Pimco's El-Erian: U.S. Jobs Report Was Messy

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Nov. 8 (Bloomberg) -- Mohamed El-Erian, chief executive officer and co-chief investment officer at Pimco discusses today's jobs report with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)


Is this report as good as it seems?

It is a messy reports.

There are different methodologies this time around.

Having said that, two things i would know -- note in particular.

The revisions to the prior month are encouraging.

Keep an eye on the employment, the population ratio, the participation number.

Those came down.

That is not good news.

A lot to chew on.

Better than expected, but with a huge asteroid because of all of the distortions.

-- pastor rick -- asterick because of all of the distortions.

What i think is much more interesting is the extent to which good news is bad news for the market.

Yesterday, had we talked yesterday at this time.

We would have seen a number that was stronger than most people expected.

Ecb surprised everybody with a cut.

I think we would have said the markets will do well.

Because it questions the fed commitments to continue to support these markets, good news becomes bad news.

That is an interesting issue.

It is difficult for investors -- whether you are institutional investors or a mom-and-pop investor, to invest in this market.

How does a number like this play into your new normal scenario and how fast or at what point will we get out of that scenario?

The key issue is that growth is unusually sluggish which means unemployment doesn't come down as fast as people want.

That means the fed and other central banks are unusually active in markets.

They do so using untested measures.

That is the conversation of the new normal.

There is a question mark of the true handoff of policy induced growth to long-term, genuine growth.

That question has not been answered.

The markets are going to be torn.

Bad news is good news, on the policy front.

Bad news is bad news on the fundamental front.

That fundamental tension is why investors find it difficult to reconcile short-term positions with long-term positions.

Is this going to last for many more years?

It will last as long as the other policymaking entities do not get their act together.

Whether you look out washington or the initiatives in europe, we do not see other policymaking entities step up to the plate.

It does last.

We cannot remain on this artificial policy induced roll forever.

We either turn into indigenous high-growth or we are going to return to much lower growth and financial instability.

The jury is how -- is out on how that is navigated.

Investigators still doubt the commitment that the fed had to its stimulus program.

That makes it difficult to invest.

For investors, they have been leaving those funds.

They are not sure where rates are headed.

How difficult is that make your job and how do you get them back to a fund that like yours?

It is important to distinguish the import -- the elements of policy.

Low rates, forward guidance, balance sheet operations.

The first two are not going away.

Rates will stay low for a long time.

Forward policy is going to become more aggressive.

What is at question is the third element, ballots -- balance sheet supports.

For a bond investor, focus on the short end of the curve.

Focus on areas where people have not gone and remember that you are managing an overall portfolio and not individual asset classes.

The big lesson this year is the importance of thinking holistically given how volatile correlations have become.

When you look between bonds and stocks, you hired a new head.

As part of the reason you did that because you are seeing these redemptions?

This reflects the decision taken back by the pimco managing directors in 2007 and 2008. when we look forward and asked what we need to do, we said a few things.

One is recognize we need to evolve from a fixed income perspective to becoming a complete provider of global investment solutions.

Second, recognize that it is not just about products, but it is about providing solutions.

Thirdly, become more global goal -- global.

Thank you.

We appreciate you joining us.

This text has been automatically generated. It may not be 100% accurate.


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