- Yesterday, Friday, global economist and President of Queen's College at Cambridge University, Mohamed El-Erian, highlighted some of the contradictions that the American economy is witnessing during the current period.
- Al-Erian said in a post on his account on the social networking site X - formerly Twitter - “The purchasing managers’ index for the non-manufacturing sector issued by the American Institute for Supply Management was weaker than all expectations.”
The US service sector declined
- The global economist added, “The index decreased from 51.4 to 49.4, which is its lowest level since the end of 2022.”
- A reading above 50 indicates growth in the services sector, which represents more than two-thirds of the US economy, while a reading below 50 indicates a decline in the sector, and the Purchasing Managers’ Index reinforces the evidence that the economy has begun to lose some of its strength.
- The president of Queens College continued, “Business activity witnessed the largest decline - to its lowest level since May 2020 - while the employment component also showed weakness, and in contrast, the measure of prices paid by companies recovered to their levels in January, rising from 53.4 to 59.2.”
- “In short, this indicates some inflationary winds accompanied by stagnation, in contrast to the previous jobs report,” El-Erian explained.
- In another post, the economist said, “The moderate US jobs report led to a sharp decline in government bond yields, which in turn pushed stocks to rise in various sectors.”
US jobs report
- Al-Erian added, "The moderate US jobs report will be welcomed by both the Federal Reserve and the markets."
- Al-Erian continued, “The monthly employment rate remains strong, with 174,000 new jobs created,” noting a decrease in wage growth of about 0.2% on a monthly basis and 3.9% on an annual basis.
- The Fed was expected to start cutting interest rates this year, but stumbles in bringing inflation down to the 2% target have delayed the move.
