PIMCO CEO and co-CIO Mohamed El-Erian spoke with Bloomberg Television Friday about last week’s jobs report and the global economy.
On jobs, El-Erian said, “let’s not also forget the numbers outside these headlines … we should not lose sight that we have structural issues that are not being dealt with.”
Also, “my gut says we are likely to see [QE3], but the question is when and how big.”
El-Erian on Friday’s jobs report:
“It is a strong report. We should welcome in job creation of 243,000 and welcome unemployment rate of 8.3%. But the qualifier, and it is an important one, is let’s not also forget the numbers outside of these headlines. I look at long-term unemployment, those that have been unemployed for 27 weeks or longer, that is stubbornly stuck at 5.5 million, and second, youth unemployment is stuck at 23%. We should welcome the headline numbers. They are really good, but we should not lose sight that we have structural issues that are not being dealt with. That’s going to be the question mark. Is this just a cyclical bounce or can this hand off into a secular bounce, which the economy needs?”
On Bill Gross saying it’s a risk-on trade:
“It is a short-term risk-on trade. Markets are dominated these days by short-term trade for good reason. There are so many uncertainties about the global economy. People are not clear what Europe is going to look like, and whether you get the political response the American economy needs. A lot of investors have lost long-term conviction and are now focusing on the very short term. It is a risk-on trade in the short term, and in the longer term we will have to deal with these issues confronting the global economy and therefore markets.”