Gerard Tamparong, of Payden and Rygel, a manager of investments for large institutional clients, spoke on the state of the economy.

With a gross domestic product of $14.8 trillion, the United States is still the world’s largest economy.  Nevertheless, the 2008 – 2009 recession is the deepest and longest in the post-World War II era.  The pattern from 1930 to the present as reflected in the Standard and Poors 500  Stock Index is one of relatively “flat” periods of oscillation (e.g., 1930 -1950;  1960 -1980;  1994-2000) with sharp upward spikes in between (e.g., 1950 –1960;  1980-1994).

Recovery is not marked by full employment since full employment is never achieved.  There is always a portion of the population that cannot be employed.  Nevertheless, some 120 million Americans have jobs.   Between 10 million and 15.3 million are out of work.   The national unemployment rate is 9.6 percent.  The unemployment rate in Los Angeles County is 17.5 per cent.   In some areas (e.g., Imperial County) it is as high as 30 percent.  300,000 new jobs are needed in order to get the unemployment rate down to 5 percent in the next five years.

In addition to the unemployment rate, there is also the underemployment rate.  This involves workers who are employed at jobs underneath their skill levels, involuntary part-time workers (e.g., those on work furloughs), workers employed in seasonal jobs, etc.  Whereas the unemployment rate is 9.6 percent, the underemployment rate is about 18 percent.

Government cannot create jobs beyond a certain point.  Most of the jobs are created in the private sector.  Today it is taking workers far longer than in the past to shift to new jobs.  The average period of unemployment per worker is 18 months.

Inflation is not a problem yet, but it will be.  At the moment, there is deflation as prices are being cut.  The government wants to make it unattractive for people to be in the money market.  Instead, it wants people to invest in such things as real estate.

With the third quarter GDP increasing at 2 percent, the economy is growing very slowly.  Therefore, the  problems which started two years ago won’t be fixed in the next four years.   Whereas the U.S. growth is at 2 percent, that of China is between 9 and 10 percent.

For current investing, Gerard Tamparong prefers bonds with an average yield of 3.2 percent per annum.