Is the Fed Done Raising Rates? U.S. Jobs Report Today; ECB Signals It Isn't Ready to Pause Inflation Fight By Perry Cleveland-Peck

Good day. Fed officials this past week raised interest rates to a 16-year high and signaled they might be done hiking them for now. But they didn't say exactly how they will know when they have reached that point. We take a look at four key factors below. Meanwhile, the European Central Bank said yesterday that it would increase its key rate by a quarter percentage point to a near 15-year high. However, it also signaled that it isn't ready to pause its campaign against high inflation, unlike the Fed. And today, we will get a sense of how the U.S. labor market is holding up against the Fed's interest-rate increases, high inflation and banking-sector turmoil when the Labor Department releases its employment report for April. Economists surveyed by The Wall Street Journal estimate 180,000 jobs were added last month and the unemployment rate edged up from 3.5% in March to 3.6%.

Now on to today's news and analysis.

Top News Is the Fed Done Raising Rates?

Federal Reserve Chair Jerome Powell said at a press conference Wednesday that policy makers will base their decision on whether to raise interest rates again "on the totality of incoming data and their implications for the outlook for economic activity and inflation."

The Fed has increased rates rapidly over the past year to lower inflation by slowing the economy. Here is a look at four factors that policymakers are monitoring as they decide whether they have lifted rates enough: bank lending, income growth, labor demand and inflation.

Jobs Report to Show How Labor Market Fared in April

Friday's jobs report will show how the labor market fared in April , as the economy faced banking turmoil, rising interest rates and still-high inflation. Other signs show the red-hot labor market is modestly cooling this spring. That in part reflects a return to a more normal job market after a rapid rebound from pandemic layoffs three years ago. But some employers are now also slowing hiring out of caution about the economic outlook.

The Labor Department is set to release the April employment report at 8:30 a.m. ET Friday. Economists surveyed by The Wall Street Journal estimated that employers added 180,000 jobs in April and that the unemployment rate edged up to 3.6% from 3.5% in March.

European Central Bank Slows Pace of Rate Increases

The European Central Bank on Thursday slowed the pace of its interest-rate increases but signaled it isn't ready to pause its campaign against high inflation, diverging from the Federal Reserve.

Macklem Warns Inflation Could Get 'Stuck Materially Above' Target

Bank of Canada Gov. Tiff Macklem said there is a risk that robust wage growth, elevated inflation expectations and frequent price increases from businesses could impede central bank efforts to slow inflation toward its 2% target .

Regional-Bank Shares Dive as Investors Fret About Contagion

Regional-bank stocks tumbled Thursday despite assurances from the Federal Reserve the banking system is on solid footing. PacWest Bancorp, which has been hit hard since the collapses of several banks, dropped by about 50% .

U.S. Economy U.S. Trade With World Rose in March on Energy, Auto Shipments

U.S. trade with the rest of the world increased in March as companies shipped more oil, natural gas and vehicles overseas and exported more products to China. U.S. businesses also imported more consumer goods.

Profit Margins Are Stabilizing, Creating New Tailwind for Stocks

More than halfway through the first-quarter earnings season, the net profit margin of S&P 500 companies has ticked up to 11.5% from 11.3% in the fourth quarter, based on results and estimates for companies yet to report.

Bankrupt Businesses Fight to Keep Cheaper Loans on Books

Some bankrupt companies are turning to a strategy to help them restructure their debt without losing the attractive terms on legacy loans as interest rates rise, often to lenders' chagrin.

Key Developments Around the World Oil Prices Under Pressure on Economic Fears, Russian Supply

This week's tumble in oil prices has its origins in concerns the Fed's campaign of higher interest rates is slowing the economy , and traders think Moscow hasn't followed through on pledges to throttle output in response to sanctions.

The 'Bad Boy' of Shipping Cashes In on Russian Oil Drones Target Russian Supply Lines Ahead of Expected Offensive

For Americans in Russia, Unease Is Often Outweighed by Family Ties

The arrest of Wall Street Journal reporter Evan Gershkovich has caused unease for many Westerners living in Russia , including Americans who decided to stay after Moscow invaded Ukraine last year.

Reserve Bank of Australia Still Jittery About Stubborn Inflation Risks

The Reserve Bank of Australia continues to warn that while inflation pressures have peaked, the risks that inflation remains higher for longer are significant and further interest-rate increases may be needed.

