Bill Gross of Pacific Investment Management Co. said governmentsshould be focusing on creating growth rather than reducing debtafter a report showed employment in the U.S. stagnated inAugust.

“To do it right now is almost suicidal,” Gross, manager of theworld's biggest bond fund, said in a radio interview on “BloombergSurveillance” with Tom Keene and Ken Prewitt.

Payrolls were unchanged last month, the weakest reading sinceSeptember 2010, after an 85,000 gain in July that was less thaninitially estimated, Labor Department data showed today inWashington. The median forecast in a Bloomberg News survey calledfor a rise of 65,000. Hourly earnings and hours worked bothdeclined. The August data included a 48,000 drop in informationindustry jobs, mostly reflecting striking Verizon CommunicationsInc. workers.

The economy expanded at a 1 percent pace in the second quarterfollowing a 0.4 percent gain in the first three months of the year,the Commerce Department reported last month. Consumer spending grew0.4 percent, the smallest increase since the last three months of2009.

The $245 billion Total Return Fund managed by Gross has lost 0.4percent in the past month, underperforming almost 90 percent of itspeers, according to Bloomberg data. The fund's 4.07 percent returnthis year is worse than about two-thirds of competitors, the datashow. Gross has outperformed 98 percent of his rival fund over thepast five years.

Treasuries have returned 7.5 percent since February, when Grosseliminated the Total Return Fund's holding of U.S. governmentsecurities. He boosted Treasuries to 10 percent of assets in Julyfrom 8 percent in June, the Newport Beach, California-based firmsaid on its website last month.

Gross said in a Financial Times interview that was publishedthis week that it was a “mistake to bet so heavily against theprice of U.S. government debt.”

U.S. government bonds have returned 2.8 percent in August, themost since December 2008, as investors bet on slower growth andsought a refuge from global financial market turmoil, according toa Bank of America Merrill Lynch index.

BloombergNews