Mohamed El-Erian Says Another Indicator Consistent With His View That The Economy Is 'Slowing More Than Many Expect, Including The Federal Reserve'

Mohamed El-Erian, the chief economic advisor at Allianz, took to X, formerly Twitter, to highlight a significant economic indicator that points to a slowdown. He referred to the “monthly measure of job vacancies,” which dropped from 8.35 million to 8.05 million, the lowest in three years and well below the consensus forecast.

What Happened: El-Erian suggested that this data point is consistent with his previous observations that the economy is slowing down more than many anticipate, including the Federal Reserve.

Earlier the economist also mentioned the recent ISM data, which showed that the US factory activity in May was below the consensus forecast and at its lowest in three months. El-Erian pointed out that these numbers are in line with other signals of an economy losing momentum at a faster rate than most expect.

El-Erian also highlighted the disparity between the market’s expectations for Fed policy action and the actual economic conditions.

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Notably, on Tuesday El-Erian had said that lower yields and oil price drop were part of the markets’ reactions to the worries about the U.S. economy which he called the “engine of global growth.” He said the nation’s economy may be slowing more than expected.

Why It Matters: In April, U.S. job openings remained steady at 8.1 million, with little change in hires (5.6 million) and total separations (5.4 million), according to the Bureau of Labor Statistics data released Tuesday. Within separations, quits held at 3.5 million, reflecting workers’ confidence, while layoffs and discharges were stable at 1.5 million. The report noted changes in job openings and separations across various industries and establishment sizes.

El-Erian’s tweet comes at a time when the bond market is rallying, driven by concerns about a potential recession and increasing bets on a rate cut in September. The recent soft economic data has led to a reevaluation of the Federal Reserve’s rate cut expectations.

Long-dated U.S. Treasuries, including the iShares 20+ Year Treasury Bond ETF TLT, have been rallying, breaking a key downtrend that began in late 2023. This surge has lifted TLT, a gauge for long-term bond performance, above its declining trend channel for 2024 and its 50-day moving average, indicating a potential trend reversal.

El-Erian’s observations are also in contrast with the views of some Federal Reserve officials. For instance, Neel Kashkari, the President of the Federal Reserve Bank of Minneapolis, has advocated for no interest rate cut until there is more convincing data to support it, amid inflation uncertainty.

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