US Economic Slowdown 'Talk Of The Town,' Says Economist Mohamed El-Erian As Fed Chair Powell Reaffirms Growth At 'Solid Pace'

Rishabh Mishra

March 10, 2025

Benzinga

Economist Mohamed El-Erian highlighted the risks of an economic slowdown as Federal Reserve Chairman Jerome Powell reiterated that the economy was growing at a “solid pace” during his Friday address at the University of Chicago.

What Happened: During a podcast with Forward Guidance, the chief economic advisor at Allianz, El-Erian underscored “two disturbing data” sets on the stagflation side.

This included a fall in February’s ISM Manufacturing New Orders Index, which contracted to 48.6% after expanding for three months, indicating a weakening demand and a decline in new orders compared to the previous month.

The other data set highlighted by El-Erian included February’s job report, wherein nonfarm payrolls increased by 151,000 and the unemployment rate rose to 4.1%, the highest in 3.5 years, thus inducing uncertainty in the labour market. However, “one qualification is the slip in labor force participation,” from 62.6% to 62.4%, according to him.

“So the concern that we all have, is that while growth is slowing down, companies will feel that they need to pass on the higher costs into higher prices, of course that’s why tariffs play a major role because people are worried that it won’t be a once and for all effect, it may be a repeated effect, so there’s a price level and then there’s an inflation effect,” he said.

Economic slowdown was “the talk of the town,” El-Erian said while highlighting lower oil prices, negative stock futures, lower yields, and a weaker dollar on Monday.

The possibility of lower US economic growth is now the talk of the town, amplified by this weekend's remarks from high-level officials.
As you would expect, the market impact so far this early morning in Asian trading includes lower oil prices (with Brent again joining WTI below… pic.twitter.com/egyftI2GpR
— Mohamed A. El-Erian (@elerianm) March 10, 2025

Meanwhile, President Donald Trump did not rule out a recession this year, acknowledging potential short-term turbulence from his economic agenda but expressing confidence in future prosperity. In a Fox News interview, he said, "I hate to predict things like that" and called the changes "very big."

Why It Matters: Despite the looming uncertainties and the difficulty of businesses to chart their way forward, Fed Chair Powell said, “The U.S. economy continues to be in a good place.”

He reaffirmed that the labor market is solid, and inflation has moved closer to the 2% longer-run goal. “At the Federal Reserve, we are intently focused on the dual-mandate goals given to us by Congress: maximum employment and stable prices,” Powell said.

Outlining the future course of action, he said that if inflation doesn’t fall to the 2% goal, the Fed will maintain policy restraint for longer and if the labor market weakens, the Fed will ease the policy accordingly.

Talking about the rate cuts, El-Erian added that he sees one cut and not three cuts in 2025 because of the persistent inflation and how the Fed is unlikely to “look through” that issue, the way they did in 2021.

Price Action: Futures of the Dow Jones slipped to 0.38%, whereas S&P 500 and Nasdaq 100 declined by 0.49% and 0.61% respectively. Crude Oil WTI Futures dropped 0.51% to $66.7, the dollar index spot was down to the 103.816 level and the 10-year Treasury bonds yielded 4.29% as of 2:18 a.m., EDT.

The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, advanced on Friday. SPY gained 0.56% to $575.92, and QQQ was up 0.74% to $491.79, according to Benzinga Pro data.

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