The jobs report came in much stronger than had been expected, with a seasonally adjusted 288,000 new jobs and upward revisions to job growth in both February and March, but as Allianz Chief Economic Advisor Mohamed El-Erian explains on Bloomberg Television’s In The Loop, the country still hasn’t finished healing from the financial crisis.
Long-term unemployment under 3.5 million
Aside from the headline jobs numbers, El-Erian was impressed that the report contained good news for some of the country’s most vulnerable populations.
“If you look at long-term unemployment, that came down to under 3.5 million. We have not seen that level for a while. If you look at teenage unemployment, that came down to under 20%. We have not seen that level for a while,” said El-Erian.
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The drop in long-term unemployment is especially important as many people have wondered whether people whose skills have become outdated will ever be able to get their careers back on track, though the decline may also reflect people who are settling for jobs they wouldn’t have taken a few years ago.
He concedes that the report wasn’t all good news, the decline in the participation rate makes it the lowest we’ve seen in almost thirty years and wages have remained stagnant, but he sees wage growth as the ‘next step in this progression of healing,’ and is still very positive about this news.
El-Erian: Stock market worried about Fed response
The stock market dipped slightly when the jobs report first came out, which El-Erian interprets as the mixed reaction of a market that wants to see jobs growth, but doesn’t want to see the end of QE. If job creation continues at this pace, the Federal Reserve will have no reason to put tapering on hold, but El-Erian doesn’t think it will bring the next rate increase any sooner.
“It is important for the market to take account of the unemployment picture and inflation picture,” says El-Erian.
The Fed has a dual mandate of bringing down unemployment and keeping inflation close to its target rate of 2%. Unemployment may finally come down below 6% this year, but 2% inflation seems a lot less likely. Others have argued that Fed chair Janet Yellen, as a financial dove, will continue trying to push unemployment down for as long as low inflation will allow her.