U.S. jobs data is supposed to provide clues on bank health. Good luck playing detective.

Nationally, unemployment and jobless-claims data has slowly improved. But the metrics vary widely from market to market and, complicating matters, many bank operations, even those of regionals, straddle strong and weak markets. That means picking winners from losers on the basis of such data is harder than it seems.

The national unemployment rate for March, to be announced Friday, is expected to be 8.9%, unchanged from February, according to a consensus of economists surveyed by Bloomberg. Yet state-by-state figures, the latest of which are to be released April 19, have been, pun intended, all over the map.

Unemployment rates were higher — significantly — than the national average in February in 10 states, primarily in the West and Southeast. The Midwest and Northeast, on the other hand, have shown marked improvement.

But the situation is not so black and white as to say that those concentrated in the worst-performing states are doomed and those concentrated in better-performing areas are poised for rapid growth.

Even within each region, the unemployment picture can vary, making the timing and scope of growth in given areas difficult to pinpoint. And some banks have concentrations in more than one area of the country.

"The regionals have exposure in a wide range of markets that have different employment characteristics," said Jason O'Donnell, a banking analyst at Boenning & Scattergood Inc. "So if you look at Fifth Third, for example, those guys have material exposure in the Midwest but also in Florida. There are different trends that are impacting their credit quality overall."

Meanwhile, banks like Webster Financial Corp. that are based in the Northeast — the region where unemployment is the lowest — may also have exposure to Rhode Island, which O'Donnell calls "the black sheep" of the region. The state has the fourth-highest unemployment rate in the country.

The unemployment rate is considered a primary indicator of consumer credit loss rates. Some believe these losses overall have peaked, but that they are still a threat to banks operating in particular regions.

"Credit is an issue for the pace of improvement," said Jefferson Harralson, a managing director at KBW Inc.'s Keefe, Bruyette & Woods Inc. "Because the Southeast region is slower economically, there are more banks in that region that credit still matters for."

Unemployment can also be a barometer for loan demand, which has been lacking so far during the recovery, said Peter Winter, a managing director at BMO Capital Markets.

"Loan demand continues to be very weak," he said. "The thinking is as the economy improves in certain markets, the balance sheet strengthens for certain borrowers, so there are more lending opportunities."

Ultimately, "banks in slower-growth regions will end up buying banks in faster-growth regions over time," Harralson said. "The banks will seek growth. The banks in the faster-growth regions will seek it within the region."

There are factors besides employment levels to consider when assessing the strength of a particular region, including population trends, weather, the housing picture and the regulatory environment. Citing those factors, many analysts say that some pockets of the South, where unemployment is generally high, are well positioned over the long term, while improvement in areas of the Midwest may plateau.

Harralson, who focuses on banks in the Southeast, is upbeat about its long-term growth prospects despite high unemployment in states like Georgia and Florida.

"There are different levels of weakness, I suppose," he said. "Florida has been the biggest laggard, so the banks that have the most exposure there are seeing the slowest turnarounds."

Regions Financial Corp., for instance, has significant exposure in Florida, Harralson said, which has impeded its efforts to return to profitability.

BB&T Corp., on the other hand, is a Southeast-based bank with less exposure to Florida. That's helped the Winston-Salem, N.C., bank avoid losses throughout the downturn, Harralson said.

"Over time you'll see that geography show strong growth again," he said. "The weather is a driver. I think the labor is generally cheaper in the Southeast. I think for many of the Southeast markets it's generally less expensive to live. I still think you'll see corporate relocations and job growth in the Southeast someday."

Harralson's outlook is long-term — two to five years out. Still, he doesn't see banks in that region running for the hills.

"The Southeast banks believe that over time the Southeast region will experience strong growth," Harralson said. "I haven't seen where Southeast banks feel the need to diversify out of the Southeast. … They are starting to move from defense to offense. They are starting to feel a little bit more confident in the economy."

In the near term, however, the Southeast doesn't have the brightest forecast.

"While those economies do have population-growth dynamics, we don't think it oversteps [other factors] in the near term," said Chris Gamaitoni, a vice president at Compass Point Research and Trading in Washington. The potential for another slide in the residential real estate market there, for instance, is a big concern for Gamaitoni. "Pricing is down, sales are decreasing and no one has seemed to notice," he said.

The exposure Regions and SunTrust Banks Inc. have in the Southeast "is still definitely a headwind," he said. "We think the Midwest is more attractive, excluding the Chicago real estate market."

There's no doubt that the employment picture is rosier in the Midwest, which exhibited the biggest year-over-year decline in unemployment. A 1.6-percentage-point drop in February, to 8.4%, gave the Midwest the second-lowest unemployment rate, behind the Northeast's 8.3%.

"If we look at the economic recovery, the one bright spot has been manufacturing," Winter said. "And so the thinking is that the Midwest banks, like a U.S. Bancorp, Comerica … a Fifth Third, the thinking is that they should be able to benefit and take advantage of something like that."

Long-term, though, growth prospects may diminish in the Midwest. Improvement could plateau in states like Michigan, analysts said.

Michigan has shown the biggest year-over-year decline in unemployment: 3.1 percentage points, to 10.4% in February.

"In Michigan's case, the economic situation was so dire that once the automakers stabilized, some bounce-back was inevitable," O'Donnell said. "There is an improvement, but the general consensus is that they're not going to return to a strong state.

"I'm just not sure what's going to take that market to the next level from an industry standpoint," he added. "There's just not a lot of growth."

Dana Johnson, chief economist at Comerica, said he expects manufacturing there to remain fairly strong at least through 2011.

"I would think Michigan would look surprisingly good for a little while longer before it reverts to a sluggish growth pattern," he said. "I suspect that's next year's story, not this year's story."

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