Investors Face a Conundrum Over the Jobs Market

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Watch out for Friday's employment report

Investors will still tune in early to one of the most important jobs reports of the last year.

According to Reuters' poll of economists, employers in the U.S. created about 240,000 new jobs in March. Investors are worried that a positive reading on the jobs market, combined with the inflation data expected next week, will force the Fed into raising interest rates on May 3 in order to bring down the soaring price levels. The fact that the jobs report has exceeded analyst expectations for the past 11 reports is adding to the anxiety.

The labor market is still strong despite the massive layoffs in the tech and financial sectors. According to the Bureau of Labor Statistics (BLS), employers added 4.3 million new jobs over the past 12 months, which brought the unemployment rate down to its lowest level in 53 years.

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Inflation has become more difficult to control due to the hot job market. The combination of increased wages and robust hiring has pushed up prices, even though other areas of the economy are showing signs of slowing.

The labor market is at a turning point. This week, the JOLTS report from the Labor Department indicated that employers are beginning to slow down their hiring pace. The quit rate increased, indicating that workers are more confident about quitting their jobs and looking for another.

Stock market volatility is heightened by mixed signals. Interest rate-sensitive technology stocks have been on a losing streak for three days after an impressive rally in the first quarter. Investors are increasingly worried that the Fed may be forced to increase rates as the economy is heading towards recession. The stock market has fallen and the odds of a market recession have increased.' Jamie Dimon is C.E.O. JPMorgan Chase CEO Jamie Dimon wrote this in his annual investor letter.

The recession predictions increase the importance of Friday’s jobs data. Quincy Krosby wrote to clients in a Wednesday note that it might be a good idea for Friday's payroll report to be released because of its importance for the recession debate.

Here's What's Happening

Kevin McCarthy, House Speaker, meets Taiwan's President in California. The visit of President Tsai to the Republican leader’s home state in California was carefully planned to show solidarity while Washington attempts to challenge China without provoking a military conflict. Beijing has condemned the U.S. for holding the meeting with Taiwan.

Rupert Murdoch could be required to testify at the Dominion defamation case. The judge who presided over the lawsuit against Fox News decided that he wouldn't stop attempts to force Mr. Murdoch to appear in person. Murdoch has apparently called off his engagement with Ann Lesley Smith, which lasted two weeks.

Twitter calls NPR "state-affiliated" media. The social network changed their policies to place the broadcaster into the same category with China's Xinhua, and Russia's RT. This drew a protest from American media group. (which only receives a small portion of its funding through the U.S. Government). This is the latest example of Elon Musk’s unpredictable, and sometimes contentious, makeover of Twitter.

Switzerland cuts bonuses for 1,000 Credit Suisse employees. Federal officials asked the Finance Ministry for a possible clawback of bonuses already paid to the bankers of the failed Swiss institution after the fire sale. The decision was made just days after Credit Suisse's shareholders expressed their anger at the bank's failure.

Disney announces its new streaming boss. Joe Earley will oversee Disney+, as the new leader of the direct-to consumer division at the media giant. He'll also be responsible for budget cuts expected in streaming. Ike Perlmutter, former Marvel boss, told The Wall Street Journal he was fired - not laid off - after a clash with top Disney executives.

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What is the next financial time bomb?

Analysts are bracing themselves for a potential crisis in the $20 trillion commercial property market, following the turmoil that forced Silicon Valley Bank to close and gripped the banking sector as a whole last month.

Lisa Shalett warned Morgan Stanley Wealth Management investors this week that commercial real estate, which is the backbone of the lending industry, 'faces an enormous hurdle'. This sector is in danger due to the toxic mix of rising interest rates, post-pandemic office vacant spaces and mass mortgage refinancing.

By the end of 2025, more than half the $2.9 trillion worth of commercial mortgages must be renegotiated. Most of these loans are owed to local and regional banks. Morgan Stanley predicts that interest rates will continue to increase by up to 4.5 percent. This debt burden will be a drag on business, even though low occupancy is putting pressure on property values.

