"The economy, absent consumer spending, is basically in a recession," the 72-year-old billionaire bond-fund manager said in an interview Friday on Bloomberg Television. While employers are hiring "there's a dearth of investment spending," he said.

Payrolls surged, climbing by 255,000 last month, a sign of renewed vigor in the U.S. labor market. Even as the Federal Reserve has kept interest rates low to spur growth "it's a deflationary world" in which monetary policy is "weak and dying," said Gross, who runs the $1.5 billion Janus Global Unconstrained Bond Fund. That means investors will need to adjust their expectation for returns.