Investors Face a Conundrum Over the Jobs Market

What to watch in Friday’s jobs report

Stock markets will be closed for Good Friday, but investors still will be tuning in early for one of the most consequential jobs reports of the past year.

Employers in the U.S. added roughly 240,000 jobs in March, according to economists polled by Reuters. Investors worry that a strong reading on jobs — combined with potentially disappointing inflation data due out next week — will force the Fed to raise interest rates at their next meeting, on May 3, in the hope of bringing down soaring prices. Adding to the jitters: The jobs number has come in above analyst expectations in each of the last 11 reports.

Despite the layoffs sweeping the tech and finance sectors, the labor market remains strong. Employers added roughly 4.3 million jobs in the 12 months to February, according to the Bureau of Labor Statistics, bringing the unemployment rate to a 53-year low.

The hot employment market has made the Fed’s job to bring down inflation tougher. A combination of robust hiring and higher wages has put pressure on prices even as other parts of the economy have shown signs of slowing.

The labor market appears to be at an inflection point. The Labor Department’s JOLTS report this week indicated that employers were beginning to slow the pace of hiring. But the quit rate ticked up, an indicator that workers feel confident about leaving a job and finding another.

The mixed signals are adding to stock market volatility. After an impressive first-quarter rally, interest rate-sensitive tech stocks are on a three-day losing streak as investors become increasingly concerned that the Fed will be forced to raise rates even as the economy could be heading toward recession. “The stock market is down and the market’s odds of a recession have increased,” Jamie Dimon, C.E.O. of JPMorgan Chase, wrote in his annual letter to investors this week.

The recession predictions add to the importance of Friday’s jobs data. “Maybe it’s a good thing that markets are closed on Friday for the release of the payroll report considering its importance in terms of the recession debate,” Quincy Krosby, chief global strategist for LPL Financial, wrote in a note to clients on Wednesday.

HERE’S WHAT’S HAPPENING

House Speaker Kevin McCarthy meets Taiwan’s president in California. President Tsai Ing-wen’s visit to the Republican leader’s home state was carefully choreographed to show solidarity as Washington tries to challenge China without precipitating a military crisis. Beijing condemned the U.S. and Taiwan for the meeting.

Rupert Murdoch may have to testify in the Dominion defamation trial. The judge presiding over the lawsuit against Fox News ruled that he would not stop efforts to compel Mr. Murdoch and his son Lachlan to testify in person. In more personal Murdoch news, the billionaire has reportedly called off his two-week engagement to Ann Lesley Smith.

Twitter labels NPR “state-affiliated media.” The social network changed its policies to put the broadcaster in the same category as China’s Xinhua and Russia’s RT, drawing a protest from the American media group (which receives only a tiny portion of its funding from the U.S. government). It’s the latest sign of Elon Musk’s unpredictable and often contentious makeover of Twitter.

Switzerland moves to cut bonuses for 1,000 Credit Suisse bankers. Federal officials urged the Finance Ministry to scrap about $66 million of payouts at the failed Swiss bank after its fire sale to UBS, and pressed for potential clawbacks of already-paid bonuses. The decision came days after Credit Suisse shareholders expressed anger over the bank’s collapse.

Disney names its new streaming chief. Joe Earley, who leads the Hulu platform, will also oversee Disney+ as he becomes the media giant’s new direct-to-consumer leader; he’ll oversee expected budget cuts in streaming. Separately, the former Marvel chief Ike Perlmutter told The Wall Street Journal that he had been fired — not laid off — after clashing with top Disney executives.

The next banking time bomb?

The turmoil that drove Silicon Valley Bank out of business and gripped the wider banking sector last month has analysts bracing for a possible crisis in the roughly $20 trillion commercial real estate market.

Commercial real estate, the lifeblood of the lending business, now “faces a huge hurdle,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, warned investors in a note this week. The sector is precarious thanks to a potentially toxic cocktail of post-pandemic office vacancies, rising interest rates and a mass refinancing of mortgages that lies ahead.

