Gains in U.S. employment last month that were less than economists forecast indicate it’s too early to declare the economy self-sustaining, according to Pacific Investment Management Co.’s Mohamed A. El-Erian.
“We have structural problems all over our economy,” El-Erian, chief executive officer at Pimco in Newport Beach, California, said in an “In the Loop” interview with Betty Liu on Bloomberg Television. “The duration of unemployment is at record highs. When it comes to hiring for future business, companies are still hesitant.”
Treasuries rallied on April 6 after the Labor Department reported that U.S. employers added 120,000 jobs in March after a revised increase of 240,000 in the previous month. The median forecast of economists in a Bloomberg News survey was for a gain of 205,000. The unemployment rate fell to 8.2 percent, a three-year low, as people left the workforce.
Yields (USGG10YR) on 10-year notes decreased 13 basis points after the payrolls figures in the biggest daily drop since Oct. 31. The yields slid as much as three basis points today to 2.02 percent, the lowest level since March 12.
Europe is also a risk to the economic outlook, El-Erian said. Treasuries gained last week partly on concern the debt crisis is worsening as rising borrowing costs make it harder to finance deficits in nations such as Spain.
“No one knows what Europe is going to look like in five years,” El-Erian said. “There’s caution out there, and it’s understandable.”
Pimco lowered its $252 billion Total Return Fund’s (PTTRX:US) proportion of U.S. government securities to 37 percent of assets in February from 38 percent in the prior month, according to a report on the company’s website.
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