Friday morning the U.S. Government's Department of Labor's Bureau of Labor Statistics released its report on the labor situation for February 2023, noting:

Total nonfarm payroll employment rose by 311,000 in February, and the unemployment rate edged up to 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in leisure and hospitality, retail trade, government, and health care. Employment declined in information and in transportation and warehousing.

Well, good--more people are working but, well, bad--more are also unemployed.  Whaaaat?

Well, the labor force participation rate slightly increased by .1 percent.

But:

“It’s no longer accurate to say without reservation that the labor market is a bright spot in the economy. From 35,000 feet, the picture still looks sterling, but digging an inch beneath the surface, there are clear pockets of softening,” said Aaron Terrazas, chief economist for jobs review site Glassdoor.

Terrazas noted that hiring [h]as slowed in “risk-sensitive” sectors. He added that, “The challenge for policymakers is that these weak points are a small part of the overall economy, but potentially have linkages lurking that have yet to emerge.”

Here  a "linkage."  Or two, or...more.

The problems of two small banks on the West Coast are rippling across markets and causing new investor concerns about some of the country’s largest financial institutions.

Why? Three words: rising interest rates. (italics added)

The Federal Reserve’s aggressive campaign to bring down inflation helped set the stage for major problems at two California lending institutions — SVB Financial (SIVB) and Silvergate Capital (SI) — as an outflow of deposits forced both to sell assets at a loss. Those assets were bonds.

Banks are big investors in assets like Treasury bills because they need lots of safe places to park their cash. Many financial institutions piled into these investments during a period of historically-low interest rates that spanned the early years of the pandemic, as banks took in tons of new deposits and lending was somewhat restrained.

But now the Fed is hiking rates at a rapid clip, with Fed Chair Jay Powell warning earlier this week the central bank may have to speed up the pace of its rate increases to cool the economy further. The problem that creates for banks is simple: higher rates lower the value of their existing bonds.

O-o-ooh!  In reaction, the US stock market opened lower.  

Stay tuned.  If not, the tune will come to you.

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