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When will we get our U.S. labor market again?

Blog post   •   Sep 23, 2010 02:04 EDT

CEO of Pacific Investment Management Co. (Pimco), Mohamed El-Erian, thinks the last decade is a "lost decade" of unemployment for the labor market within the U.S., as outlined by Bloomberg. El-Erian also thinks that the economy is used to moving forward and never looking back. More people than ever need a loan, but the credit market will not at the moment bear the demand. A "new normal" is setting in. He thinks America will get used to it. Post resource - Will the U.S. labor market rise from ashes of a lost decade by Personal Money Store

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Unemployment and labor continue to suffer

Unfortunately, El Erian thinks the labor market isn't really going anywhere with the federal stimulus that is actually hurting. He also thinks there is still a high unemployment and the credit market still isn't really lending. Charles Nenner of the Charles Nenner Research Center has an opinion on it too. It is also very negative. El-Erian thinks the economy is not that flexible while Bloomberg Television's "On the Move" showed Nenner thinking the Dow Jones will go down to 5,000 in two years. Giving individuals free instant money by holding hands and changing interest rates won't help anything. It especially won't help long term recovery. There are too numerous people who just want fast cash without considering long term impacts. They're doomed to fail because of the concept of propping themselves up now when forgetting about the future. 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."

Stocking up on high-quality assets

High quality assets are bought by Pimco right now. The company's Total Return Fund, which has returned 11.8 over the past year (besting return on peer bonds by 67 percent, writes Bloomberg), is the largest of its kind in the United States. El-Erian thinks the country needs more structure. Between the stimulus and the U.S. housing market, the recovery seems pretty far away. Businesses occasionally need restructure. The economy needs this kind of restructure. El-Erian said, "It needs other agencies to help and in unique, it needs structural policies to be there," to Bloomberg. "Put another way, you need to stimulate not just demand, but also you need to make supply more flexible." El-Erian's concept of a "new normal" could act as a fresh rubber band that will snap back after economic calamity, or a faux safety net made from IOUs and dreams of wild market speculation.

Further reading

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