Staffing CEO Sees Unemployment Maxing Out At 13-15%

and one thousand in March, just extraordinary. The unemployment rate jumped to four point four percent, the highest level since two thousand seven teen. We had those jobs claims yesterday, six point six five millions of the jobs numbers. The uh employment situation in this country deteriorating just extraordinarily rapidly. To get a sense of kind of how bad it could get, we welcome Tom gimbal CEO of Global Staff and Company, Last Sound Network. So Tom, thanks so much

for joining us. Let's start right there. How bad do you think this is going to get on the jobless front? Oh? I think it's going to get bad. But the numbers that the government reports aren't going to be that applicable because what you're going to see if you see the jobless claims come in at such a high number, then the unemployment claims come in and under a million. Hard

to believe. I'm saying that's an optimistic thing. But then with the p p P program, you're going to see that the unemployment claims go down because these people that filed will be back on their employer's payroll for the companies that get that money. And then we'll see in a higher unemployment number when traditional non restaurant, non hospitality companies have to let people go and those people file.

So I think the May and June numbers are going to be a lot different than than what we're seeing, and it's really not maccurate read on what's going on. Tom. I think that everyone agrees on that nobody kind of put too much faith into the actual number. However, they did try to dig in to get some signs of how the economy was doing before the real shutdown began

in the United States. I was really looking forward to speaking with you, in particular, because you've been particularly optimistic about a lot of some of the dark clouds for a long time, and I'm wondering, based on the fact that we saw companies freeze high airing before even the US economy shut down in Earnest and the true pain began. Are you revising some of it optimism? Well, I mean this is gonna go. Yes, my My whole perspective has

changed immensely based on this. And I think we're gonna be in a in a bad place economically for probably longer than a lot of economists are saying. Is from what I'm seeing and and and what I believe to have happened. Now, what I think was going on with some companies prior to the shutdown was there's always a little bit of paranoia of are we in the last

innings of the ballgame? And that was coming on. And there was also the fear that while it hadn't hit America before the shutdown, we had seen what was going on in China, and there was some precursor to that. So there were some bigger companies that really saw a little bit of the writing on the wall and started

to prepare for it. But I was extremely bullish. Most of the companies I talked to, their first quarter numbers were really really good in going into March, and so now but with this, we're going to see an extended period. What's really going to happen that I'm quite certain of is a cash crunch coming in Q three and maybe

even into Q four. So companies that are still spending right now to an extent, they're not going to be paying these bills for three, four or five six months, and that's gonna hurt some small and medium sized companies. So tom just thinking a little bit forward, where do you think unemployment rate, the real unemployment right in this country will will go over the next couple of quarters. I think there's no doubt that it will be double digits.

The question is going to hold at fifteen percent, twelve percent, or is it going to get to twenty I think the estimates oft are very high and a little bit the sky is falling. I don't see that happening from what we've seen in China, that the rebounding of that, and then while spending may not come back as fast as we like, the consumer programs that we've set up the government has with PPP and the rebate checks, I think that it will come back and I think it

maxes out probably around thirteen to fifteen. Tommy said that you thought that the pain would be felt for a lot longer than many economists even think how long will it take? Now? My guess is that we're looking I mean, for a real ian think about this. In two thousand nineteen, there were people saying we were still in a recovery from two thousand and eight. So this is while it's it's much faster and everything's happening at once, so there's

a belief that it will come back faster. My guess is we're looking at at late early where it really feels que quote unquote normal from from a standpoint of hotels and travel and restaurants and and then and and traditional corporations hiring, it's going to be a little bit of a of a long sladre. So Tom, give us a sense of kind of we've seen obviously from some of the restaurant industries, some of the travel industries. Where do you think the next industries that are going to

be at risk for significant job losses? Well, my my take on that is is you really don't know. However, what I think is going to start happening is and this will be an interesting thing to see through the big payroll companies, the a DP in the paychecks because as companies lay people off. They're not processing payroll for the same numbers, and the way payroll companies get paid on their traditional lines of businesses how many checks they

processed a period. So as those numbers dip, you'll see that it's starting to affect the technology and software companies. And then you have software user licenses like a sales Force or linked In, And these companies, while huge and can withstand a setback in the economy, they get paid on a per user license and there's contracts the companies signed.

