, the old-fashioned way and that is gonna. Save because. You're not going to get bailed out by high, returns, on the consistent, basis anywhere. Natalie. Let's. Just shift for a moment and talk a bit about other. Another, state issue that I know you. Have spent time at the Gardner, Center talking about, a bit and thinking about and. That's the whole question of inequality this. Is not affecting, everyone equally. Any. Thoughts about that, well. You know we went into this crisis, with, inequality. Being, you know something that's very much changing, in our country. I I, think that this will only exasperate. That you. Have a situation, where, you know let's say large tech companies, whether it be an Amazon and. Others that. This is very advantageous for, and there, will be a continued, consolidation. Of you. Know economic, might in in, large companies, that are tech, oriented and able to adapt to this new world. And, and, so I think that. The combination. Of that consolidation. And then the fact that this virus, we. Know is hurting, minority. Communities. And let's. Say tight. Urban settings. The. Economic, impacts, of this are, concentrated. And in. In, many ways that will be, another legacy. That we're gonna have to work with and when we get through this a difficult time. Coming. Here you're on mute.
Unmute. Yeah unfortunately other. Okay I think I think whoever is running I, think, training a mutant, on mute, you. Can hear me now can't you yeah, yeah we can hear yeah. We're the question now yeah okay quickly and really save me let's, go to questions. Excellent. We, have a couple, questions, we've got some viewers. Here from some international locations. Or people who do business in international. Locations, and so. One, has an international, ecommerce. Business. And they do business in Brazil Australia, and, Russia, where exchange. Rates are very important. And then we have another viewer from Barcelona. Who is asking a question about Spain, so, really overall. Oh. What. Countries, do you think will come out of this economic retraction. First and are there any things that people should be looking for if they do business, internationally. Mark. We're gonna call on you for that one sure. Well. I mean, a lot depends on on. The. Virus and the damage it's doing to those particular, economies. I, do, know that many, emerging. Markets, you mentioned Russia. And. Brazil are. Struggling. With the virus the, number of infections, are rising and you. Know a lot goes to their health care systems, and the, inability of their healthcare systems to manage through something like this we've, had our problems and, we're a very you. Know obviously wealthy. Highly, developed economy, with a very. Significant. Healthcare system so, they're getting hit. Very badly. It, also those, emerging, markets, are getting hammered, by. The. Decline in oil and other commodity, prices so, unfortunately. For energy, producers, particularly the oil and natural gas markets, cold they've, been crushed. Not only by the, virus. Impact. On global demand for commodities oil and, those, commodities but. Also by, this. Inability. Of the, Saudis and the Russians to come to terms on how. To rein. Back in the, supply of oil, so. It's like two black swans one, Energy CEO. Told me of a CEO of an energy company told me I'm being, creamed by two black swans the virus and this this, battle, between these you know two large two, largest producers. In the world produce. And. That's that's obviously, tough for, countries. Like Russia the. Middle East in you. Know Brazil Brazil also, produces. A lot of other commodities, that are getting. Hammered with, lower prices. So. The currencies of those economies are as you can imagine under. A lot of pressure and. So. I you know I think emerging, markets, are going to be probably. The, last. To. Really come out of this it's. Going to take a while for them to really, tackle. The buyers get on the other side of it and poor. Quality prices, to recover, so that they can. Get their economies back on track, the final thing I'll say is when you look around the emerging world a. Lot, does depend, on governance. So those. Emerging, economies, that have better. Governments. You know less corruption, and a better, managed. Independent. Central bank they're, gonna do better than those that don't, so yes, some.
