While unemployment will peak between 10.5 percent and 11 percent in the U.S., it will remain high and stay above 7 percent, said Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., manager of the world’s largest bond fund.
“The United States right now is in transition,” El-Erian said in an interview from Pimco headquarters in Newport Beach, California. “It’s coming out of one regime. It’s on this bumpy and painful journey to what we’ve called here the new normal.”
Of course, macroeconomic pessimism helps talk down equity prices, which is usually good for a bond book like PIMCO's. Nevertheless, the new normal will be a permanently lower standard of living for most Americans. People under 40 have very little idea of just how much they'll have to cut back. In a country with less well-developed democratic traditions such unpleasantness would be a pretext for civil unrest. We're Americans, so we're supposed to be better than that.
