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“This is by far the biggest hit to the U.S. economy and the global economy that we’ve seen since the Great Depression,” he told Gerry Baker on the FOX Business' WSJ at Large. “It will make the Great Recession look like a soft blow, and we all know what we felt then.”
The pandemic's effects on the economy can be understood by how it has depleted the workforce, El-Erian, the chief economic advisor at the financial services company Allianz, said.
“In just three weeks, 17 million people joined the unemployed, which is 10 percent of the labor force,” he said. “And that change in three weeks is equal to the highest level we reached during the Great Recession. So this is a massive hit to the economy, unfortunately.”
The federal government's efforts to mitigate the blow to the economy including the $2.2 trillion dollar CARES Coronavirus Relief legislation aimed at keeping businesses afloat and getting federal money directly to people in the form of direct payments, likely prevented the decline from being worse, El-Erian said.
“What Congress, what the White House, and what the Federal Reserve have done is astounding, absolutely astounding,” he said. “It is unthinkable that they would move as fast and with the magnitude they have moved.”
President Trump and others are talking more and more about reopening the economy, which has been essentially shut down for weeks to prevent the spread of the virus, and top White House economic adviser Larry Kudlow told FoxBusiness the administration is looking at doing it in four to eight weeks on a rolling basis.
The only way that can be accomplished is by knowing what workers were infected, and which ones weren’t, El-Erian said.
“Testing is a necessary condition,” he said. “And also we have to try to figure out how do you signal that you have been tested and that you are in the group that can reengage in the economy.”
And he proposes a novel idea about the way that could be done.
“The easiest way to do that is for all of us to carry a passport that says ‘We’ve been tested, we are OK, and we’re open to random testing,’ ” he said.
However, he is aware of the difficulties that might create.
“That goes against a lot of what we stand for,” El-Erian said. “So we’ve got to figure out either a private-sector solution or in partnership with the government.”