Food Prices Running Hot; U.S. Labor Market Cools; World Bank Faces Tough Question

Food Prices Running Hot, Posing Challenge for Central Banks; U.S. Labor Market Cools, Hiring Eases; World Bank Faces Tough Question By James Christie

Good day. Food prices are on the march. One reason for this could be because businesses in the food supply chain raised their prices more than necessary to cover higher costs. High food prices are a problem for central banks as they affect headline inflation, which can influence public expectations and prompt workers to negotiate higher wages, which might feed back onto prices. In the U.S., the red-hot labor market cooled some last month, with hiring gains moderating and wage growth easing as more workers sought jobs. Average hourly earnings rose 4.2% last month from a year earlier, the smallest annual gain since mid-2021 when inflation was surging. Meanwhile, the World Bank, embarking on a comprehensive overhaul of its lending practices, faces a tough question: How should it use its limited resources to fund climate projects while still helping the poor?

Now on to today's news and analysis.

Top News Food Prices a New Inflation Threat for Governments, Central Banks

Energy prices are falling back more than a year on from Russia's invasion of Ukraine. But the other big cost of the war for households around the world continues to rise: food.

In the 12 months through March, prices of food, alcohol and tobacco were up 15.4% in the eurozone, while energy prices were down 0.9%. Food prices were up 10.2% in the U.S. in the 12 months through February, well ahead of energy at 5.2%.

Climate Change and Poverty Pose Challenge to World Bank

The World Bank's wealthy member countries are reluctant to add more to its coffers. But they are also demanding that it lend more money to programs that would fight climate change. Figuring out how to tackle that assignment-and still work to alleviate poverty- will likely fall to Ajay Banga , an India-born American businessman with little background in multilateral development work or climate policy but with ample experience in running large organizations.

U.S. Economy March Jobs Report Shows Hiring Gradually Cooling

Employers in the U.S. added 236,000 workers last month, a historically strong gain but the smallest in more than two years , the Labor Department said Friday. The unemployment rate ticked down to 3.5%.

Blue-Collar Workers Made Big Wage Gains Post-Pandemic Labor Construction Industry Has Work, Needs More Workers Warehouse Jobs Drop to Lowest Level in 15 Months More Take Parental Leave as States, Employers Expand Eligibility As Tech Jobs Disappear, Silicon Valley Veterans Reset Their Careers

America Is Back in the Factory Business

Construction spending related to manufacturing reached $108 billion in 2022, Census Bureau data show, the highest annual total on record -more than was spent to build schools, healthcare centers or office buildings.

Key Developments Around the World Russia Faces Budget Gap, as Oil Revenues Fall and War Costs Rise

The Russian government is scrambling to plug a gap in state coffers as falling oil revenues and mounting costs of the Ukraine war pushed the budget deficit to around $29 billion in the first quarter, the Russian Finance Ministry said.

South Africa, U.A.E. Clash Over Denied Extradition of Gupta Brothers

The United Arab Emirates has denied a request by South Africa to extradite two India-born brothers allegedly at the center of a corruption scandal that prompted the ouster of the African country's former president.

Financial Regulation Roundup Auditors Didn't Flag Risks Building Up in Banks

Bond losses such as those at Silicon Valley Bank could have been raised as "critical audit matters" -a measure designed to help investors decode risks and uncertainties buried in financial statements.

Digging Into a $344 Billion Investing Mystery

For the cost of notarizing a single document-probably $10 or less-you can declare yourself one of the biggest financiers in history. That's about all it takes to file private investment offerings at the SEC under Regulation D .

About That IRS Pledge Not to Audit More Earners Under $400,000

What are your odds of being audited ? It might be on your mind this month as you weigh claiming a tax deduction for those new windows in your home office, or read about the Internal Revenue Service's plans to beef up enforcement.

