Bond fund manager extraordinaire Bill Gross says the U.S. economic rebound will be tepid, thanks to the withdrawal of government support and the weak job market.
The economy grew 5.7 percent in the fourth quarter and could well expand 4 percent in the first half of this year, but then it will fizzle out, Gross says.
“The economy and the asset markets have been reflated by the wallets and checkbooks of government, not the private balance sheet,” he told CNBC.
“Now a lot of that has been halted and in some cases withdrawn. The credibility of weak governments – Greece, Portugal, Spain and Ireland – and the sustainability of stronger ones are being questioned,” Gross says.
That makes it doubtful that private demand can soon substitute for government demand.
And the weak employment market doesn’t help, says Gross, Pimco’s chief investment officer.
“About 8.5 million jobs have been lost over the past two years, and getting those jobs back is going to be very difficult.”
Many of the job losses came in the still struggling sectors of real estate, retail and local government.
“Those jobs aren’t coming back,” Gross said.
“To posit a vibrant private economy based on the job destruction we’ve experienced is extreme.”
While some economists grew optimistic on news that the jobless rate fell to 9.7 percent in January, Bank of America’s Ethan Harris shares Gross’ pessimism.
“The drop of the unemployment rate is a bit of a fluke,” he told Bloomberg.
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