Latest Insights

Economic data this week including top tier inflation data was overshadowed by Silicon Valley Bank being placed in receivership reflective of financial stress in the U.S. regional banking sector as well as the global banking system when Credit Suisse, one of the biggest but troubled financial institutions in the world, was informed by its largest shareholder that it would not provide further equity capital support. Fortunately, both circumstances were addressed in an expeditious manner by their respective regulators. In the U.S., the Treasury department, Federal Reserve, and Federal Deposit Insurance Corporation jointly put policies in place to ensure bank deposit availability for individuals and corporations. U.S. Regulators also addressed pending liquidity concerns for the banking sector with the establishment of the Bank Term Funding Program, allowing banks to obtain liquidity from the Federal Reserve via pledging assets as collateral for cash as opposed to selling securities, assisting in alleviating bank balance sheet stress. Subsequent to the action taken by regulators in the U.S., the Swiss central bank stated on Wednesday it was going to provide financial support to Credit Suisse. The following day, Credit Suisse said it intended to borrow up to 50 billion Swiss Francs ($53.68 billion) through a covered loan facility and short-term liquidity facility but in spite of these regulatory actions, market confidence has yet to be restored. The recent financial stress when combined with getting inflation under control present a major challenge for the Fed in determining the appropriate path for monetary policy.

US Nonfarm payroll employment rose by 311,000, beating expectations calling for a 225,000 increase in jobs for the month of February. The leisure and hospitality, retail trade, government and healthcare sectors saw the largest gains. The unemployment rate ticked up to 3.6% due to more workers entering the labor force as the participation rate increased to 62.5%, the highest level since March 2020. Workers between the ages of 25 and 54 led the expansion, with significant gains for women and minorities who comprised a disproportionate amount of the job losses during the pandemic. Over time, more workers in the labor market should help ease inflationary pressures. Average hourly earnings were up 0.2% month-over-month, the slowest increase in a year, and rose 4.6% on a year-over-year basis, primarily driven by the service industry. In other labor market news, the Job Openings and Labor Turnover (JOLTS) survey fell to 10.8 million, but remains elevated, and initial jobless claims edged up slightly to 211,000.