Pimco says jobs point to dismal Q4
NEW YORK (Reuters) - Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co., or Pimco, said the 533,000 drop in U.S. non-farm payrolls in November points to a contraction of gross domestic product of 4 or 5 percent in the fourth quarter.
"A very sharp drop in the GDP growth rate to negative 4 or 5 percent for this quarter is now definitely on the cards," El-Erian told Reuters on Friday.
The U.S. recession deepened in November as U.S. companies shed 533,000 jobs, the fastest rate in more than 30 years, the Labor Department said. The unemployment rate rose to 6.7 percent last month in the highest reading since 1993, compared with 6.5 percent in October, after widespread losses across the country's major industry sectors.
"The rapidly worsening job situation significantly increases the probability of President-elect Obama proposing a $500-700 billion fiscal stimulus package," said El-Erian, who helps oversee $830 billion in assets at Pimco.
El-Erian added that Friday's "disturbing numbers are another vivid illustration of the mounting pressures facing the U.S. economy."
He said the rise in the monthly unemployment number would have been even more pronounced were it not for a fall in the labor participation rate.
"The rapidly deteriorating employment numbers will rightly fuel general concern and serve to dampen further an already poor outlook for consumption in the face of the credit crunch, wealth destruction, and falling house prices," El-Erian said.
(Reporting by Jennifer Ablan; Editing by Chizu Nomiyama)
