• And, on the less favorable side, a relatively constant labor participation rate that confirms that what is holding back the return of those who exited the workforce is more structural than cyclical in nature.
If this is what the jobs report contains on Friday, markets will need to price more seriously the likelihood that the Fed will deliver on its policy guidance, starting with initiating the process of shrinking its balance sheet, together with another hike in the remainder of the year. In the process, the central bank would reduce two risks: that future growth would be derailed by today’s current financial market excesses, and that both its mandate and operational autonomy would be vulnerable to greater political interference.
What even this wouldn’t do, however, is provide decisive relief for concerns about economic growth that is too low and insufficiently inclusive. For that, Congress and the administration need to accelerate work on pro-growth policies, starting with tax reform, infrastructure and labor market measures that better address the structural impediments.
Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco.
This column was provided by Bloomberg News.