INTERCONNECTED — Two stories dominated economic headlines today: the spectacular collapse of Silicon Valley Bank (SVB) and a February jobs report that displayed a still-hot jobs market. These stories may seem largely unrelated. They are not. Taken together, they offer a nifty microcosm of what exactly is going on in our highly complex, virtually impossible to predict, post-pandemic economy. And both events have potentially significant implications for what the Federal Reserve decides to do on interest rate policy at its meeting later this month. Let’s start in Silicon Valley with the biggest bank failure since the 2009 financial crisis. SVB was among the go-to banks for start-ups and biotech companies. That sector, which gorged on cheap money for years, is currently one of the few now shedding workers (though not that many) as the Fed hikes rates to fight persistent inflation. While Fed officials are generally happy to see some froth come out of the tech industry, they certainly weren’t hoping to help tip a bank with over $200 billion in assets into insolvency. And it certainly was not all the result of the Fed. SVB was (yes, it’s now officially dead) a strange bank. Nearly all of its depositors held over the insured FDIC limit of $250,000 in their accounts. That insurance was created to end the parade of bank runs that dominated the Depression era. But it did little to help SVB once its well-to-do depositors realized they could actually lose their money and raced to take it out. It all happened so fast — with a failed capital raise on Thursday — that the feds had to shut the place down Friday in the middle of the day , an extremely rare and highly dramatic move. The question now is whether the Fed looks at SVB and wonders if all of its tightening could destabilize any other industries and the financial institutions that serve them. One large bank failure may not induce the Fed to choose a quarter-point hike this month, instead of half-a-point. But at the margins, it could nudge them toward a quarter-point. That brings us to the February employment report — which showed that outside of technology, the jobs market remains hot and the economy looks pretty good. The 311,000 jobs figure beat expectations. And the tick up to 3.6 percent unemployment (from 3.4 percent) happened for the very welcome reason that nearly half a million people rejoined the labor force. The pace of wage gains also slowed a bit , though overall pay increases are proving fairly sticky, which the Fed believes (though not everyone agrees) is driving overall consumer price inflation. January’s giant 517,000 jobs gain, which seemed wildly off the mark at the time, only got revised down to 504,000. Even industries expected to suffer under the weight of higher interest rates mostly fared well. Construction employment grew by 24,000 even as higher rates are hammering home prices and the fear of recession is trimming back corporate investment plans. And both wage and employment gains continue to center on lower-paying retail and hospitality jobs. So putting the picture together, some very wealthy Silicon Valley-types are taking tough hits. And the fact that SVB could drop dead so fast raises some regulatory questions. But on its own, the bank collapse is no reason to panic. Economic equality going down since the pandemic is a feature, not a bug. The bigger question is whether the Fed’s actions wind up having similar but more delayed impacts on other industries. The Fed would accept this if it determines it is the only way to push annualized inflation from around 6 percent back to its target of roughly 2 percent. But this would be a crash landing, not a soft one. We get one more giant piece of data next week ahead of the Fed meeting, with the latest reading on the Consumer Price Index coming on Tuesday. Expectations are for some very modest declines. If those don’t materialize — or if prices surprisingly tick up again — the Fed will blow off any SVB concerns and drop another half-point hike on the economy. If the numbers are more Fed-friendly, the central bank will have a bit more room to consider whether to ease up on the economic brakes. Because no one wants to see more SVBs. Or to see millions of Americans who are not Tesla-driving tech folks take a big hit. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s author at bwhite@politico.com or on Twitter at @morningmoneyben . | 
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