World Week Ahead: Economy, jobs back in focus

The monthly U.S. jobs report, due at the end of this week, always has a way of refocusing investors’ attention.

"You can't describe the economy as in a recovery until you have job growth," Charles Lieberman, chief investment officer of Advisors Capital Management, LLC in Paramus, New Jersey, told Reuters.

And so whatever else happens economically-speaking this week it will pale beside Friday’s February jobs report.

According to surveys by Bloomberg News and Reuters, the world’s biggest economy shed 50,000 jobs last month, compared with a 20,000 drop a month earlier. The unemployment rate is forecast to have risen to 9.8% from 9.7%.

The importance of the labour market data is that the consumer is key to the outlook, accounting for about 70% of economic output. Until enough new jobs are being created it’s hard to see how consumers can begin spending in earnest again.

“The market is looking to move off center ... and the employment report is probably going to be the most important of the week,” Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, told Bloomberg.

“If that number comes in weak, it really confirms the strong unemployment claims data we've seen. If it comes a little bit better, it would indicate maybe we're creating jobs at a fast enough pace to offset the claims,” he said.

There is a consensus building that the U.S. recovery, while imperfect, is on track and Warren Buffett is the latest to add his comments on what lies ahead.

In his annual letter to shareholders, Buffett forecast that the U.S. residential real estate slump would end soon. He also said the last year had represented a buying opportunity.

“We entered 2008 with US$44.3 billion of cash-equivalents, and we have since retained operating earnings of US$17 billion. Nevertheless, at yearend 2009, our cash was down to US$30.6 billion (with US$8 billion earmarked for the BNSF acquisition).

“We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – ...