Speaking on CNN, former chairman of the White House Council of Economic Advisers Kevin Hasset said a global recession is imminent, with a loss of 1 million jobs in April.
“I think that the odds of a global recession are close to 100 percent right now,” Hassett said. “I think in the U.S., we’re going to have a very terrible second quarter. At The Lindsey Group, we just ran the numbers carefully over the weekend, and we think the second quarter will be about minus 5 percent.”
Hassett pointed out that although “millions and millions of people” are typically hired and fired each month, the spread of the coronavirus means hirings will remain close to zero and firings will continue, leading to “one of the biggest negative jobs numbers that we’ve ever seen.”
“We think the jobs number in early April might be as much as minus a million or so because nobody is going to be hired next week,” Hassett added.
You can watch footage of Hassett’s remarks below.
— CNN (@CNN) March 16, 2020
On the matter of the Federal Reserve’s decision to slash interest rates and buy $700 billion in Treasury securities to protect the United States’ economy from the effects of the virus, Hassett was also critical. (U.S. stocks plunged as investors responded to the agency’s measures.)
“I think that’s why the market is responding the way it is right now to the Federal Reserve’s action,” Hassett said. “I think the market understands that its Fed, with its hundreds of economists, has really started to think about the numbers coming in and is really sure they’ll be terrible, which is why they did this extraordinary action.”
Lawmakers could potentially “get ahead of the curve” if they consider different avenues, Hassett added, including President Donald Trump’s proposed payroll tax cut.
“The way to think about it is that, you know, businesses are going to have to pay wages for people even though there aren’t a lot of sales because everybody is staying home,” Hassett said. “So if you have a payroll tax holiday, basically what you’re doing is giving a big chunk of payroll both to workers and firms to help get them see through three or four months that are going to be super negative.”
The payroll tax cut has been criticized for being a simple stop-gap measure, and an analysis conducted by the Penn Wharton Budget Model (PWBM) found that will cost $807 billion, more than the 2008 bailouts, while not protecting low-income workers and households most likely to be affected by the pandemic’s economic impacts.
But Hassett did not discount the need for some kind of stimulus.
“If Congress doesn’t understand that we’re looking at maybe one of the worst jobs numbers we’ve ever seen, and we’re looking at a negative GDP number in the second quarter that’s really large, if they don’t understand that, then they cannot do a stimulus for sure,” he said.
He added: “But they need to understand that and they need to give a big stimulus right now. If they have a better idea than a payroll tax holiday, then they should pass that, but if they don’t take a big action, then that minus 5 percent will to spread into the third quarter and you’re going to look at a recession. “
The Senate returns to work today and will take up coronavirus relief package that the House passed last week. Legislators are already considering more economic stimulus, including the payroll tax cut and a tax rebate.
“It is clear that confronting this virus will take boldness, bipartisanship, and a comprehensive approach,” Senate Majority Leader Mitch McConnell (R-Ky.) said in a statement. “Discussions are already underway on these key pillars. The Senate is eager to work with the Administration and the House to deliver the solutions our nation deserves.”