PIMCO CEO Mohamed El-Erian reiterated Friday what many housing economists have been saying for months: If you want a real recovery, you better look to jobs and training and bypass the notion that stimulus will jump-start the economy. When reviewing Friday’s jobs report — where unemployment edged up to 9.1% — El-Erian said policy makers should avoid scapegoats like the tragedies in Japan and oil prices and instead focus on failures in education and training. Jay Brinkmann, chief economist and senior vice president of research and economics for the Mortgage Bankers Association, told reporters in early May that without a growth in jobs, there will be no housing recovery. “Economic growth and job growth ultimately drive mortgage growth,” Brinkmann said. “We are at the mercy of what happens to the rest of the economy.” El-Erian agreed, writing that “for too many years, the economy relied excessively on inwardly-looking sectors for its employment engines (e.g. construction, housing, retail and leisure).” “In the process, it eroded its edge in educating, training and retooling its labor force,” he said. “This slippage has been extremely costly given national and global realignments.” El-Erian said the worst case scenario is a continued reliance on economic stimulus, while the need for training, jobs and education falls by the wayside. “The numbers indicate that a stimulus-induced cyclical recovery is not sufficient to overcome structural impairments to sustained and large job creation. It is high time to move beyond financial band-aids if the goal is to address properly what is now an unemployment crisis,” he said. A third round of quantitative easing may be asking too much, he said. The Fed’s aggressive $600 billion Treasury bond-buying program, known as QE2, expires at the end of June. Another round will be difficult to implement, El-Erian contends. “Fiscal stimulus is off the table in the context of an increasingly polarized national debate concerning the country’s debt outlook; and another round of asset purchases by the Federal Reserve (QE3) faces political constraints and a worsening trade-off between its expected benefits and the costs and risks,” El-Erian wrote. “The numbers indicate that a stimulus-induced cyclical recovery is not sufficient to overcome structural impairments to sustained and large job creation. It is high time to move beyond financial band-aids if the goal is to address properly what is now an unemployment crisis.” Write to Kerri Panchuk.
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