Bloomberg reports what Pacific Investment Management Co. (Pimco) CEO Mohamed El-Erian thought about the labor market. Bloomberg reports that he thinks it is a “lost decade” of unemployment. El-Erian also said the economy in the U.S. is used to never looking back when moving forward. More individuals than ever need a loan, but the credit market will not presently bear the demand. He thinks a “new normal” in America is getting set in.
Still difficulties with unemployment and labor
El-Erian explained that there is still a high unemployment rate, credit markets aren’t lending and the labor market isn’t really being fixed by the federal stimulus. Charles Nenner of the Charles Nenner Research Center is even more pessimistic. El-Erian thinks the economy isn’t that flexible while Bloomberg Television’s “On the Move” showed Nenner thinking the Dow Jones will go down to 5,000 in two years. Playing with interest rates and holding hands out for an instant money bailout aren’t necessarily the best springboards to long-term recovery. People and institutions that search for cash until payday without understanding the long-term impact of borrowing from the future to prop up the present are doomed to fall from the trapeze and strike bottom.
El-Erian said on “Bloomberg Surveillance” that “This country has very weak safety nets.” “It is built on the assumption that our labor markets are very flexible, that if you lose your job in California you move somewhere else, you get another job, and what we’re seeing is structural unemployment.”
High quality assets
Pimco’s strategy has been to stock up on high quality assets. There has been a 11.8 return within the last year within the company’s Total Return Fund. Bloomberg explains that it is better than the peer bongs return of 67 percent. El-Elrian still thinks things are wrong. Structure should be more significant in the country. Between the stimulus and the U.S. housing market, the recovery seems fairly far away. The U.S. economy needs to restructure the way business is done. “It needs other agencies to help and in particular, it needs structural policies to be there,” El-Erian informed Bloomberg. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”
El-Erian thinks the “new normal” might just snap back after the economic calamity that is set by all of the dreams and wild market speculations going on.
Bloomberg
bloomberg.com/news/2010-08-30/el-erian-sees-lost-decade-for-u-s-jobs-amid-weak-safety-nets-tom-keene.html
PIMPCO
europe.pimco.com/LeftNav/AboutPIMCO/Milestones.htm
Understanding the “new normal”
youtube.com/watch?v=t8oyYYBJGX4
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