But if you start to see that employee companies layoff employees, anything that's build out to their vendors on a per user basis, like software like payroll, you're gonna see those get hit as well. So I think it's going to come into areas that a lot of people aren't even talking about yet. Tom Gimble, thank you so much for being with us, and I hope you do come back and give us a sense of the progress being made and instr update us on your views. Tom Gimble is

chief executive officer of the global staff and company Lascell Network. Paul, a mystery listener, made a suggestion to me recently, um that we have a dad joke of the day and that during this period of time, everybody needs a little bit of levity, and he had a suggestion for one. So we're gonna start this, and it is why can't a nose be twelve inches long? Why? Because then it would be a foot Okay, So if you think you could do better, if you let's start this though, And

if anyone wants to write in suggestions, you can. You can email me l Abramoids at Bloomberg dot net. Um, and let's do this. Let's have a dad joke of the day throughout this whole period because everybody kind of needs a little bit of a break because it's only going to get worse when we look at the numbers and there's a lot of gloom and doom and Lisa Bromoids along with Paul Sweeney and this is Bloomberg Markets.

While we keep hearing reports about how the hospitals are completely over whelmed, nurses and doctors working around the clock, having to buy all this additional equipment, having to pay for hundreds of thousands of new patients coming through their doors for extensive hospital stays, unventilators, all very high cost, and there's a question who's going to pay for it? Donathan. Dr Jonathan Grouper as a professor of economics at the

Massachusetts Institute of Technology. He was one of the key architects of Obamacare and Romney Care, and he joins us now from Cambridge, Massachusetts. Dr Grouper, thank you so much for being with us. How big of a cost do you expect this to be for the health care system? Do we have any ballpark figures at all? Yeah, it's it's a great question. So there's sort of two ways to think about it. One way is how big is the cost of COVID nineteen And here I've seen estimates

ranging from a hundred billion to five hundred billion. Uh, A hundred billion would be fairly manageably absorbed, five billion would not um But that's not really the right number. The right number is what is the net effect, which accounts the factor losing a lot of other business. So there's a lot of of places that are a lot of services aren't being delivered, in particular elective surgery. So figuring out the effect and healthcare sector has actually been

complicated because on the there's being scissored. On the one hand, there to increased demand for this COVID nineteen services. That's gonna cost a lot of money. On the other hand, they are being um, they're losing all their sort of elective surgery business. So professor Okay, So a hundred billions to who at the end of the day pays for that, is that part of some federal fiscal stimulus that goes to the healthcare system directly? Uh No, A lot of

it's gonna be private insurers. Um So, basically, once again, the scissors is exactly the opposite for private insurers. So to the extent that um, the elective surgery that doesn't happen never happens, then that hurts providers, but help private insurers. To the extent that there's more COVID nineteen cases, most of those people will have private insurance, and so that hurts private insurers. That helps the writers because they're not

getting paid for that. Um So, I think really a lot of the costs are going to come from government and government through the Medicare and Medicaid program, but really private insurers with the primary payer. And then finally we have the uninsured rapidly increasing number with the huge job lost numbers we've seen and they're the questions who's gonna

pay for them? And we haven't resolved that yet. Well, and I'm wondering, do we have a sense of how organized the effort is to try to coordinate payments and not necessarily create a complete mess of bills and and and bankruptcies personal bankruptcies is people try to grapple with the new reality after a visit to the hospital here, you know, I I think there's a huge issue, and there's a huge coordination issue, because remember a lot of

our private health insurance is built around restricted networks, and the last thing you want to do is restrict where someone can go. You at them to go to the hospital has a space for him. Then you've got the fact that many people have high cost sharing deductibles and things where they haven't spent much health care yet this year, so they're gonna hit with their full deductibles. And then you've got the fact that many americ twenty million Americans

and growing are uninsured. So I I think we have a big problem. I think the federal government hasn't taken very seriously as far as I can tell um, when they've been pushed on it, they've just said, well, we'll just divert. The latest is President Trump's announceds can divert some of the hundred billion dollar fund for hospitals into helping care for the uninsured, which is the last thing we need because the hospitals need that money. So I I think we need, we we urgently need much more

action on dealing with these uncovered healthcare costs. So does that bring back some type of Afformable Care Act? Do you believe you think there's political will there for that? Well? I think you know, the Affordable Care Act was actually designed for situations like this. Remember the whole idea is that are you know, our reliance and employer sponsored insurance is a little fragile to situations like this. Unfortunately, the Affordable Careacter set up exchanges that people will be able

to go to if they lose their jobs. And so I I think we're well prepared for that. UM in terms of having this exchange, that should make people appreciate the fact Affordable Care Act is there. Uh. That said, um, many people uh still can't afford insurance on the exchanges, so we're gonna have to think what we're gonna do for them. UM. And many people also if they have UM private insurance. UM, they might not want to go in exchange insurance. They wan't want to keep their employer insurance.

