Mohamed El-Erian Weighs in on the Jobs Report and QE3
Chief executive officer and co-chief investment officer of PIMCO Mohamed El-Erian told Bloomberg’s Betty Liu and Dominic Chu today’s weak jobs report makes it almost certain the Fed will engage in QE3.
El-Erian pointed out the 3-month average jobs creation is under 100,000; a very low number. There has also been no growth in worker earnings and labor participation has dropped to multi-decade levels, he added. Finally, teenage unemployment is up to almost 25%, El-Erian said.
Put all of the negatives together and it triggers the need for policy response, according to El-Erian.
What should happen is a comprehensive policy response out of Washington, but since Congress is polarized all activism will come from the Fed, which is not enough, El-Erian stated.
Dominic Chu asked El-Erian his opinion on the outlook for German bunds versus U. S. Treasuries. El-Erian indicated Treasuries were the better investment and provided his reasons why (see video below).
El-Erian commented further on the political challenges facing the U. S. and the structural problems he sees developing in the economy where the children may end up worse off than their parents.