El-Erian Says Strong Jobs Data Closes Door on July Fed Rate Cut

Stronger-than-expected US May jobs data closes the door on a July Federal Reserve rate cut, Mohamed El-Erian said.

“This is a really strong report in terms of demand for employees and in terms of wages paid,” El-Erian, the president of Queens’ College, Cambridge and a Bloomberg Opinion columnist, told Bloomberg Television on Friday.

The pace of job creation blasted past expectations in May, with nonfarm payrolls climbing 272,000 last month versus the 180,000 forecast by economists and a small downwardly revised gain of 165,000 for April. The unemployment rate edged up to 4%, while a snapshot of monthly wage growth picked up by a more-than-forecast 0.4% from 0.2% in April.

“It does close the door on a July rate cut, regardless of what the CPI number says next week,” said El-Erian. “There is no way they can cut or signal a cut in July with this data.”

Mohamad el erian

US Treasury yields jumped around 13 basis points in the wake of the data, with the sharp selloff reflecting a substantial market rally since late May. After the jobs data Friday, the Treasury market sharply pulled back from pricing in two quarter-point cuts this year, between September and December.