Investors are taking the US job report as “good news” even though the mixed payroll figures provide few solid signals for policymakers, according to Mohamed El-Erian, the president of Queens’ College, Cambridge.
“The bottom line for policymakers and most economists, we will see this as not containing much new information,” El-Erian told Bloomberg Television. But investors’ current mindset is that “good news is good news; bad news is good news,” he said.
Friday’s report showed that the US unemployment rate climbed to a two-year high in February and wage growth slowed even as payrolls continued to grow at a solid pace, pointing to a cooler yet resilient labor market. Stock futures jumped following the report, while bond traders fully priced in an interest-rate cut by the Federal Reserve at a policy meeting in June.
“This is an ambiguous report,” and “people will see what they want to see in this report,” said El-Erian, a Bloomberg Opinion columnist and former Pimco CEO. “You have an even bigger separation between economists telling you things are uncertain and the market who sees things as all positive.”
Nonfarm payrolls advanced 275,000 last month following a combined 167,000 downward revision to the prior two months, a Bureau of Labor Statistics report showed Friday. The unemployment rate rose to 3.9%.
While the report was mixed relative to market exceptions, it still suggests that the US is outperforming most other major economies, said El-Erian. He pointed out that Germany, the UK and Japan all slipped into technical recessions, while China’s economy is struggling.
The message is: “US economic exceptionalism,” he said. “The US is just exceptional.”