Business Blog Posts

Jobs are considered a lagging indicator. They typically recover many months after the economy comes out of a recession, and this cycle was no exception. So will troubles in Japan, Libya and elsewhere push up U.S. unemployment later this year?

"The U.S. economy is headed for another soft patch brought on by the double shock," said IHS Global Insight chief economist Nariman Behravesh, referring to Japan and upheaval in the oil-producing Arab world.

Assuming oil prices stabilize and Japan's reconstruction and recovery begin in the next few months -- as most economists currently expect -- Behravesh says the soft patch will likely be short-lived. If he's right, the impact on the labor market should be minimal.

Friday brings the March employment report, and economists polled by Reuters are looking for growth of about 188,000 jobs, with the unemployment rate holding steady at 8.9 percent.

This employment report carries a bit more uncertainty than usual because it arrives before some of the early indicators economists rely on to fine-tune their forecasts.

Normally, the jobs report is released after the monthly Institute for Supply Management readings on manufacturing and services, both of which contain employment measures.

Not so this time.

The ISM manufacturing survey comes out on Friday, about 90 minutes after the jobs data, and the services report won't be released until the following week.

That leaves Thursday's weekly jobless claims report as the best guide, and the trend there has been "heartening," said Deutsche Bank economist Brett Ryan.

He said payrolls historically have not turned significantly higher until weekly jobless claims broke below the 400,000 barrier. The four-week moving average, which smooths out weekly volatility, has been below that threshold in four of the past five weeks.

That makes him a bit more optimistic than most about Friday's employment figures. He thinks they will show a gain of 200,000 jobs, with the unemployment rate dipping to 8.8 percent

JOBS TRUMP OIL?

Even with the benefit of all the early clues, economists have not had much success in predicting the jobless rate in recent months. It has fallen by more than expected in each of the prior three months, coming down nearly a full percentage point since November. Indeed, the labor market has been among the few positive surprises lately.

Paul Ashworth, an economist with Capital Economics in Toronto, said the U.S. economy "appeared to have everything going for it headed into the new year" before the run-up in food and energy prices and the Japanese earthquake.

The two will be speakers at an event set for Wednesday at the U.S. Chamber of Commerce, the country's largest business lobbying group, in its Corinthian-columned headquarters situated within view of the White House.

Warren, 61, is an earnest Harvard Law School professor brought up in Oklahoma, while Dimon, 55, is a consummate New York City insider and one of Wall Street's richest CEOs.

He was once a close adviser to President Barack Obama on financial regulation policy, but has become a vocal critic of the administration's efforts, especially since passage in 2010 of the Dodd-Frank Wall Street reforms.

She is helping the administration set up the Consumer Financial Protection Bureau (CFPB), a watchdog called for by Dodd-Frank to shield consumers from abusive practices in the mortgage and credit card businesses.

The remarks by Warren and Dimon will generate headlines, although analysts said other financial regulation news this week will have more impact on banks and the markets.

"The big event next week in Washington is the long-anticipated release of the rules implementing the Dodd-Frank risk retention requirement," said Brian Gardner, a senior policy analyst at investment firm Keefe Bruyette & Woods.

Under Dodd-Frank, mortgage lenders that sell loans as securities -- a practice known as securitization -- must keep at least 5 percent of the credit risk on their books.

The measure, requiring lenders to have "skin in the game", is meant to help restore lending discipline that went out the window during the securitization-fueled real estate boom at the root of the 2007-2009 financial crisis.

The Federal Deposit Insurance Corp will hold a meeting on Tuesday to consider a risk-retention rule proposal, as well as a related measure to allow some exemptions.

LIVING WILLS

The FDIC will also consider a proposal on living wills for large banks and financial firms, another Dodd-Frank measure. Such wills are meant to tell regulators how to shut down an institution on the brink of collapse in an orderly way, averting the need for bailouts or bankruptcies.

Less than three years after taxpayers rescued Wall Street and the big banks from their worst crisis since the Great Depression, bank executives, the chamber and many Republicans in Congress are on the attack against Dodd-Frank.

Another committee hearing on Wednesday in the House of Representatives will give Republicans a platform to question Dodd-Frank and the costs of complying with it. The reforms were pushed through Congress last year by Democrats over the opposition of Republicans and bank lobbyists.

The same lobbyists are now trying to weaken Dodd-Frank at the agency implementation level, while Republicans seek to cut the budgets of agencies putting the reforms into practice, and offer bills to repeal or amend parts of it.