Forward Guidance Monday (all times ET)

10 a.m.: The Conference Board Employment Trends Index for U.S. for March

4:15 p.m.: New York Fed's Williams in fireside chat at New York University

Tuesday

6 a.m.: NFIB Small Business Optimism Index for U.S. for March

11:30 a.m.: Bangko Sentral ng Pilipinas's Medalla speaks at International Monetary Fund Governor Talks

12:30 p.m.: South African Reserve Bank's Kganyago speaks at Peterson Institute for International Economics

1:30 p.m.: Chicago Fed's Goolsbee speaks at The Economic Club of Chicago Forum Luncheon

6 p.m.: Philadelphia Fed's Harker speaks at Wharton Initiative on Financial Policy and Regulation

7:30 p.m.: Minneapolis Fed's Kashkari speaks at College of Business and Entrepreneurship Town Hall, Montana State University

Research March Jobs Report Likely to Prompt May Fed Hike, Then a Pause

The U.S. jobs report for March keeps the Federal Reserve on track to raise interest rates by 25 basis points in May, according to economists at Bank of America, who write that, "The labor market is showing signs of cooling off, but it remains very tight." They still expect the Fed to go on hold after the central bank's May meeting, implying a terminal rate of 5.0%-5.25%. The economists say the sequential slowdown in data after January implies a weak handoff to the second quarter, and creates significant risk of negative growth in the second quarter. "The Fed will have a good amount of 2Q data by the time of its June meeting, which should justify a pause in rate increases," they write.

-Patrick Sheridan

Fed Has Reason for Optimism With March Jobs Report

While the unemployment rate in the U.S. remains low, there are reasons for the Federal Reserve to be optimistic about the labor market, says Dante DeAntonio, an economist at Moody's Analytics. The pace of overall job gains is slowing and both temporary help services and average hours working are coming down, pointing to a softening in labor demand, Mr. DeAntonio says. Wage gains continued to moderate in March, with year-over-year growth in average hourly earnings falling to their lowest level since mid-2021, he says. Wage growth over the last three months has slipped below 3.5%, which is likely sustainable and in line with the Fed's target inflation rate of 2%, Mr. DeAntonio says.

-Dean Seal

Commentary U.S. Economy's 'Two Cycles' Put Fed in a Pickle

Labor market conditions are probably weaker than they look from the latest jobs report and there is reason to believe they will keep deteriorating, but it remains hard to say the jobs picture is poor overall, Aaron Back writes.

Turn Off the Fed Bubble Machine

Former Federal Reserve Chairman William McChesney Martin famously said the central bank's role is "to take away the punch bowl just as the party gets going," but the Fed seems to have superglued the bowl to the table by staying accommodative for so many years, Andy Kessler writes.

Is Big Tech's R&D Spending Actually Hurting Innovation in the U.S.?

Big companies tend to give employees incentives to be cautious rather than bold , to pursue overly complicated solutions rather than simple ones, and to seek promotions over serving customers, Christopher Mims writes.

Basis Points U.S. consumer credit rose $15.3 billion in February, down from a revised $19.5 billion gain in January, the Federal Reserve said Friday. That translates into a 3.8% annual rate in February, down from a 4.9% gain in the prior month. Economists had been expecting a $20 billion gain in February from the initial January estimate of $14.8 billion, according to a Wall Street Journal forecast. (MarketWatch) This week's kickoff to the corporate earnings season offers the next trial for the market as investors consider whether U.S. stocks can hold on to recent gains in the face of deteriorating profits. Analysts expect companies in the S&P 500 to report a second consecutive decline in quarterly earnings. First-quarter profits are projected to drop 6.8% from the same period a year earlier, according to FactSet. Growth in China's car sales slowed in March as consumers hesitated to make purchases while awaiting deeper discounts from car dealers and more government incentives. (Dow Jones Newswires) Iran, Guyana, Norway, Kazakhstan, Brazil and Nigeria have pumped more oil since the fall, boosting the world's supplies even as some of the biggest producers throttled back. Nigeria in particular has seen output bounce, with help from armed guards protecting barges in the vast creeks and waterways of the oil-rich Niger Delta. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

04-10-23 0718ET