More than half of the $2.9 trillion in commercial mortgages will need to be renegotiated by the end of 2025. Local and regional banks are on the hook for most of those loans. And interest rates are expected to continue to rise by as much as 4.5 percent, Morgan Stanley estimates. That debt load will weigh on businesses even as low occupancy means property values come under pressure.

The effect is likely to put a chill on lending, experts say. “We are reluctant to declare ‘all clear’ on recent regional banking stress,” wrote Candace Browning, who heads global research at Bank of America, in a note this week. In a sign of market uncertainty, the F.D.I.C. is still searching for a buyer for the $60 billion loan portfolio held by the collapsed lender Signature Bank.

The economic impact is vast. Even as it struggled with the effects of the pandemic, commercial real estate — including office buildings, shopping malls and warehouses — contributed $2.3 trillion to the U.S. economy last year, an industry association calculated. How the sector would weather a looming lending crunch is unclear. “It is a perfect storm right now,” Varuna Bhattacharyya, a real estate lawyer with Bryan Cave Leighton Paisner, recently told The Times.

Is the Fed at fault? A growing chorus of critics say that, with parts of the banking sector so fragile, the central bank should rethink its aggressive interest rates policy. The high price of refinancing commercial real estate loans in coming years will “likely lead to the next major crisis,” The Kobeissi Letter, a newsletter that covers the economy and markets, wrote on Twitter last week, adding that “the Fed plays a major role.”

So far the Fed is unswayed: At least one more rate increase is in the cards this year.

“If your company is unprofitable, the mathematical truth of high interest rates is that it renders your company valueless.”

— Chamath Palihapitiya. In his annual letter to investors, the outspoken venture capitalist wrote about how rising interest rates caused “absolute value destruction” among money-losing start-ups, like the ones he had invested in. That drop in valuations also appears to have led to his facing a margin call on a loan he used for other investments.

Remembering Bob Lee, the founder of Cash App

Bob Lee, a tech executive and investor who founded the payment service Cash App, was fatally stabbed in San Francisco on Tuesday. Mr. Lee was the chief product officer of the cryptocurrency start-up MobileCoin and a former chief technology officer of Block, the payments company previously known as Square.

He was also an investor in companies including SpaceX and Clubhouse, according to his LinkedIn profile. As news of his death spread on Wednesday, members of the tech community posted memories of him online.

• Elon Musk tweeted that he was “very sorry to hear” of Mr. Lee’s death and urged city authorities to do more to tackle violent crime. “Violent crime in SF is horrific and even if attackers are caught, they are often released immediately,” he posted.

• Joshua Goldbard, the founder and chief executive of MobileCoin, said, “Bob was brilliant,” adding that you could pick a topic “and Bob would be right there with you telling you all of the ways he had thought about the idea already.”

• Jack Dorsey, the founder of Block and co-founder of Twitter, called Lee’s death “heartbreaking” on the social media site Nostr and said, “Bob was instrumental to Square and Cash App.”

• The chief executive of the design platform Figma, Dylan Field, tweeted that he had first met Mr. Lee in 2006. “He didn’t care that I was only 14 and we talked tech / geeked out about programming,” he said.

THE SPEED READ

Deals

Policy

• The F.D.I.C. hired BlackRock to sell the securities portfolios of Silicon Valley Bank and Signature Bank, which are worth about $114 billion combined. (Reuters)

• Two New York City pension funds announced plans to reach “net zero” emissions by 2040, including by asking asset managers not to invest in fossil-fuel production. (Pensions & Investments)

• The F.B.I. and other global law enforcement agencies shut down Genesis Market, an online hub for stolen passwords and personal information. (BBC)

• The foreign ministers of Saudi Arabia and Iran met at a China-brokered summit in Beijing, the first high-level discussions between the rivals in seven years. (WSJ)

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