'Worst is yet to come on job front' amid coronavirus: Neel Kashkari

Neel Kashkari, president of the Minneapolis Federal Reserve Bank and Liz Ann Sonders, chief investment strategist for Charles Schwab, appear on "This Week."
5:58 | 05/10/20

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Transcript for 'Worst is yet to come on job front' amid coronavirus: Neel Kashkari
Let's get more on all this of the president of the Minneapolis federal reserve bank Neel kashkari and Liz Ann Sonders. This tremendous rise off the bottoms of the stock market over the last three weeks even as we have seen these absolutely recordbreaking unemployment numbers, can you explain this great disconnect to the American people? Probably not fully. Everything that's been happening both in the economy given that it was a government shutdown by fiat effectively in order to try to stem the economic impact, and also the warp speed in which we saw the stimulus kick in both by the fed and congress, we moved into bear market territory at a recordbreaking pace. I think at the lows, when the market was down 35% you could argue that it was pricing in the type of economic carnage that we're seeing right now. I think the rally since that low, the speed in which we retrieved that, reflects a couple of things -- one, the stimulus, that represents more than a quarter of gdp and two, I think it's on the assumption that the market is looking through sort of the valley and that maybe April will be the worst month, the inflection point, I think there's some risks associated with that. You got the potential second wave of the virus, so I think the speed that the market rebounded does now present some risks. I think everything is happening in a much more condensed time frame. No question about that. Neel, we see the market pricing in that relatively rapid sustained recovery you just heard Larry kudlow saying, he expects a very strong second half of 2020 and a roaring 2021, is that realistic? I wish it were. This is more likely to be a slow, more gradual recovery. Unfortunately the virus continues to spread. People continue to get it. Unfortunately people are tragically dying. When we look around the world, there's evidence when countries relax their economic controls the virus tends to flare back up again. The more this goes on the gradual the recovery will be. If we see companies going through bankruptcy, empty strip malls for a while until new businesses form, the economic recovery takes longer. I loved to see robust economy, that would require a breakthrough in vaccine, widespread testing, a breakthrough in therapies to give all of us confidence that it's safe to go back. I don't know when we'll have that confidence. Ultimately the American people will decide how long the shutdown is. Right, and we'll be talking about that later in the program. But in the meantime, we have seen this extraordinary response from the fed and the federal government right now. You heard kudlow said it could add up to about $9 trillion, what more should we do as a fed governor, what are you recommending the fed do right now and will we need another congressional package? The fed is standing behind the financial system, clearly, to make sure that the financial system continues to run. This is first and foremost a healthcare crisis. Anything congress can do to support more investment in those technology breakthroughs will be money well spent. Number two, if this goes on for a long period of time, I think it's going to go in some phase for a year or two. Think congress will have to give assistance. As you said, it's really around 23%, 24% of people right now who are out of work today. If this is gradual recovery the way I think it's going to be, those people are going to need more help. And Liz Ann, what are advice are you going to your customers right now about to think about this market in this economy? Again, we're reminding them that the speed with which the bear market unfolded, the rally that has happened since then, the compression in economy is unlike we have ever seen, you can apply the same kind of logical thinking around investment that applies in this short-term environment, hopefully you had a plan, you weren't winging it, diversification across economic classes, and then use the ability and benefits of rebalancing. So trimming into strength and adding into weakness, just staying on the right side of the trade. Those tried and true disciplines. Too many investors think that the only path to success requires top picking and bottom ticking. That's gambling on a moment in time. Even when what's happening is in a more condensed frame of time and that's the best advice we can give in this environment. Finally, Neel kashkari, you have access to the best economic information in the world. What should everyone be expecting over the next several months as we wait for effective treatments, vaccines, treasury secretary Steve mnuchin this morning is saying that unemployment could go as high as 25%? Yeah, the worst is yet to come on the job front unfortunately. It's really going to be, as these states start to reopen, and as thee these businesses start to reopen, obviously we need to reopen safely and we need to monitor and look for signs of things flaring back up. We may have to clamp back down again as the virus continues to spread. To solve the economy we must solve the virus. Let's never lose sight of that fact. Neel kashkari and Liz Ann Sonders, thanks very much.

This transcript has been automatically generated and may not be 100% accurate.

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