Double-dip recession risk rising: El-Erian

[steven johnson]

Unemployment is expected to reach 10 percent by the end of 2009 and stay high for a long time according to a highly respected economist. He does not see increased consumer and corporate demand stimulating the economy after the stimulus effect wanes.

http://en.wikipedia.org/wiki/Mohamed_A._El-Erian

Fri Sep 4, 2009 6:41pm EDT

NEW YORK (Reuters) - The U.S. economy faces an increasing risk of stalled growth in 2010, the chief executive of top bond fund Pimco said on Friday, adding that rallies in the equity and bond markets have outpaced economic trends.

Despite signs that an economic recovery is taking shape, a soft job market and flat incomes could hinder a sustained recovery, Mohamed El-Erian, Pimco's CEO, told Reuters in an interview.

He spoke after the Labor Department reported that U.S. unemployment jumped to a 26-year high in August of 9.7 percent, although the pace of job losses slowed. Employers cut 216,000 jobs from payrolls in August, fewer than forecast, and down from a 276,000 drop in July.

"The risk of a double dip for U.S. economic growth in 2010 is increasing," with a 50 percent chance of such a scenario next year, said El-Erian, who oversees $850 billion in assets for Pacific Investment Management Co, known as Pimco.

Double-dip recession risk rising: El-Erian