Mohamed El-Erian REUTERS/Fred Prouser
The markets are signaling to the Federal Reserve that it should begin to taper its asset purchases, Mohamed El-Erian said to Bloomberg TV Friday.
His comments were made just moments after the September monthly jobs data revealed a significant miss in jobs added.
Higher wages and an upward revision of the July and August numbers helped to alleviate the weak headline number.
Mohamed El-Erian, Bloomberg TV's Friday correspondent, said that markets are signaling to the Federal Reserve to stop buying assets in the wake a disappointing jobs report.
Bloomberg was informed by the Queens College President and economist, Jerome Powell, Fed Chair. He stated that he had met his previously stated test to begin tapering this year.
El-Erian stated that the market was also separating taper and rate increases. "So, the market is telling the Fed: "Go ahead and taper. We expect you to."
His comments were made just minutes after the Bureau of Labor Statistics published monthly jobs data that showed 194,000 new jobs in September. This is a significant drop from the consensus estimate of 500,000.
Higher wages in September and an upward revision of the July and August numbers helped to alleviate the weak headline number. This added 169,000 jobs, for a total of 371,000. While the unemployment rate fell to 5.2% from 4.8%, the labor force participation rate remained flat.
El-Erian has been urging the Fed to reduce its tapering efforts for several months. El-Erian claimed that bond market turmoil was caused by the Fed. He said markets would question the Fed's inflation judgment if it didn't taper sooner.
In a note to clients, Rick Rieder (BlackRock's CIO for global fixed income) sided with Elrian.
"The Fed probably will (and should) continue its plan to taper excessive liquidity-accommodation in the very near future," Rieder wrote. "The Fed's true test into 2022 will be whether these supply shocks, including labor, continue throughout the year and how the Fed deals with continued inflation."
Charlie Ripley, strategist at Allianz Investment Management, stated on Friday that the Fed should not be stopped by the bright spots in the employment data.
Ripley stated that the Fed should not be stopped from tapering its bond program in the next months. Ripley said that tighter labor conditions and higher wage pressure overshadow the inequalities in the payroll numbers in the past few reports.
