Begin forwarded message:
> From: dasg...@aol.com > Date: July 7, 2010 4:40:39 PM PDT > To: ramille...@aol.com > Cc: ema...@aol.com, j...@aol.com, jim6...@cwnet.com, christian.r...@gmail.com > Subject: The New "Normal" -- ANOTHER Crash Coming as Gamblers Bet on Another > BAILOUT > > Unemployment Is No Longer A Lagging Indicator: El-Erian > > > http://finance.yahoo.com/news/Unemployment-Is-No-Longer-A-cnbc-455987481.html?x=0&sec=topStories&pos=2&asset=&ccode= > July 7, 2010, 10:57 am EDT > Unemployment has shifted from a "lagging indicator" to a leading one and is > warning government policymakers to confront problems in an economy mired in > slow growth, Pimco co-CEO Mohamed El-Erian told CNBC. > > > > The consideration of unemployment as a lagging indicator is a favorite mantra > among economists who believe the rate primarily looks at the past rather than > what is to come. > > But the internal details of current trends paint a different picture: More > than half the labor force out of work for more than 26 weeks, the average > length of unemployment at greater than 35 weeks, and the unemployment rate of > 25.7 percent for 16- to 19-year olds. > > "These are structural aspects which cannot be solved overnight, cannot be > solved with a cyclical mindset," El-Erian said. "And they are worrisome > because they make the unemployment rate not only a lagging indicator but also > a leading indicator." > > The US has been "an outlier" among nations who have been confronting the > challenges posed by what Pimco, the world's largest bond fund with more than > $1 trillion in assets under management, calls the "new normal" of prolonged > slow growth. > > "Somehow in the US we are caught in this active inertia that results in just > a cyclical response," said El-Erian, the firm's co-CEO. "We need more than > that. we need cyclical and structural." > > He cited China, Brazil and Russia specifically as countries that have taken > more proactive approaches to their problems. While other nations have looked > at austerity and structural reform, the US is saying, 'Hey, what we need is > growth.' What you need is harmonization that is about growth, is about > austerity and critically is about structural reform." > > As for investors, El-Erian said stock prices are "getting toward fair value. > We're not quite there yet because I don't think analysts quite understand > what the new normal looks like, in terms of lower growth and lower top-line > revenue, but we're getting there." > > He said the bond market, with the yield on the benchmark 10-year Treasury > note yield below 3 percent, is close to fair value. > > A double-dip recession, which has gathered more talk about economists, is a > "risk scenario" ... > > "We find it striking that consensus, which used to romance a 'V' (recovery) > is now moving toward what we've been calling the new normal, and some people > are going right through the new normal and romancing a double-dip and a > Depression," El-Erian said. >
