March jobs report a win for stocks, says economist Mohamed El-Erian

  • The March jobs report is a win for equities and the Fed should maintain a steady pace of rate hikes in May, Mohamed El-Erian said.
  • The world’s largest economy added 236,000 jobs last month, below the median forecast of 239,000.
  • Stock futures closed higher after the jobs report arrived during the Good Friday holiday.

The March U.S. jobs report showing a slowdown in hiring amid a still-robust economy should boost stocks and keep the Federal Reserve on track by raising interest rates to fight inflation, said said economist Mohamed El-Erian on Friday.

The largest economy in the world added 236,000 off-farm jobs last month, below the median forecast of 239,000 among economists and below February’s upwardly revised gain of 326,000.

The unemployment rate fell and the participation rate rose, indicating that people were looking for jobs and returning to work at the fastest rate since before the COVID pandemic hit.

“It’s good to see some good economic news,” El-Erian, chief economic adviser at Allianz, told Bloomberg TV after the Labor Department released its report.

The data also bodes well for stocks, he said.

“We’re making this transition from where the stock market was obsessed with interest rate risk to a market preoccupied with credit risk,” he said. El-Erian was referring to the recent turmoil in the banking sector sparked by last month’s bankruptcies of Silicon Valley Bank and Signature Bank.

“This figure here suggests he should be less concerned about credit risk for now,” said the economist who is also president of Queens’ College in Cambridge, England.

US stock futures rose after the Labor Department released its data. S&P 500 e-mini futures And Dow e-mini futures contracts each increased by 0.2%. Nasdaq-100 Futures Contracts also increased by 0.2%. Equity futures trading was open until 9:15 a.m. Eastern Time on Friday, while broader equity trading was closed for the Good Friday holiday.

The Federal Reserve, by raising interest rates, tried to cool the labor market to curb inflation. At the same time, he wants to prevent the economy from sliding into a deep recession.

The jobs report “increases the likelihood of them hitting 25 basis points in early May,” El-Erian said of the Fed’s next policy move. “Of course, the CPI numbers can be important. But given that, it doesn’t warrant a pause given their way of thinking.”

The March report showed “solid job creation, including in services – both providing nice upside surprises to the economy,” he later wrote in a message on twitter.

The S&P 500 closed Thursday up 0.4% at 4,105.02.

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