Of The emerging. Markets we're talking about here their governance, is poorer. And so, that's gonna make it more difficult for them to recover that you're. Just not going to see the capital inflows to those economies, because, people are going to be very we're wary, of the. Governance issues around price crisis, management and, economic. Edge hey. And mark I'd like to just put a state-by-state, touch, on that even though that was more of a global question but I, think, will be interesting to our viewers I think, Nevada will be the hardest-hit state because. Of their tourism dependence. And right behind them Hawaii. But, that gives you a sense of how different the economies, are state, to state and. Then I'll also add, that Utah. Is an oil exporter and we do have a you. Know important, oil and gas industry, in our state that's, been very, hard. Hit right now this would be concentrated. In Uintah Basin in the, Uintah and Ocean County. Just. A follow-up question for. Both of you do, you see we've, had some, discussion, in the media about States being in some, states not, being as. Well-managed, as Utah has been over the years that are in some fist serious, fiscal circumstances. And, there's actually even talking, about talk, about states going, bankrupt. Is, that a serious threat. Nationally. And I'll give a Utah. Example. Oh you all may go first yeah. Okay, sure. Well. I am supportive. Of providing. Aid, to state, and local governments, that you know badly. Managed, well-managed. And, everything in between. State. Governments, are getting crushed by this, as you can imagine and. Of course when we say state and local government what we really mean. Our. Police. Fire. Teacher, you, know these are the things that you, know when you put it in those terms you go all that makes a lot of sense we got to help make, sure that they get the money that they need so. I, think. It's a, mistake. Not. To help state and local governments, at this point in time because. We're gonna lay off all those people that we need at a time when we really need them and, it's gonna do a lot more damage to, the, economy and, we're gonna lose a lot more jobs when we desperately need, those, jobs so. That makes no sense, to me that you would you know go down the path and to say oh. Don't. Worry go bankrupt. I mean are you kidding I mean that. Means state, governments, are gonna behind the financial 8-ball forever, because, investors, are gonna say oh you're gonna go bankrupt now, you got to pay me a lot more money if you're ever gonna borrow from me to, finance anything you know rode, an. Airport, renovation, you know school, whatever it is and the. Costs, to us. As citizens is going to be measurably, higher forever in future you, know the one thing that, distinguishes the. United States of America, from anyone, else on the planet is we. Pay our debts we pay her text you, know and, when, you when everyone knows that but by the way that's a founding principle of the, United States of America, when when, Alexander. Hamilton said to. The, people. Who financed, the revolution, when. That debt was trading for five cents on the dollar he said I'm going to give you a hundred cents on the dollar that was the best decision ever, made financial.
Decision Ever made on the planet, and we've been benefiting, from that ever, since and if, we give that up but, we lose that, forever. For every generation that's going to follow us that makes no, sense whatsoever. So. I think, it is incumbent, upon, lawmakers. Congress, and this administration to, come together and, pass. A piece of legislation, it. Gives you know right now the National Governors Association says, they need 500 billion you, know maybe that's a little more than they actually need but if I were king for the day I'd give it to them because that's going to go right to, teachers. Police. Firemen. Emergency, responders, healthcare profession everybody, we need, at this point in time so I you know I think it's. Just it would be just. About. Practice, policy, malpractice, if we didn't help state governments at this point sorry. Well, so the local Thai on this is something that I think is very, complimentary. Of Utah, I feel, like Utah mark, and governor Leavitt have been preparing, for this for the past ten years we. Have a very, prudent. And frugal, state, government local, governments, as well, right. Now we have, what. We call a working, rainy day fund our state has been spending hundreds, and hundreds, of millions of dollars of cash. For, buildings and roads that they're now going to convert to borrowing so. That's the first infusion, of money that our state will get mark. We have about, 900. Million dollars saved. Away and their various, budget reserve accounts or rainy day funds to help us do this our, state has been doing budget stress testing to be ready for this yeah, yeah. And then lastly I'll just say I teach public, finance here at the University of Utah and I teach my students if, you want to be a you, know fiscally. Prudent state, you, need to have a triple-a, bond rating which we have from all three major rating agencies, you. Want to have a line-item veto, which our governor has you. Want to have fiscal, notes that are multiple years so that legislators. Can't hide money, away, or spending away, you. Want to have a constitutional. Limitation, on how much you can borrow which we have and we even have a spending, or appropriation, limitation, in our state so. Utah's. Can be very confident. In state finances, and then I'm also with mark to. The agree the federal government helps us we'll put it to good use. Well. This has been a remarkable conversation. Mark, Zandi a thank you so, much for the effort that you made and for. Your contributions, not, just, today, but for, many years in advising. Our state and Natalie the, same with, you I know. Personally the conversate. Of the contributions. That you have made through. Many, many years as an economist, and as a leader, in the community so. With that we're, gonna draw, this episode. Of how, to rebuild. Your business and outer e and. How to rebuild our community, to. An end and I'm going to move. Back to, Dean. Taylor Randall, who will bid. Our farewell, and tell you about coming, weeks. Governor. Lovett thanks for being such a great moderator, today and again we think Nathalie doctor and Mark Zandi for being on and thank all of you listeners, today as well hope you picked up a, forecast. That you can use in your businesses. And your and, your in your planning on Tuesday. We're going to have a special, session for the construction, industry in. The state of Utah construction, and real estate and hope. That you'll, join us for that that'll be very industry-specific. Next. Friday we're going to be talking about building, confidence during, this next phase of recovery confidence. Both in society. And confidence, in your customers. Customers. As, well as confidence. In. Your. Employees, because, we know confidence, is going to be a big part of this recovery, thanks. Again to the George S and Dolores Torre Eccles foundation, for making this possible, keep. Your wits about you we're, going to get through this together thank.