Financial Regulation Roundup Sen. Warren Seeks Information From First Republic's Former CEO

Sen. Elizabeth Warren has written to the former chief executive of failed First Republic Bank asking for more information on his and other executives' pay and management practices ahead of the bank's collapse.

Toronto-Dominion Bank, First Horizon Call Off Merger

Canadian lender Toronto-Dominion Bank said it couldn't be sure when or if it would get the necessary approvals for a $13.4 billion merger with Tennessee-based First Horizon, so the two banks decided to terminate the deal.

Crypto Firms Find a Way to Bank Without Banks

Regulators' warnings and a series of bank failures have caused some banks to step away from cryptocurrency clients, but a handful of middlemen companies are helping keep the nascent industry banked.

Forward Guidance Friday (all times ET)

8:30 a.m.: Canada labor force survey for April; U.S. employment report for April

Monday

10 a.m.: The Conference Board Employment Trends Index for April; U.S. wholesale trade sales and inventories for March

2 p.m.: Federal Reserve Senior Loan Officer Opinion Survey on Bank Lending Practices

Research U.S. Labor Conditions Seen Opening Door for Fed Pivot

An easing in the U.S. labor market "is the last missing piece of the puzzle required to open the door for a genuine Fed pivot [and it] is falling into place," Deutsche Bank researchers write in a note. They question Fed Chair Jerome Powell's assertion that the jobs market remains extraordinarily tight, pointing to a quit rate now back in its pre-Covid range. "The quit rate is one of the most reliable indicators of [labor] market slack," the researchers write. Markets are pricing a pause in interest-rate increases by the U.S. central bank in June and cuts starting as soon as July, according to the CME FedWatch Tool.

-Paulo Trevisani

Commentary A Debt Deal Could Help Solve the Country's Inflation Problem

Traditionally, the Fed worries about inflation and leaves fiscal policy to Congress and the president, but in the early 1990s Alan Greenspan implicitly premised rate cuts on a deficit-reduction deal , Greg Ip writes.

Singapore's Moment Is Here. Will It Last?

To keep the march it has stolen on Hong Kong, Singapore will need to tame its housing market and demonstrate that it truly is neutral territory in the intensifying competition between the U.S. and China, Nathaniel Taplin writes.

Executive Insights

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.

Supply Chains Have Changed Forever

Nearshoring. Automation. Supplier diversification. Sustainability. WSJ Pro takes a closer look at how companies are reshaping their logistics.

A Cyberattack Forced a Logistics Company to Temporarily Halt Operations . A breach at Expeditors International contributed to supply-chain snarls in 2022.

CFOs Focus on Building Resilient Supply Chains, Even as Pandemic Disruptions Fade . Finance executives boost automation and diversify sourcing. 'I'm diving into the details more,' says one CFO.

Investors Continue to Back Logistics Tech . Startups that are invested in robotic arms, visibility software and 3-D printing for chip making are being funded.

SEC's Climate-Disclosure Rule Isn't Here, but It May as Well Be, Many Businesses Say . Legal challenges to the proposal for emissions tracking are likely, but many firms see value in assessing suppliers even if rules get watered down.

Basis Points The U.S. banking crisis is unnerving Americans in a way not seen since the Great Recession, according to a new poll. Nearly half of people are worried about their money's safety in banks, Gallup pollsters said as a new round of regional bank anxiety swirled around more banks. In Gallup's poll, the 48% of people who said they were worried about their deposits consisted of 19% who said they were "very worried" and 29% who said they were "moderately worried." (MarketWatch) Applications for jobless benefits in the U.S. at the end of April rose by 13,000 to 242,000, hinting at some softening in the labor market. New unemployment claims increased from a revised 229,000 in the prior week, the Labor Department said Thursday. (MarketWatch) U.S. productivity fell at a 2.7% annual clip in the first quarter, the government said Thursday, compared with a 1.9% decrease forecast by economists surveyed by The Wall Street Journal. (MarketWatch) Retail sales in the eurozone were weaker than expected in March, falling for the second month in a row, after high inflation weighed on food purchases and rising interest rates continued to squeeze household spending. (DJN) French industrial production ticked down in March more than expected and reversing gains made in 2023 so far, suggesting that weak demand continues amid sluggish growth in the global economy. (DJN) New orders at German factories tumbled more than expected in March, signaling sliding

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05-05-23 0715ET