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Eric Lascelles, Chief Economist, RBC Global Asset Management, sits down with David Richardson to discuss his outlook on the global economic impact of COVID-19. (Recorded on March 26, 2020)


Hello and welcome to RBC Global Asset Management daily. I’m your host Dave Richardson. This is a daily synopsis of interesting things that are happening in the markets. I know a lot of investors are concerned about what's happening with respect to the COVID-19 virus and markets around the world. We're going to bring you on a daily basis insights from experts at RBC Global Asset Management to answer some of the common questions you'll have about things that are going on in the global economy, things that are happening with the virus and certainly things that are happening with markets. I'm really pleased to be joined today by the Chief Economist at RBC Global Asset Management Eric Lascelles. Eric welcome to the podcast.

Thanks very much. Happy to be here.

So Eric the big news this morning was the release of the weekly jobless numbers from Canada and the U.S. Big numbers! They’ve made big headlines. What do you make of the numbers?

Well they certainly are huge figures. We’re talking 3.3 million more unemployed people than a week ago in the U. S., more than a million additional unemployed in Canada. So these are truly unprecedented numbers. We have not seen changes of this magnitude and it does speak to the remarkable severity of the decline in economic output that is happening as a result of this quarantining, but I would put a couple of things into context here. So the first is, unlike a plain vanilla recession where bad news start to slowly stack up and then gain momentum, this is something in which governments basically said: Don't go to work! People aren't going to work and you get just whacked extra hard all at once. And so the fact that we got more than three million new unemployed in the last week in the U.S., — there could still be big numbers in the coming few weeks, but we're not going to keep trucking along at this number for the next three months or something like that, so it is unusually front loaded and of course it’s coming from this artificial temporary thing which is government saying: Stay home, don't go to work! And so there's reason to think, when this is over, perhaps we can see a faster than normal rebound as well, but I certainly don't want to diminish the significance. This is millions of very real people losing their jobs, now being put into a position of extreme uncertainty, and so it is a very serious state of affairs. We've done some of the economic modeling and indeed the economy is going to shrink quite a bit for a period of time, so this is quite real. I'm sure we'll get into this but I do want to emphasize: we do also see some important progression occurring in terms of countries perhaps beginning to gain control over this virus, and some scenarios in which how this might play out over the coming weeks and months.

And through this, even as you're trained as an economist, but you’ve had to develop a bit of expertise around epidemiology through the process. The markets reacted quite surprisingly to these shocking numbers, and actually have performed fairly well today. What do you make of that and does that connect to the progression we're going through with respect to the virus globally?

I think it does. So let's start by acknowledging that I think we all have I wouldn’t say a good handle, because this is a work in progress, but we have nine different economic growth scenarios, — if that doesn't tell you already we don't have a perfect sense of how this is playing out. But nevertheless we know it's quite a significant hit. The consensus wasn't quite for 3.3 million job losses in a week in the U.S., but it was for millions, and so there was a pretty good sense for that. And keep in mind, as much as we do quite rightly look at things like jobless claims, here's a weekly indicator, it's quite a fresh number. We're not going to get a good sense for GDP for months and months, but we see some other things happened before, keep in mind we have other information already as well, and so for instance we've been watching China very closely. They went through this first. We've been able to see the approximate decline in their output, the approximate hit to their labor market. We can even see quite remarkable things like movie tickets sold, and we can see subway usage, we can see traffic congestion. In North America and around the world we can even see restaurant bookings and number of flights being taken, and so we've got some quasi-real time data that already more or less guided us to this kind of conclusion, I would say. And so I it's not a complete shock, but obviously it's not a good thing either, and I suppose markets at this point are saying: Well you know, we're forward looking; we have certainly retreated significantly over the span of the last month or two. And they're still comfortable with these kinds of job losses, that is the assumption that it's already essentially embedded into the market. I can't promise that this is the worst it gets or not, but the market is making some reasonable assumptions here and isn't being phased by these developments, now that they're actually coming out instead of being speculated about.

Well Eric that is fantastic perspective and thank you again for joining us today.

It was my pleasure. Happy to do it.

And please check back regularly for updates from experts at RBC Global Asset Management, like Eric, who will give regular updates on perspectives in the global economy, markets and the progress of our battle with COVID-19. Thank you for joining us.


Recorded March 26, 2020

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