FORTUNE — This morning’s U.S. employment report is an unusually good one — in terms of the headline numbers and virtually all of the key components.
Net monthly job creation came in at 203,000, above consensus expectations of 180,000. Importantly, the job additions were broad-based, with virtually all sectors benefiting.
The widely followed unemployment rate fell to 7.0%, its lowest level since November 2008. For once, this decline was not due in part to lower labor force participation. Instead, both the labor participation rate and employment-population rate went up.
On the income side, average earnings grew on account of both hourly wages and hours worked. And all this was accompanied by improvements in structural components of the labor market (with the notable exception of long-term unemployment which remained at 4.1 million, or 37% of the total).
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In sum, today’s employment report is really good news for Main Street. Is it also good news for risk assets, especially given that they have already registered impressive gains year to date?
In recent months, markets have been all over the place when it has come to whether good economic news is indeed good or bad news for risk assets. And the reason relates to the Fed — namely, whether durable economic improvement can be strong enough to enable the Fed to normalize monetary policy in an orderly fashion, thus avoiding market disruptions such as those that occurred last May-June.
If future monthly employment reports do indeed reaffirm this morning’s outcome in terms of durable and comprehensive labor market improvement, and if this finally unleashes business investment in new plant and equipment — two big Ifs — markets will be right in believing that the Fed can gradually normalize policy in an orderly fashion. And this would be good news for both Main Street and Wall Street.
Mohamed A. El-Erian is the CEO and co-chief investment officer of PIMCO.