PIMCO CEO Mohamed El-Erian is shaken by today’s disastrous jobs report.
These disappointments partly reflect changing seasonal factors, including the prior impact of this winter’s unusually mild weather. But there is something much larger in play, and the implications go beyond economics; they influence key elements of the political narrative for the upcoming presidential and congressional elections.
The report demonstrates that firms “lack conviction” to hire for “expected future business.”
Why? Uncertainty about everything, writes El-Erian:
American consumers, as a group, still carry too much debt and have to cope with higher oil prices. The prospects for exports, which have grown markedly, are gradually dimming now that the rest of the world is slowing. Meanwhile, policymakers have yet to find a way to deal properly with a year-end fiscal cliff, the result of Washington’s repeated inability to design coherent fiscal policy.
This demand uncertainty compounds worrisome structural impediments to growth.
His evidence that we already face structural problems: 5 million long-term unemployed; 9-month average time out of work; 25% unemployment for 16-19 year olds; and 12.6% unemployment for those without high school degrees.
The only option, he says, is for Congress to act and address impediments to growth “that have been repeatedly identified” but gone unaddressed.
But he’s not optimistic that will happen:
“Political bickering and dithering may again deliver a depressingly familiar seasonal pattern that undermines the wellbeing of millions and renders the subsequent recovery even more difficult to secure.”
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