Labor market is decoupling from growth, says Mohamed El-Erian of Allianz

Summary

Mohamed El-Erian, Allianz chief economic advisor, discusses the upcoming cleaner jobs report and argues the labor market is cooling and decoupling from still-solid growth. He expects the Fed to stay on hold at its next meeting and signal one to two cuts in 2026, while warning the Fed lacks strategic clarity. El-Erian also highlights potential AI-driven productivity gains and the need for AI adoption policies that limit labor-market shocks.

• The upcoming jobs report is expected to be cleaner after the government shutdown.
• El-Erian says the labor market is decoupling from solid economic growth.
• He sees a divided Fed staying on hold and signaling one to two cuts in 2026.
• He expects no strategic Fed clarity until a new Fed chair arrives.
• AI-driven productivity gains could support faster non-inflationary growth.
• He calls for AI adoption policies that enhance productivity without destroying jobs.
• Accenture, Google, and Walmart are cited as examples of companies exploring AI adoption policies.