Is Re

Recen

to get

regula

Econo

conclu

“no h

emplo

a lack

Nonet

holdin

have r

If regu

one or

invest

differ

busine

suppo

Busin

If regu

regula

about

chang

corpo

egulatory

ntly at a Sen

t the rules be

atory burden

omists from 

usion. Bruc

ard evidence

oyment.” An

k of demand,

theless, two 

ng back busi

reduced thei

ulatory unce

r more of th

tment; differ

rences betwe

ess owners a

ort the claim 

ness Profits

ulation was 

atory reform

t recovered th

ges, such as e

orate sector h

Uncertain

ate hearing S

etter and sma

n or uncertain

across the p

ce Bartlett, a 

e” has been o

nd in a recen

, not governm

commonly r

iness investm

ir hiring. 

ertainty was 

e following:

rences betwe

een the Unite

and economi

that regulat

a significant

ms were passe

heir pre-rece

energy and h

held back by

C

Note: Corpo

Source: Bur

nty a Majo

Secretary Ge

arter, but I d

nty that's cau

political spec

senior advis

offered for c

nt Wall Stree

ment policy,

repeated mis

ment and hir

a major imp

 business pr

een industrie

ed States and

ists. As disc

ory uncertai

t drag on bu

ed into law. 

ession peak, 

health care, a

y regulation. 

Corporate P

orate profits with

reau of Economi

or Impedim

eithner said, 

on’t think th

using the eco

ctrum have a

sor in both th

claims that re

et Journal su

, was the ma

sconceptions

ring and that 

pediment to h

rofits; trends

es undergoin

d other coun

cussed in a d

nty is holdin

siness today

 However, c

and earning

are among th

Profits as a S

h the inventory v

ic Analysis, Nati

ment to Jo

“I'm very sy

here's good e

onomy to gr

also weighed

he Reagan an

egulation is 

urvey of eco

ain impedime

s are that unc

the overall b

hiring right n

 in the work

ng significan

ntries that are

detailed revie

ng back hirin

y, we would e

corporate pro

gs per share i

he highest in

Share of Gr

valuation and ca

ional Income an

ob Growth

ympathetic t

evidence in s

row more slo

d into this de

nd George H

the “princip

nomists, 65 

ent to increa

certainty cre

burden of ex

now, we wou

kforce, capac

nt regulatory 

e not underg

ew of the evi

ng. 

expect to see

ofits as a sha

in industries

n the S&P 50

ross Domest

apital consumptio

d Product Accou

h? 

to the argum

support of th

owly than an

ebate and rea

H.W. Bush a

al factor hol

percent of re

ased hiring. 

eated by prop

xisting regul

uld expect to

city utilizatio

changes and

oing the sam

idence below

e profits con

are of gross d

s most affect

00. This gro

tic Income 

on adjustments f

unts. 

ment you wan

he propositio

ny of us wou

ached the sam

administratio

lding back 

espondents c

posed regula

ations is so h

o see indicat

on, and busin

d those that a

me changes; 

w, none of th

nstrained afte

domestic inc

ed by recent

owth is incon

for domestic indu

nt to be caref

on that it's 

uld like.” 

me 

ons, said that

concluded th

ations is 

high that firm

tions of this 

ness 

are not; 

or surveys o

hese data 

er recent 

come have 

t regulatory 

nsistent with

ustries. 

ful 

t

hat 

ms 

in 

of 

h a 
Trend

If regu

capac

certai

Speci

hours

the da

were 

capac

averag

deman

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quarte

econo

posed

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reflec

As sh

indust

ds in Workfo

ulatory unce

city and curre

n about the c

fically, if de

 of the work

ata: the avera

strong, firms

city. Howev

ge. Low cap

nd holding b

e same time,

er of 2009, r

omy as a who

d a threat to t

ncial Indicato

ulatory unce

cted in capita

hown in the c

tries facing g

S&P 500 

Source: Blo

orce, Capacit

ertainty was 

ent workers 

contours of f

emand was s

kers they alre

age work we

s could easil

er, the share

pacity utiliza

back current 

, business inv

real investme

ole. Howev

their ability t

ors 

ertainty were

al markets. H

chart below, 

greater regul

Economic S

oomberg 

ty Utilization

the primary 

as much as p

future regula

trong but bu

eady employ

eek for priva

ly expand us

e of total pote

ation is incon

production.

vestment ha

ent in equipm

ver, businesse

to operate pr

e having a si

However, fin

corporate bo

latory risk, s

Sectors Inde

n, and Busin

problem fac

possible, wh

ation. 

usinesses we

y rather than 

ate employee

sing existing

ential indust

nsistent with

 

as led econom

ment and sof

es would no

rofitably. 