They can do so buying buying COBRA, but that's quite expensive. Dr Gruber, if if you would, can we walk through a scenario in which the exchanges aren't reopened and Obamacare is not expanded, and there is no sort of redux in with respect to widening of the of the healthcare safety net. What happens, especially to the hospitals. If you have an increase in uninsured of newly laid off people without their their corporate insurance coming to emergency rooms for

prime care, what is that due to the hospitals. Okay, so so let's let's let's be clear about this. So when we talk about the a c A did, there's two pieces. There's the Medicaid expansions, which means that everyone losing their job in thirty and thirty five states, everyone losing their job who's falling to be very poor will have free public coverage, and the other states they're totally

out of luck, unfortunately. So one thing we can do is we can try to get those or calciern states to actually serve the interests of their residents rather than nasty politics, and actually span their Medicaid programs. In terms of the exchanges, there's no issue of reopening the exchanges. The exchanges actually have a provision that if you lose your job, you can sign up, So this is there's a bit of this kind of idea of a special

Roman peer is a bit of a red herring. Um for people who lose their job, that's called the qualifying event, they can always sign up for the exchanges. So the exchanges are there for people. Um that said, um, you know states that haven't expanded Medicaid and people who don't go on the exchanges will be insured. And we're going to have to deal with the fact that hospitals are going to have to are going to be unable to eat those bills, and so part of part of the

Hospital Bailout Fund is designing to help with that. But it's not enough money, and we're going to have to really have a new initiative either expanding access to these exchanges for people, or you could all think about a federal uncompensated care pool of the nature of the type that other states that some states have, where we basically absorb the uncompensated care costs of hospitals for COVID nineteen patients. We're gonna need some kind of initiative of that type.

Jonathan Gruber, thank you so much for joining us and giving us that color on the health care system is that it grapples with the coronavirus. Jonathan Gruber, Professor of Economics at m I T just really interesting stuff. Least,

it's a big issue, I gotta say, Paul. I mean, I'm struck by all of these needs, and they're all so important, and they're all so expensive, and really my question is just going forward, how all of these different needs are going to be prioritized at a time of crisis and when there isn't necessarily the economic growth to back it. Yep, and the states are dealing with at the federal government's dealing with it, and individuals are dealing

with it. We've been listening to Governor Andrew Cuomo of New York talking about the latest from New York State, which is the epicenter with the number of cases crossing the one hundred thousand level. He talked about the dire shortage of equipment and the need for it and the idea that the state will take ventilators and other gear from businesses that do not need it right now, they will either return it or compensate those businesses for those

items later. Also, he was talking about the apex coming very quickly and how all the hospitals here are now essentially COVID nineteen hospitals and that the jab At Center was going to be entirely a COVID nineteen facility. As the US tries to battle the epicenter of the crisis, which is at the moment in New York, saying that people are getting together volunteering, that there are hundreds of healthcare professionals coming to the city to volunteer their efforts

in the city. New York City is uh the predominant majority of the cases currently. Paul really really dire situation that he talks about four healthcare workers in the hospitals and UH and laying it out is he becomes sort of the spokesman for the crisis right now in the

United States. He really has been his UH these daily briefings that we can kind of must listen to, must watch, uh kind of to get information to get a sense of how this is really playing out uh down on the front lines and talking about an interesting concept Lisa about you know, we need the equipment. We being New York State, need the equipment now when we're done with it, and we will be done with it, but probably first uh then we will deploy redeploy the resources, including personnel

to other parts of the country. So interesting concept about a national response. Yeah, and a real focus on equipment and making equipment. Telling even small businesses, if you could have cloth and put the strings on the sides, you can make a mask, you can make some medical gear. Do it. We will compensate you for it is a business opportunity, and you would think it was a business opportunity for three M, one of the biggest manufacturers of a lot of items, including things like face masks, and

yet there has been controversy over their efforts. I want to bring in Karen evil Heart, who covers all things industrials for us at Bloomberg Intelligence. Karen, can you just lay out what the controversy is around this company? Uh? You know, um the president is saying that a they didn't UM, they dragged defeat in ramping up production. Number two, they're sending UM product to other countries and three that they're not doing enough to fight the price gouging that's

going on in the in the personal youth market market. UM. And UH number one, they've doubled production in UM since since January. In the US UM production they're doubling it again UM over the next several months. UM. One of the problems is a lot of this production doesn't The masks aren't not that many are made here. UM. A lot of them are made overseas, and a lot of the countries have been holding the masks for themselves. UM. You know, honney Well barely makes any masks in the US.

