Jobs report: El-Erian warns Fed ‘inflation not dead’

His comments came after Friday’s numbers smashed estimates, sparking a rise in U.S. stock and bond yields. Nonfarm payrolls rose by 254,000 in September, the most in six months.

“This is not only a strong labor market, but if you take these numbers at face value, it is a strong end-of-cycle labor market,” El-Erian, president of Queens’ College, Cambridge, told Bloomberg Television.

“For the Fed, it means pushing back a lot more against the markets’ pressure to put you in the single mandate box,” he added. “Enough talk about ‘The Fed should only be concerned with maximum employment.’

Investors quickly cut bets on stronger Fed policy easing in November and December after the release. The data also showed that the unemployment rate unexpectedly fell to 4.1 percent, while annual wage growth rose by 4 percent.

Swap traders are now betting on just over 50 basis points of interest rate cuts from the US central bank before the end of the year, down from more than 60 on Thursday. The yield on policy-sensitive two-year Treasury yields rose after the release, trading more than 15 basis points higher at 3.86%.

“For markets, this negates overly aggressive rate-cutting expectations from the Fed,” said El-Erian, who is also a Bloomberg Opinion columnist. “This will bring the market closer to what is likely.”