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 still is not lending. Charles Nenner of the Charles Nenner Research Center is even more pessimistic. El-Erian thinks the economy is not that flexible when Bloomberg Television’s “On the Move” showed Nenner thinking the Dow Jones will go down to 5,000 in two years. Playing with interest rates and holding hands out for an instant money bailout aren’t necessarily the best springboards to long-term recovery. 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 within 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.”

Getting some high quality assets

Pimco’s strategy has been to stock up on high quality assets. In the U.S., the company’s Total Return Fund is the largest of its kind with the 11.8 return within the last year which is beating 67 percent of peer bongs, say Bloomberg. El-Elrian still thinks things are wrong. Structure should be more significant within the country. The U.S. housing market isn’t helping the recovery along with the stimulus that is not helping things either. The U.S. economy needs to restructure the way business is done. El-Erian said, “It needs other agencies to help and in specific, 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 thinks the “new normal” might just snap back following the economic calamity that is set by all of the dreams and wild market speculations going on.

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