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PIMCO Financial Forecast: 30-35% Chance of Re-Entering Recession

At the most recent Advocacy and Government Affairs MoneyCommittee Meeting, led by Chairman Michael Hornak of Rutan & Tucker, PIMCO (Pacific Investment Management Company) representatives Erika Lowe and Dr. James Moore provided a comprehensive look at the global financial markets. PIMCO manages $1.3 trillion in assets globally and has their finger on the pulse of global markets and trends. Dr. Moore estimates there is a 30-35% probability that the country will re-enter the recession, and stated what is critically needed is for government to stop the partisan bickering and start working together on practical solutions to the country’s economic problems.

Dr. Moore noted that small business growth and hiring will be the engine of economic growth – not hiring by large corporations. Currently 16% of people are underemployed, and among young people 20-25% are unemployed. The unemployment of the nation’s youth is a long-term structural problem; the longer this group is unemployed, the weaker their skills will become and the greater the need for ongoing training to make them employable again. A stronger education culture is needed that focuses on providing students with practical, applicable skills that will prepare them to enter the workforce.

Housing is at its most affordable in recent history, though those individuals who are do not need to move are more likely to remain in their current homes than sell. Nearly three out of every ten home sales result in a financial loss, and 45% of home owners in California have negative equity. This will likely be a drag on the economy for years to come. The cycle will only break when the public gains confidence that housing prices have reached their lowest and are on their way back up.

Another factor causing stress on the financial markets is the recent political unrest in Europe. Debt challenges persist across the European Monetary Union, and stabilization will require a large fiscal adjustment across Europe. Greece in particular has contributed to the instability, and a restructuring may need to take place to allow the country to manage the debt it has incurred.

For more information contact Kate Klimow, Vice President of Government Affairs.


Posted on August 30, 2011

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