Tags: Pimco | El-Erian | US | Economy | Grim | Scary

Pimco's El-Erian: US Economy Is 'Grim and Scary'

Friday, 02 Sep 2011 01:00 PM

By David A. Patten

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Following Friday’s report that zero jobs were generated in the month of August, Pimco investment firm CEO Mohamed El-Erian called the condition of the U.S. economy “grim and scary.”

Speaking to Bloomberg Television’s Betty Liu, El-Erian estimated the chance of another recession as at least one-in-three, and possibly as high as one-in-two.

“The downside risk is increasing,” El-Erian, whose company manages a portfolio of over $1 trillion, told Bloomberg. “Now, there is going to be even more attention on what President Obama will say on Thursday. It's a critical speech."
___________________________________________________________

The ‘Unthinkable’ Could Happen — Wall Street Journal
Over one million Americans have heard the evidence for 50% unemployment, 90% stock market crash, and 100% inflation. Be prepared. Watch the Aftershock Survival Summit Now, See the Evidence.

____________________________________________________________

Economists are hoping President Obama’s jobs speech next week will encourage equity markets, which opened sharply lower on Friday following the dismal jobs report.

In addition to a net zero job creation, the report had downward revisions in job-growth estimates for previous months. The average work week dropped from 34.3 to 34.2 hours, which is considered a seriously negative indicator because it affects the income of such a broad swath of workers. And the average hourly wage dropped in August as well.

elerianAP200.jpg
Mohamed El-Erian
(Associated Press photo)
El-Erian pulled no punches in evaluating Friday’s news: “It is grim and scary,” he told Bloomberg Television.

“If you look at the three-month average, we are now down to 35,000 [jobs]. That is too low for job creation and too low for regaining confidence. It is not just levels where we are here at Pimco. It's the composition of unemployment and it is the duration of unemployment. Whatever way you look at it, this is a worrisome report. Hopefully, it will ring alarm bells in Washington.”

El-Erian said the situation calls for “crisis management” that will “lift the structural impediments facing the unemployed.”

“We cannot just rely on the Fed. Its policies are less and less effective,” he said. “You go to Europe. They have a crisis, too. We need holistic approaches rather than these ad hoc tactical ones."

Perhaps the worst news El-Erian delivered is that indicators suggest the economy is getting worse, not better. Europe is “very far away” from solving its debt issues, he says, and “the dynamics of the economy and markets are pushing toward further weakening.”

Asked if a third round of quantitative easing from the Fed would be beneficial, El-Erian said such a policy would carry substantial risks.

“There is a risk that if the Fed goes alone, we commodity prices going up again, that weakens the economy, we see the Fed coming under more attack from the political wing, that will weaken the credibility of the Fed,” he said.

“At the end of the day, we will not be solving anything. We will just be undermining the economy and a critical institution for the wellbeing of America."

Asked the most important thing Washington should do to ease the jobs crisis, El-Erian replied: "Housing is critical. I wouldn't put it as single, but I would encourage the Fed and Washington to be comprehensive to not try to focus on just one issue."

He said that “so far, we have gone in an ad hoc fashion. It is the same thing in Europe as well.”

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web

Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
Privacy: We never share your email.
 

You May Also Like
Around the Web

Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved