NEW YORK, Feb 8 (Reuters) - U.S. bond manager Pacific
Investment Management Company (PIMCO) is sticking to its
previous forecast that the U.S. economy is headed toward a
recession, despite recent data indicating economic resilience.
An employment report last week showed U.S. job growth
accelerated sharply in January while the unemployment rate hit a
more than 53-1/2-year low of 3.4%, pointing to a tight labor
market that could be a headache for the Federal Reserve in its
battle against inflation.
Tiffany Wilding, PIMCO North American economist, said the
strong economic data suggests a recession may come later than
previously expected, but remains likely.
"Recent data on net haven’t caused us to change our outlook
for a mild U.S. recession – we’re only pushing the timing back a
little bit," she said in a note.
PIMCO, which manages $1.7 trillion in assets, said last
month it would focus on high-quality bonds this year due to
their higher returns and the protection they offer should the
global economy economic downturn be deeper than anticipated.
Some investors believe signs of strength in the labor
market make a recession less likely and increase the chances of
a soft landing, in which the Fed tames inflation without pushing
the economy into a recession. Goldman Sachs now sees a
25% probability of the United States entering a recession in the
next 12 months, down from a previous 35% forecast.
Markets have rallied over the past few months on the back of
moderating inflation. In January, U.S. Treasury yields - a
benchmark for borrowing costs on assets ranging from mortgages
to corporate loans - declined by about 30 basis points.
That rally, however, stumbled last week as the jobs data
raised the prospect of more interest rate hikes by the Fed.
"Although market-based measures of financial conditions have
eased somewhat recently, financial conditions are still tight by
historical standards," Wilding said.
"We think it’s underappreciated how much tightening pressure
the overnight rate actually puts on the economy."
(Reporting by Davide Barbuscia; editing by Jonathan Oatis)
Messaging: davide.barbuscia.reuters.com@reuters.net))
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