Experts say that the effect will likely be to chill lending. Candace Browning of Bank of America's global research department wrote in a recent note that they were reluctant to say 'all is well' with the recent regional banking stresses. As a sign that the market is uncertain, the F.D.I.C. The F.D.I.C. is still looking for a buyer of the $60 billion loan portfolio owned by the failed lender Signature Bank.

The economic impact of the pandemic is huge. Commercial real estate, including office buildings and shopping malls, contributed $2.3 trillion in the U.S. last year despite the pandemic. Uncertainty surrounds how the commercial real estate sector will cope with a potential lending crunch. Varuna Bhattacharyya is a real estate attorney with Bryan Cave Leighton Paisner. She told The Times that the current situation was a "perfect storm".

Is it the Fed's fault? Critics are saying that the Fed's aggressive interest rate policy should be reconsidered, given the fragility of parts of the banking industry. The Kobeissi Letter - a newsletter covering the economy and the markets - wrote last week on Twitter that the high cost of refinancing real estate loans will likely lead to the next crisis.

The Fed has not yet changed its mind: at least one rate hike is expected this year.

If your company is not profitable, high interest rates will make it worthless.

In his letter to investors each year, the venture capitalist was outspoken about the 'absolute destruction of value' that rising interest rates had caused among start-ups like those he invested in. This drop in valuations may have also led to him being asked to pay a margin on a loan that he had used to make other investments.

Bob Lee, founder of Cash App, is remembered

Bob Lee, an investor and tech executive who founded Cash App, died after being fatally stabbed on Tuesday in San Francisco. Mr. Lee, a cryptocurrency start-up MobileCoin's chief product officer and former chief technology of Block (the payments company formerly known as Square), was fatally stabbed in San Francisco on Tuesday.

According to his LinkedIn profile, he was also an investor with companies such as SpaceX and Clubhouse. On Wednesday, as the news of his passing spread, many members of the technology community shared their memories.

Elon Musk said he was "very sorry" to hear of the death of Mr. Lee and called on city authorities to take more action to combat violent crime. Elon Musk tweeted that violent crime in San Francisco is horrendous and attackers who are caught are often immediately released.

Joshua Goldbard is the founder and CEO of MobileCoin. He said that Bob was brilliant. You could choose a topic, and Bob would be there to tell you how he already thought of it.

Jack Dorsey (founder of Block, co-founders of Twitter) called Lee's passing 'heartbreaking,' on Nostr, a social media website, and stated that Bob was instrumental in Square and Cash App.

Dylan Field, the chief executive officer of design platform Figma tweeted that he first met Mr. Lee back in 2006. He said, 'He didn’t care that I wasn’t 14 years old and we geeked out over programming'.

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Deals

Hedge funds have made $7 billion betting against bank shares during recent market turmoil. (FT)

Scopely is a Saudi-owned company that specializes in eSports. It has agreed to purchase the mobile game maker Savvy Games at a price of $4.9 billion. (Variety)

KKR will reportedly buy a third of FGS Global in a deal valued at $1.4 billion. The deal values the PR and lobbying company at $1.4 billion. (FT)

Tiger Global, an investment fund focused on technology, has reportedly put up stakes in venture-capital firms for sale. (The Information)

The F.D.I.C. BlackRock was hired by the F.D.I.C. to sell the portfolios of Silicon Valley Bank (Significant Bank) and Silicon Valley Bank (Silicon Valley Bank), which total $114 billion. (Reuters)

Two New York City Pension Funds announced plans to achieve 'net zero emissions' by 2040. This includes asking asset managers to refrain from investing in fossil fuel production. (Pensions & Investments)

The F.B.I. The F.B.I. (BBC)

Saudi Arabia's and Iran's foreign ministers met in Beijing at a summit organized by China, marking the first high-level talks between the rivals since seven years. (WSJ)

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