The Fed wants higher unemployment because it would bring down inflation

Good morning readers. Phil Rosen here. It's jobs day today.

If the reading comes in too hot, the Fed's going to have even more ammunition to push interest rates higher in the coming months — and every move higher tightens the screws on the economy even more, ramping up risk of a recession.

Before the new data comes out at 8:30 a.m. ET, let's break down what to expect.

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1. A reading of 200,000 or more jobs added in February means we're getting a bigger rate hike this month.

At least that is what Barclays analysts think about the hotly anticipated February non-farm payroll report due this morning.

"The bottom line is that in the absence of a disappointing February employment release, we think a 50bp hike in March, followed by two additional 25bp hikes in May and June, will become a much more plausible outcome," strategists wrote Wednesday.

Fed Chair Jerome Powell said this week that the trajectory of monetary policy doesn't hinge solely on today's jobs report, but markets are still bracing for impact.

Today, we'll learn what direction payrolls, wage gains, and unemployment are moving in, all of which are key inputs for the Fed's upcoming policy decision in a few weeks.

If the jobs report paints a picture of a robust labor market, the Fed likely won't need any more convincing to make a jumbo-sized rate hike at the next meeting, regardless of what next week's inflation data reveals.

Bloomberg economists are projecting a 225,000 increase in February payrolls, which would be roughly half of what we got the prior month.

Earlier this week, the ADP survey for private hiring clocked in at 242,000, well above the expected 200,000.

Remember, the Fed's stated goal is a 2% inflation rate. But it's currently more than triple that level, which means the economy is running too hot and consumers are spending too much.

The Fed doesn't explicitly say it like this, but a sure-fire way to crush spending is to raise unemployment — that's why it's bad news when the Fed sees more and more Americans joining the workforce each month.

During Powell's Capitol Hill testimony this week, Senator Elizabeth Warren asked him about just that (she's a longtime critic of his aggressive monetary policy).

"So Chair Powell, if you could speak directly to the 2 million hard working people who have decent jobs today, who you're planning to get fired over the next year, what would you say to them?" Warren asked. "How would you explain your view that they need to lose their jobs?"

Powell said he would "explain to people more broadly that inflation is extremely high and it's hurting the working people of this country badly."

He continued:

"All of them, not just 2 million of them, but all of them are suffering under high inflation and we are taking the only measures we have to bring inflation down…will working people be better off if we just walk away from our jobs and inflation remains 5%-6%?"

Meanwhile, Wharton's Jeremy Siegel said Thursday that the Fed is taking a flawed policy approach, and it shouldn't be so focused on jobs.

"I think their focus on just how tight is the labor market – suddenly a monomaniacal type of a focus – is the wrong way to go about it," the professor said.

Has tighter monetary policy impacted your job security? What's your job market outlook for this year? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.

In other news:

2. Shares in SVB Financial are continuing to plummet as depositors move to withdraw their funds. The financial troubles at startup-focused Silicon Valley Bank sent shock waves through the sector, wiping $55 billion off the market value of Wall Street's four biggest banks. Read more on the meltdown here. And for the latest market moves, click here.

3. Earnings on deck: Apple, AIA Group, and more, all reporting.

4. Wall Street analysts weighed in on how to capitalize on AI technologies like ChatGPT, DALL-E, and more. Analysts from Bank of America, UBS, and other firms picked out the top stocks to buy now that can bring in profits from the nascent sector. Get the details.

5. Crypto investors could be set to lose a big tax loophole as part of President Biden's new budget proposal. The proposal could alter how cryptocurrency transactions are treated, which could raise as much as $24 billion, according to the Wall Street Journal. Currently, people can claim losses on sales of underwater crypto investments, then repurchase them.

6. The most closely watched recession indicator is telling markets that a downturn won't materialize for another two years. Credit Suisse's chief equities strategist said that the yield curve inversion is signaling that a downturn won't hit until August 2025. Currently, the Treasury futures market suggests that signal could flash until at least 2026.

7. The European Union will expand its liquefied natural gas import capacity by nearly a third. The bloc's nations continue to wean off Russian energy supplies, and it aims to add eight new LNG import terminals to ease bottlenecks. Here's what you want to know.

8. This 30-year-old property owner in Seattle is experimenting with short-term rentals. He's overcoming the "Airbnbust" trend by setting up one-of-a-kind listings — including a 1970s-themed "Groovy Guest House" that cost $11,000 to create.

9. Bank of America's stock chief shared why she thinks investors are using the exact wrong playbook for the oncoming recession. Savita Subramanian said it's time for a strategic revamp as the economy faces headwinds — and she's now very wary of tech stocks and long-term bonds.

10. SVB Financial's shares fell 30% in premarket trading Friday, after plunging as much as 60% Thursday. A year of Fed interest rate hikes seriously hurt the financial profile of the company, and the pain could continue if the IPO market doesn't pick up soon. SVB lost a huge chunk on its $21 billion bond portfolio.

Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.