Mohamed El-Erian says markets are asking the Fed to start tapering now after the big fiasco in September jobs report

Mohammed Al-Arian Bimko
Mohammed Al-Arian

  • Markets are sending a clear signal to the Federal Reserve to start reducing asset purchases, Mohamed El-Erian told Bloomberg TV on Friday.
  • His comments came just moments after monthly jobs data showed a significant mandate for jobs added in September.
  • The weak headline figure was mitigated somewhat by higher wages and an upward revision to the July and August figures.

Mohamed El-Erian told Bloomberg TV on Friday that markets are sending a clear signal to the Federal Reserve to start reducing its asset purchases in the wake of the disappointing jobs report.

The Queen’s College president and economist told Bloomberg that Federal Reserve Chairman Jerome Powell’s previous criterion test to begin tapering this year has been met.

“The market is now also separating the taper from the price increase,” El-Erian said. “So the message from the market to the Fed is: ‘Go ahead and taper off, we expect you to.’

His comments came just moments after the Bureau of Labor Statistics It released monthly job data showing 194,000 new jobs It was created in September, a big mistake from a consensus prediction of 500,000.

The weak headline figure was mitigated somewhat by a wage hike in September and an upward revision to the July and August figures, adding 169,000 additional jobs for a net total of 371,000. The unemployment rate also fell from 5.2% to 4.8% while the labor force participation rate remained flat.

Al-Arian has been banging the drum for months on the need for the Federal Reserve to taper off as quickly as possible. Last month, he He blamed the central bank for the bond market turmoil, saying that markets will begin to question the Fed’s judgment on inflation the longer it waits for a gradual decline.

Rick Ryder, BlackRock’s chief information officer for global fixed income, largely sided with El-Arian in a note to clients tracking job data.

“It is likely that the Fed will (and should) continue with its plan to scale back the measure of excessive liquidity in the very near future,” Rieder wrote. “What will be a real test for the Fed in 2022 is whether these supply shocks (including employment) will last into the year, and how the Fed will deal with persistent inflation.

Similarly, Charlie Ripley, a strategist at Allianz Investment Management, said Friday that the bright spots in the jobs data should keep the Fed on its gradual path.

“Today’s report should not dissuade the Fed from moving forward with tapering its bond program in the coming months as tighter business conditions and upward wage pressure outweigh the disparity in payroll numbers over the past few reports,” Ripley wrote.

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