Markets

Gundlach says if coronavirus concerns lead to major job losses 'put a fork in the economy'

Key Points
  • Jobless claims are a key data point to watch for a possible recession, DoubleLine's Jeffrey Gundlach said.
  • One area where the job market might weaken is airlines, as companies scramble to manage falling demand for travel.
  • "If this situation with travel and leisure and nonsocial activity continues, you just wonder if you can keep initial claims down near 200,000 per week," Gundlach told CNBC, adding that the longer-term average is around 243,000. 
Jeffrey Gundlach speaking at the 2019 SOHN Conference in New York on May 6th, 2019.
Adam Jeffery | CNBC

DoubleLine Capital founder and CEO Jeffrey Gundlach said Thursday he is watching weekly unemployment claims for signs that the coronavirus outbreak is tipping the U.S. economy into recession. 

The virus is spreading within the U.S., leading companies to cut back on travel and encourage employees to work from home, but the weekly data on Thursday showed unemployment claims falling. If those numbers spike in the coming weeks, it could be a sign that the economy is contracting, Gundlach said. 

"If they go above their five-year moving average, you're done. You can almost put a fork in the economy," Gundlach told CNBC's Scott Wapner on "Halftime Report." 

One area where the job market might weaken is airlines, as companies scramble to manage falling demand for travel. United Airlines announced Wednesday that it was slashing domestic and international flights and implementing a hiring freeze.

"If this situation with travel and leisure and nonsocial activity continues, you just wonder if you can keep initial claims down near 200,000 per week," Gundlach said, adding that the longer-term average is around 243,000. 

Weaker data for job openings and turnover are concerning, Gundlach said, and may be a leading indicator for a rising jobless claims. Rising unemployment could spill over into consumer confidence, and that data has shown that people are already skeptical about the longer-term outlook, Gundlach said. 

"They've been dismal about the future for some time, and historically it's when the view of the present joins the view of the future in weakening that is also sort of definitional of a recession," Gundlach said.

Often called the "Bond King," Gundlach also said he thinks the Federal Reserve panicked when it cut rates this week, but "sometimes panic is justified." He said he expects the Fed to cut interest rates again.

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Watch CNBC's full interview with Jeffrey Gundlach

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