Pimco's El-Erian Sees `Lost Decade' for U.S. Jobs: Tom Keene
Aug. 30 (Bloomberg) -- Mohamed El-Erian, chief executive officer and co-chief investment officer at Pacific Investment Management Co., discusses the outlook for U.S. economy and Pimco's investment strategy. El-Erian talks with Tom Keene and Ken Prewitt on Bloomberg Radio's "Bloomberg Surveillance." (This is an excerpt. Source: Bloomberg)
A “lost decade” in U.S. employment reflects a change in the structure of the nation’s labor market, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co.
“This country has very weak safety nets,” he said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “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.”
Global growth will be below average during the next three to five years as developed economies struggle with mounting deficits and increased regulation in the wake of the 2008 collapse of credit markets, said El-Erian, who is also co-chief investment officer at Pimco.
Pimco shifted to higher-quality assets in the search for yield, El-Erian said. The $234 billion Total Return Fund managed by Pimco co-founder Bill Gross has returned 11.8 percent in the past year, beating 67 percent of its peers, according to data compiled by Bloomberg.
The actions of the Federal Reserve alone to boost the economy aren’t sufficient, given a “frozen” housing market, slow growth and high unemployment and significant debt, El-Erian said.
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“It needs other agencies to help and in particular, it needs structural policies to be there, " he said. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”
Treasuries rallied today after the Bank of Japan said “uncertainty” regarding the American economy is growing and Morgan Stanley cut its forecast for U.S. gross domestic product. The 10-year yield fell 5 basis points, or 0.05 percentage point, to 2.60 percent at 8:54 a.m. in New York, according to BGCantor Market Data.
Newport Beach, California-based Pimco, which managed more than $1.1 trillion of assets as of June 30, according to its website, is a unit of the Munich-based insurer Allianz SE.
To contact the reporters on this story: Mary Childs in New York at mchilds5@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net
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