Here's what a $2.1T investment in public infrastructure could result in

Beth Ann Bovino, S&P Global U.S. Chief Economist joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss overall markets, including jobless claims. Bovino also weighs in on a recent analysis conducted by S&P Global to demonstrate what a $2.1 trillion dollar investment in public infrastructure could result in.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to talk more now about the jobs picture in this country with Beth Ann Bovino. She is US chief economist at S&P Global. And Beth Ann, always good to see you. Welcome to the show again. I was reading your notes, and you are very big on infrastructure as a way out of this jobs recession. You say we had a great opportunity after the Great Recession of '08-'09. We didn't take advantage of it. Why is now the right time to do this?

BETH ANN BOVINO: Well, think about it-- we have record low interest rates. We have very cheap material prices and an unemployment rate, which is at again another record low. It seems a perfect time to be able to take advantage of this. And also keep in mind, infrastructure has been lagging for some time in terms of spending. That also means that we're failing in many places. We had done an analysis where we would see that if we invested about $2 trillion in infrastructure spending over a 10-year period, that would create-- that would add another $5.7 trillion to the economy and create 2.3 million jobs in just four years.

BRIAN SOZZI: Beth Ann, where we are we failing? And how would you how would you allocate that $2.1 trillion in spending.

BETH ANN BOVINO: Well, there's so many places it could go. The roads are certainly in disrepair. Look at, I guess, the Society of American Civil Engineers-- has the US infrastructure graded at a D+ for the last seven years. The World Economic Forum has really scaled down the quality or given the quality of US infrastructure has dipping lower and lower and lower. And one perfect example is look what happened with public health infrastructure. We weren't able to meet the demand that was required during the pandemic. And so a lot could be done there as well.

ALEXIS CHRISTOFOROUS: What do you make of the market activity, Beth Ann, recently, given the economic backdrop? I mean, have investors really embraced this possibility that the recovery may be a very, very long road back and have valuations sort of met that mindset?

BETH ANN BOVINO: Well I think markets are generally-- you know, markets are very forward looking, so they've priced the huge recession in the first half of the year. We had this recession down about 12% cumulatively, which is three times greater than what we saw in the Great Recession. I think markets have pretty much wrote it off. But the question is, is what the recovery will look like. We're not expecting the recovery in the US to return to pre-crisis levels at least for two years. Markets seem to be a little bit more optimistic than we are, and I'd say probably other economists as well.

ALEXIS CHRISTOFOROUS: Do you think that we should be a little optimistic given the fact that, yes, 2.4 million Americans filed for first-time unemployment claims. That is still a historically high level, but it's off the highs we saw in mid-March. It seems as though we've hit a peak with those weekly unemployment numbers. Should we be reading anything into that?

BETH ANN BOVINO: I do think that's something to keep an eye on. You know, the good news is the number of people who are basically going to the unemployment center, I guess figuratively, is half what it was just in March. And so that's good news. The big problem, though, is it's still in the millions. We now have 39 million people who've applied for unemployment insurance over the last nine weeks. It took the great the Great Recession, I think, over 80 weeks to get those levels. So we have a long way to go. And the other factor to consider is how fast will they get their jobs back once COVID-19 is gone.

BRIAN SOZZI: Beth Ann, I think some comments this week from Fed president James Bullard may have rattled some investors. He said, we are at peak crisis now. I think a lot of people in market thought we were in peak crisis in April. Do you think May is peak crisis?

BETH ANN BOVINO: In terms of the economy-- in terms of the economy, well, think about it. What we're seeing is we have basically many more workers now on the dole, I guess you could say, with as I mentioned the significant numbers that are there. And the worry, of course, is businesses. The hopeful news was that once COVID-19 leaves the stage, that you would see businesses open up and they would bring back those workers. Those workers would return.

There was incentives put into place with the Paycheck Protection Program. But first the question is, will businesses survive this ordeal? And I think maybe that's what President Bullard was getting at. And second, if they do survive, will they have the wherewithal and the capacity to be able to bring those workers back? We expect that the unemployment rate will not reach pre-crisis levels until sometime in 2023. So that to me means the crisis is still ongoing.

ALEXIS CHRISTOFOROUS: So given all that, Beth Ann, do you think that investors need to brace for even a bigger shock? Are we going to see another return to the lows for the stock market, do you think? Or is it just going to be a bumpy road, but we're not we're not going to make new lows.

BETH ANN BOVINO: Well, I can't really speak on stocks, because I don't cover that area. But I have to say I'm a bit more nervous. Often I say, when I'm nervous, maybe you should be too.

ALEXIS CHRISTOFOROUS: Do you think that another stimulus package from Congress is more important to investors at this point than movement on a vaccine?

BETH ANN BOVINO: I think they're both equally important. The vaccine means-- if indeed we do have a vaccine and if it does come into play, that means COVID-19 will not be a story five years from now. And that is a huge, huge relief to many, many people. But the other point is that the vaccine, if it indeed-- at least according to health professionals, is that a vaccine, even if we start to get close to one, is going to take at least a year or maybe even two years to be able to have it up and running to inoculate our citizens worldwide.

So that's still a long ways away. I think the stimulus that's being discussed here, I think is in a sense the bridge that will help the United States, our citizens, get to the other side-- bout our citizens and our businesses get to the other side. And I'm glad to see that at least the government is talking about that again.

ALEXIS CHRISTOFOROUS: We are too. All right. Beth Ann Bovino, US Chief Economist at S&P Global, great to see you. We'll see you soon.

BETH ANN BOVINO: Thanks guys. Bye.