Mohamed El-Erian: U.S. Economy in Better Shape Than Expected
(From left: Mohamed El-Erian, Mike Fratantoni and Laura Escobar. Image by Anneliese Mahoney)
DENVER–Renowned economist Mohamed El-Erian gave his thoughts on the global economic outlook during the Mortgage Bankers Association’s Annual Convention & Expo Oct. 28, noting that the U.S. economy is in a better place than anticipated, especially given recession predictions over the past few years.
“If we look at where we are, relative to where most of us expected the U.S. to be, it truly has been exceptional,” El-Erian said. “As to where we’re going, I think we have a 70% chance that we either soft land or do better.”
He did note he still sees a 30% recession risk, driven by a few factors, including that certain segments of the U.S. economy remain under pressure. Additionally, negative global conditions are messy and could affect the U.S. And, he warned, a policy mistake that sends us into a recession is always on the table.
With all that in mind, he said that the U.S. economy is still more attractive to international investors than other options.
MBA Chief Economist Mike Fratantoni and MBA 2025 Chair Laura Escobar jointly interviewed El-Erian, who serves as President of Queens College and CEO at Allianz, the corporate parent of PIMCO.
Asked about the Federal Reserve outlook, El-Erian said he’s pretty sure there need to be more 25-basis point cuts, but also cautioned that the Fed should aim to be more strategic, and has begun to act as an amplifier instead of a stabilizer.
“The whole point of forward policy guidance–and this is a very strong tool as you know–is to signal where you’re going,” he said. “Because if you signal where you’re going, the market adjusts in an ordinary fashion, and you get there with minimal probability of failure.”
El-Erian also offered his concerns over the issue of the American deficit, which currently stands at 6.4% of GDP. “We do have a fiscal problem,” he said. “We do have the debt problem.”
Looking at the upcoming election, El-Erian described trying to predict policy outcomes of either administration as trying to “solve a three-dimensional matrix,” but offered that both former President Donald Trump and Vice President Kamala Harris’ proposed plans carry some risks.
Another key data metric that’s recently attracted some attention is data on productivity in the U.S.; Fratantoni noted that it has picked up.
El-Erian said that we should be “excited about the long-term,” but there may be a bumpy journey to get there.
“For the first time in my lifetime, we can be really confident that we have the ability–it’s not a guarantee–but the ability to enhance productivity in a major way,” he said, pointing to technological advancements such as artificial intelligence.
“If we get better productivity we can get higher growth, we can do more on the distribution side–it becomes a much better world,” El-Erian said.