They largely import everything. Um G three M makes about a third of their masks here, but it's not enough. So it's uh, you know, it's hard to say. And on the price gouging, they have stepped in front of that and they've been, UM, you know, trying to fight that. Who knows if they did it quickly enough, It's hard to know. So, Karen, I mean, is there an opportunity, Is there an ability from some of these companies, these manufacturers like three M to significantly ramp up production and

really make a difference in the near terms. Governor Cuomo so earnestly, you know, asked for I think collectively, Um, it could matter like um, honeywell, just now repurpose the plant in Phoenix to make some masks in the US, because most of them don't come from here. But it cannot happen overnight. And there's a supply chain impact as well. There's there's shortages of certain products, parts that go into the production of these masks and the productions of the ventilators.

I mean I I read an article where Phillips that it's six hundred and fifty parts go in components go into ventilators, which is more sophisticated than the respiraries. But nonetheless, that's a lot of parts to round up and round up overnight. You know, companies typically take time to ramp up um and everybody scrambling to get up as quickly as possible. But it cannot happen over and that's the issue.

I would think though that with the masks it would be a lot easier or why can't there be a more domestic supply chain if there is an issue of importing some of the parts, Well, they do have to they do have to reprioritize a lot, but a lot of you know a lot of componentry for a lot of things like I cover h VAC, A lot of the componentry comes from someplace else. Um, we have really I don't want to say decimated are our domestic supply chain, but we certainly shrunk it. And I think people started

with the tariffs. We've seen companies, um change, you know, make alterations in their supply chaine to have more products locally. But that is a structural change that takes time. Um. You know, Um they three and the other thing is three M said of their masks. So went to industrial and the reason is that, you know, they have all these requirements, health requirements and social requirements. You could not use industrial mass, which was the US production for health

care use now you can. They there was a monthorization that allowed them to do that, but only ten percent on what they made here went into healthcare. So you ten percent of sixteen million is not even enough for you know, two weeks in New York. So, um, it will happen. It is happening. It can't happen overnight. And now that they will have all the supply chain prior

ties towards them. And you know, um, which is another step that the government is taking that anything in the supply chain is also going to be under the d p A so that all the need so that more of the needed componentry, etcetera. UM, and a lot of it's like chemical you know, like polypropyline stuff like that can get to the manufacturers of these masks very quickly. I kind of note that hunt Well isn't getting that

banged at all and honeywell does we produced many here? So? UM, just so, how how is how is three M responded to some of the attacks from the administration. Well, you know, I know this management micro Roman is a pretty you know, even level headed guy, much more low key than the prior CEO. But he's come out as well as he can swinging and you know, if you hear some of his commentary, you know it's worded very diplomatically in the releases, but you know, on on TV today said the claims

are completely false. Um, that we're not doing enough. We're killing ourselves to get this production up and the ray scouching thing. We've been very vocal on how we're trying to fight that. UM. But a lot of the distribution. A lot of the masks go through distribution, particularly industrial masks go to distribution and then they can go anywhere. So they have to take control of that so that everything that comes from them, they know where it's going.

You can't just go to a distributor at this point, and all of it's being reallocated to healthcare. Anyway, the distribution was largely the distribution part was through the industrial chain, and a lot of that's being re jittered to go to healthcare. So, I mean, he's pushing back, and you know there are costs and benefits of doing that, you know, So maybe because Honeywell is laying low, you know, they're being left alone. I don't know. Count ubal Heart, thanks

so much for joining us. We appreciate that, Count ubal Heart. She covers all things industrials for Bloomberg Intelligence, the research arm of UH Bloomberg and looking at three M right now in the stock is down about two point two today, down about a year to date, so uh, interesting time for a lot of these companies. Say they try to scramble, Lisa, and it doesn't help to get pressure from book, pressure

from the president via Twitter. So but we'll see companies kind of revamping, rejiggering, trying to react as aggressively as they can, and then include some of those industrial companies like three M and Honeywell that Karent just mentioned. I'm so pleased to say we're joined by Tim O'Brien, a senior columnist for Bloomberg Opinion, joining us after a hiatus.

