Fed Cut It Close With Its Latest Rate Decision; March Data on U.S. Labor Market in Focus Today

Fed Cut It Close With Its Latest Rate Decision; March Data on U.S. Labor Market in Focus Today By James Christie

Good day. Federal Reserve officials went down to the wire with their decision in March to raise interest rates amid concerns about the banking system crisis that erupted earlier in the month, Nick Timiraos of The Wall Street Journal reports. He notes that the decision, on the heels of rolling out new tools to address heightened financial stress, highlighted the flexibility and improvisation that has been a calling card of Fed Chair Jerome Powell during his five years at the top of the central bank. The decision to lift rates rather than hold them steady came only after it appeared Swiss authorities had stemmed a dangerous decline in confidence in the global banking system with the forced acquisition of Credit Suisse Group AG by rival UBS Group AG the night before. Today, we will get a snapshot of how the U.S. labor market fared last month with the March jobs report. The labor market has boomed even with the Fed continuously raising interest rates to tame high inflation. Employers added about 800,000 jobs in January and February, while the unemployment rate hovered at historic lows.

Now on to today's news and analysis.

Top News Latest Fed Rate Increase Came Down to the Wire

Federal Reserve Chair Jerome Powell and his colleagues faced their closest call on interest rates in years. It wasn't until the clock was ticking down two days before their scheduled decision last month that senior leaders settled on a plan to lift rates by a quarter percentage point.

That was down to the wire in Fed time. Rate-setting meetings are usually tightly choreographed and devoid of suspense. The big decisions happen in the week leading up to the gathering and not during the two days of elaborate presentations and discussion around the boardroom table. Fed leaders like to avoid surprises so they can fine-tune their public message.

Fed's Bullard Doesn't See Credit Crunch That Triggers Recession

In the wake of the collapse of Silicon Valley Bank, conventional wisdom has been that banks will cut lending and damage the economy. On Thursday, Federal Reserve Bank of St. Louis President James Bullard said he was "less enamored" with this forecast. About 20% of lending is going through the banking system and only a fraction of banks are small or regional banks, he said, adding that, "I just don't think it is big enough by itself to send the U.S. economy into recession." Mr. Bullard said he doubted there would be a pullback of lending by small and medium sized banks because loan demand remains robust. (MarketWatch)

March Jobs Report to Show Whether Hiring Boom Continued

Economists surveyed by the Journal estimated that employers added 238,000 jobs in March and that the unemployment rate held at 3.6%. Strong job gains at service businesses are helping offset cuts at large companies in industries such as technology, finance and entertainment. Weekly jobless claims, a proxy for layoffs, have risen from historic lows and job openings have declined, in signs of easing demand for workers as the labor market gradually cools.

U.S. Economy Higher March Jobless Claims Add to Signs of Cooling Labor Market

The March average of weekly claims was a seasonally adjusted 237,750, compared with an average level of less than 200,000 before revised calculations. Claims declined by 18,000 to 228,000 in the week ended April 1.

Bosses Want Hard Workers-So They're Hiring Older People

Johnny C. Taylor Jr., chief executive of the Society for Human Resource Management, says "some companies are saying, 'Why don't we just go hire people who are naturally predisposed to work harder? '"

These Tech Workers Say They Were Hired to Do Nothing Investors Retreat From Commercial Real Estate Bonds

Prices of bonds backed by commercial mortgages have recently dropped to levels not seen since the early days of the pandemic, pointing to a growing economic threat stemming from office vacancies and rising interest rates.

Declines in Loan Values Are Widespread Among Banks

Nearly every publicly traded bank in the country is sitting on loans that have declined in value since they were made. The culprit is rising interest rates, which also slashed the value of banks' other big asset-their securities holdings.

Key Developments Around the World Russia's Ruble Slides on Capital-Flight Fears

The Russian ruble fell Thursday to its lowest level in a year as Moscow's weakening oil revenues and fears over capital flight weigh on the currency, running counter to a broader trend among global currencies.

