Mohamed El-Erian, the chief economic advisor to Allianz and a former CEO and co-CIO of PIMCO, said that he was shocked to see Bill Gross’ departure from the giant bond firm.
El-Erian himself left PIMCO abruptly in January. Nevertheless, El-Erian told Betty Liu in an interview with Bloomberg TV that he didn’t expect Gross’ move. He did say that he was not surprised that Gross’ replacement was Dan Ivascyn, a money manager and former deputy CIO.
El-Erian touted Ivascyn as a “brilliant investor.” This might have to do with the fact that Ivascyn’s PIMCO Income fund has well surpassed competitors by 99% over the past three to five years.
Here is a partial transcript of the interview, in which they also discussed Friday’s jobs report.
What Your Peers Are Reading
BETTY LIU: Well for more reaction on the jobs data I want to bring in Bloomberg View columnist and former PIMCO CEO Mohamed El-Erian, who joins us a little jetlagged from London. Mohamed, great to see you this morning. Look, you went through the jobs report yourself. And how do you think the Fed is going to interpret this? Does this at all change Janet Yellen’s schedule on interest rates?
MOHAMED EL-ERIAN: I don’t think so. It is the mirror image of the report we talked about a month ago. This time around it is the headline numbers that are really encouraging. If you add the job creation plus the revisions, you’re looking at almost 320,000 new jobs. That’s taken the three-month average to 224,000. That’s really good. And the unemployment rate is down.
But on the other hand, the internals this time around are less encouraging, particularly long-term unemployment stuck at 3 million, youth unemployment up to 20%, and of course the participation rate is coming down. So net-net this is a mixed report. And the most disappointing aspect, Betty, is one that you’ve been talking about for the last half hour, which is wage growth. Wage growth simply is not there yet.
LIU: It isn’t there yet. And do you have any further clarity or explanation as to why? With the labor market tightening we haven’t seen wage growth escape at all.
EL-ERIAN: I think this is a different economy. And I think people are starting to realize that this is a different economy. In addition, little steps that should be taken, the minimum wage, et cetera, are not being taken. And that’s part of a bigger problem that we don’t have a holistic policy response as yet because of the polarization of Congress.
LIU: And given that, we’ve seen, Mohamed, more market volatility, right? Do you expect that if we continue to get numbers like this where it kind of shows a mixed picture that this volatility is only going to increase?