Thank you so much for being with us. Tam, you wrote a column but I thought was fascinating looking at the fate of small businesses following the coronavirus shutdowns, a pretty dismal assessment. Why do you think so many small businesses don't have a chance of coming back after this whole thing is over. Well, you know, you know the stimulus plan right now, Lisa essentially envisions getting them across a bridge for the next two months or so. It's

a meaningful amount of money. You know, it's a two trillion dollar package. Billion of it is four small businesses. Small businesses employ the lion's share of American workers. Uh. You know, they contribute a huge portion uh to annual GDP, nearly half um. But the reality is as as mammoth as this bill is and as well intentioned as this aid is it may end up being just a gigantic

band aid. And I think the things that small businesses, policymakers and Americans have to come to terms with is this is probably just phase one, and you know, is it being engineered regardless of that in a way that actually puts small businesses on their feet for the long term. So I think that's the first issue. The second issue

is how's it going to be administered? And there's already a lot of signs that the Treasury Department has not given banks clear signals for the standards around uh, lending the money out and handling applications. The banks are complaining about it. Small bisusinesses are already wary of it, and it could end up being a bit of a train wreck if it's not managed well. All right, So Timson, again, what are the They're key issues is to get capital

into some of these small businesses. How much how much you know reserves does a typical small business have it? I just don't think it's that much. It is not even Paul. You know, even in the best of times, running a small business is a perilous endeavor. Uh they you know, the failure rate is always high because small business are risky. But even for established small businesses that have been in in business for a while, they rarely have enough cash on hand to cover more than a

few months of payroll and operating expenses. Payroll is usually the biggest piece, which is why a large portion of this of this three fifty billion is targeted at payroll costs. UM. So you know, it's it's going to be extremely tricky and uh, and we'll have to give it a little time to roll out. But Steve Manuchin this week touted UM the launch of the program today to help small businesses, which is today UM. And there's again already signs that it's hard to get this, you know, the blood flowing

around this. We have to give it a little time to wait and see. But it's you know, it's going to be tricky and and the thing about small businesses too is that they're very tied up in people's hopes and dreams. Small business owners, you know, run companies in all of our towns. They give a lot of character and flavor to the life of a town, and and they tend to very deeply personal connections to their business. And the poignant and sort of tragic piece of all this.

Beyond the economic impact, is the loss of all those hopes and dreams too, Tim. I have to wonder, you know, there is sort of the program, and we have heard about the unclarity around exactly the interest rate and how banks are exactly going to make these eligible for a guarantee by the government. There are all sorts of question in the rollout of this. But putting that aside, there also is the question of the transformation in the economy

stemming from the coronavirus. Is effect move towards Amazon in particular, and I'm wondering how much that will accelerate this beyond any kind of financial program that the that Congress could pass. That's a fantastic question. You know. Uh. President Trump is referring to himselves as a wartime president. There's been a lot of talk about this whole event, the financial and

public health, the epic sides of all this. That this is a like a you know, a wartime moment, and we know historically that that society changes immensely before and after any wars. It happened before and after World War One and World War Two. I think the thing you're hitting your finger on right now is UM, I don't see how inevitably digital commerce and and distance commerce UH don't come out of this even more triumph and than they were before the virus took off. Brick and mortar

retailers were having longstanding troubles competing. You know, Macy's UH furloughed a hundred and thirty thousand, the majority of a hundred of its hundred and thirty thousand workers earlier this week because they're having had had trouble competing before the virus, and they may never really be competitive again. So I do think you're going to see this epic transformation in the way that business is conducted and how consumers interact with businesses. Hey, Tim, thanks so much for joining us.

We really appreciate you coming on the program. Good to have you back. Tim O'Brien, senior columnists for Bloomberg Opinion, in his column three fifty billion dollars won't save us small businesses, suggesting LI so that UH it perhaps needs to be even more, needs to be more direct, but even that small businesses unfortunately are going to be in for a very tough road ahead over the next several months. Are that with the initial claims that we got yesterday.

I mean, we'll only see more of it, right, but we got a sense that basically, if you can't keep the lights on, then you fold. And there isn't much by way of resources to keep things going or diversification. And the question is, just from my perspective, how quickly can things get ramped up and will they ever return? Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm

on Twitter at pt Sweeney. I'm Lisa Abram Woods. I'm on Twitter at Lisa Abram woyds one. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio