When will the U.S. labor market going to come back?

The past decade is of unemployment and a bad labor market are a “lost decade” reports Bloomberg quoting CEO Mohamed El-Erian of Pacific Investment Management Co. (Pimco). There is also one more flaw El-Erian pointed out. That is that the economy within the country typically moves forward without any looking back at what has happened. Loans are needed by more people than the credit market can allow. A “new normal” is setting in. He thinks America will get used to it.

Unemployment and labor continue to suffer

Unfortunately, El Erian thinks the labor market isn’t going anywhere with the federal stimulus that is really hurting. He also thinks there is nevertheless a high unemployment credit market nevertheless isn’t lending. Charles Nenner of the Charles Nenner Research Center is even more pessimistic. 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. Long term recovery won’t happen when interest rates change and instant money bailouts are given to people. Those who do not care about the future and just want to make themselves better right now by taking cash without considering the long term impact are likely to do really bad in the end.

El-Erian said “This country has very weak safety nets” on “Bloomberg Surveillance.” “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.”

Right now, Pimco is getting assets. It is trying to make sure these assets are high quality. In the U.S., the company’s Total Return Fund is the largest of its kind with the 11.8 return in the last year which is beating 67 percent of peer bongs, say Bloomberg. El-Erian thinks the country needs more structure. The U.S. housing market is not helping the recovery along with the stimulus that isn’t helping things either. The economy needs restructure like companies often need. “It needs other agencies to help and in specific, it needs structural policies to be there,” El-Erian informed Bloomberg. “Put another way, you need to stimulate not just demand, but also you need to make supply more flexible.”

You will find numerous dreams and wild speculations occurring with IOUs. El-Erian’s idea of a “new normal” could just help the economy snap back.

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