El-Erian Says ‘Goldilocks’ Jobs Report to Please Fed, Markets
Workers at a vinyl records manufacturing facility in Detroit, Michigan, US.
(Bloomberg) — A cooling of the labor market should provide welcome relief for the Federal Reserve as it looks to ease the US economy into a soft landing, Mohamed El-Erian said after the release of April US jobs data.
“A Goldilocks report that will please the Fed and please the markets,” El-Erian, the president of Queens’ College, Cambridge and a Bloomberg Opinion columnist, told Bloomberg Television on Friday.
The data showed that employers dialed back the pace of job creation in April, with a reading of nonfarm payrolls climbing 175,000 last month versus the 240,000 forecast by economists. The unemployment rate rose to 3.9%, while a snapshot of monthly wage growth slipped to 0.2% from March.
“I’m not particularly surprised on the miss on job creation, because we have been running at very high levels for the year,” El-Erian said. “I’m a little surprised on the wage, the 0.2%, that is the one that surprises me. That’s something that one needs to look at much more closely.”
The market’s reaction to the Friday report should also offer a reprieve for global economies grappling with a stronger dollar as the Fed holds benchmark rates higher for longer, El-Erian said. A Bloomberg gauge of the dollar extended losses after the release Friday.
The yen in particular has suffered from rising US yields this year, and Japanese officials possibly stepped in on two occasions this week to support the currency in what would be the first foreign-exchange intervention since 2022. The yen advanced some 0.8% against the greenback after the release of the jobs data Friday.
“For the rest of the world, because of exchange rates, it’s about what US yields do,” El-Erian said. “Certainly the Japanese authorities are very happy, between Chair Powell’s more dovish-than-expected press conference and today’s number, a lot of the pressure has been relieved. I suspect that around the world people will find some relief.”
US yields and the dollar tumbled on Wednesday after Fed Chair Jerome Powell in the news conference following the central bank’s latest policy meeting said a resumption of interest-rate increases was unlikely, even as the outlook for rate cuts remains uncertain.
–With assistance from Lisa Abramowicz, Jonathan Ferro and Annmarie Hordern.
(Adds comments on currencies beginning in fifth paragraph.)
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