Fresh French Protests Keep Pressure on Macron

French workers mounted a new round of protests against President Emmanuel Macron's pension overhaul, a test of their movement just as the country's constitutional council prepares to rule on whether his plan can become law.

Saudi, Iranian Foreign Ministers Agree to Resume Flights

Saudi Arabia and Iran agreed to restore flights between their countries and resume government and private-sector visits , after their top diplomats met in Beijing as a thaw begins in one of the Middle East's thorniest rivalries.

Saudi Arabia, Gulf States Want Better Returns for Bailing Out Egypt

Saudi Arabia and other Persian Gulf countries have warned Egypt that any financial bailout would depend on Cairo devaluing its currency and appointing new officials to run its economy, according to Egyptian and Gulf officials.

Financial Worries Lead to Rush of Chinese Mortgage Prepayments

Homeowners in China, worried about future income levels and poor returns on investment, have been paying down their mortgages at a much faster pace than in previous years, a trend that is weighing on banks' profitability.

Financial Regulation Roundup IRS Plan to Spend $80 Billion Includes Real-Time Tax Alerts

The IRS unveiled its plan for revamping the agency amid Republican opposition, promising to shift more taxpayer interactions onto digital platforms and add thousands of enforcement staffers to audit the wealthy and corporations .

Decentralized Crypto Markets Threaten U.S. Security, Treasury Says

The burgeoning decentralized cryptocurrency market threatens U.S. national security and needs greater oversight and enforcement against money-laundering, the U.S. Treasury Department said on Thursday.

Forward Guidance Friday (all times ET)

8:30 a.m.: U.S. employment report for March

3 p.m.: U.S. consumer credit

Monday

10 a.m.: The Conference Board Employment Trends Index for U.S. for March

Research Rate Cuts in Brazil Might Start Sooner, But Will End in Same Place

Central Bank of Brazil policy makers might begin to cut the country's benchmark interest rate, the Selic, earlier than previously anticipated because of a slowdown in credit markets, but they'll still stop at the same level as expected, XP Investimentos economists write in a research note. The bank lifted the Selic to 13.75% last August to slow consumer price increases and has left it there since. XP says it now expects the bank's first rate cut, of 25 basis points, this August, followed by half-point cuts until the Selic falls to 11.00% in the first half of 2024.

-Jeffrey T. Lewis

Commentary OPEC+ Cut Won't Throttle Chinese Oil Demand

The health of the two main sectors driving oil consumption in China-transport and housing-related heavy industry-are now quite clearly on the mend, and the pace of improvement is accelerating, Nathaniel Taplin writes.

You Don't Need a Banking Crisis for a Financial Meltdown

The reality is that risk adheres to any institution engaged in financial intermediation in sufficient volume, whatever you choose to call it, and our problem is that more than a decade of unprecedented low interest rates and quantitative easing distended global finance , Joseph C. Sternberg writes.

Executive Edition

Editor's Note: Each week, we will share selections from WSJ Pro that provide insight and analysis we hope are useful to you. The stories are unlocked for The Wall Street Journal's subscribers.

Movie fans have been trickling back to the cinema after the pandemic upheaval, but the financial pain has intensified for some of the largest theater-industry players, including Cineworld Group and AMC Entertainment.

Private-equity investors looking to stand out as they enter the crowded-and potentially lucrative-playing field of sports are buying into less popular segments such as rugby, where pricing pressure is lower, but risks loom large.

Healthcare has been a bright spot in a slowing exit environment for private-equity firms. In one of the more recent examples, global private-equity firm Warburg Pincus stands to score a lucrative return with the sale of gene therapy technology provider Polyplus, the latest in a string of healthcare exits the firm has produced over the past year.

America is aging, but many companies don't want to hire older people. Some employers may subtly communicate through their wording in online help-wanted ads that older workers ought not apply. But including this demographic is important for maintaining a healthy labor market.

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04-07-23 0715ET