ignificant im

nancial indic

ond yields a

such as insur

ex Trailing

ness Investm

cing busines

hile avoiding

re concerned

hire additio

es has been r

g capacity wi

trial output i

h concerns a

mic growth o

ftware has gr

t increase in

mpact on busi

cators do not

re low acros

rance and en

12-Month E

ment

ses, firms w

g building ad

d about futur

nal workers

roughly flat 

ithout taking

n use remain

about future r

over the last 

rown by 26 

nvestment if 

iness perform

t provide any

ss a range of

nergy, are no

Earnings Pe

would prefer t

dditional cap

re regulation

. We have s

for the past y

g on the cost 

ns 3 percent 

regulatory ri

few years. 

percent – ab

they though

mance, we w

y evidence i

f industries, s

ot being price

er Share 

to use their e

pacity until th

ns, they wou

seen no evide

year. Simila

and risk of 

below its lo

isk, but align

Since the en

bout five tim

t that future 

would expect

n favor of th

suggesting th

ed out of the

existing 

hey are more

uld increase t

ence of this 

arly, if dema

added 

ong-run 

ns with weak

nd of the firs

mes as fast as 

regulation 

t this to be 

his hypothes

hat firms in 

e market.[1]

e

the 

in 

and 

k

t 

the 

is. 
Bond 

includ

during

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of the

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disper

aggre

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face r

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g the financi

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rsion across 

gate uncerta

ussed further

regulatory un

ted by the pr

e debt crisis 

0

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e: Barclays inve

vide more d

ot limited to,

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ed, and betw

s low as that

industries h

ainty, which 

r below). W

ncertainty – 

roblems in E

– such as en

Note

Sourc

9 2000 2001 20

oints

Bo

estment grade co

direct inform

, risk resultin

rticularly for

nce, and finan

een mid-201

t observed in

has increased

is likely ass

While it is true

such as REI

Europe. Othe

nergy, electri

Chart 3.

: Option-adjuste

ce: Barclays inv

002 2003 2004 2

ond Yields f

orporate subindic

mation on how

ng from unc

r industries d

ncial firms. 

10 and mid-2

n the mid-20

d. However,

ociated with

e that the rec

ITS, Finance

er industries 

icity, and na

. Bond Spre

ed spread relative

estment grade co

2005 2006 2007

for Selected

ces, measured as

w the market

ertainty ove

directly invo

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2011, spread

000s). Since

 the increase

h the intensif

cent rise in s

e, and broker

facing the p

atural gas – s

eads for Sele

e to nearest matu

orporate subindi

2008 2009 2010

d Industries

s yield to worst a

t views the r

r future regu

olved, includ

preads move

ds were comp

e the summer

e in spreads 

fication of so

spreads has b

rages – these

possibility of

saw spreads r

ected Indus

urity benchmark

ices 

0 2011

Basic Industry

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s

at the end of the 

risk in differ

ulatory actio

ding real esta

ed down fair

pressed acro

r, spreads ha

corresponds

overeign deb

been greates

e industries w

f additional r

rise by less. 

stries 

k Treasury 

s

ical

month. 

ent industrie

n. Bond spr

ate investmen

rly steadily o

oss industries

ave moved u

s with an incr

bt problems i

t in industrie

were also mo

regulation bu

es. This risk

reads shot up

nt trusts 

once the wor

s at a fairly l

up and 

rease in 

in Europe 

es assumed t

ost directly 

ut less affect

k

p

rst 

low 

to 

ted 
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(know

so, the

has co

VIX i

a simi

that u

specif

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th

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re

ec

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a 

 A

se

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regula

to cre

growt

towar

commonly ci

wn as the VIX

e VIX has st

ome down so

in August an

ilar measure

uncertainty in

fic to the Un

Business Ow

cent surveys,

o they blame

n the Septem

han twice as 

ercent). 

n an August s

espondents d

conomy. 

s noted abov

lack of dema

ccording to 

econd quarte

nsible Path F

ecretary Geit

atory system

eate a 21st ce

th and saving

rd these goal

ited measure

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tood only a b

omewhat in 

nd previous s

e calculated f

n both count

nited States, 

St

Source: VIX

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, business ow

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many respon

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er of this yea

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thner noted d

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entury regula

g Americans

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e of uncertai

measures the 

bit higher th

recent week

sharp increas

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tries primaril

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for job cuts:

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conomists by

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nt Wall Stree

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during his re

hy the Presid

atory system

s billions of 

nty is the Ch

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an in the pre

ks (see chart 

ses in late 20

man stock ma

ly reflects gl

ulatory chang

t Volatility i

Journal/Haver An

are Saying

conomists do

:

iness owners

poor sales (

y the Nationa

ulatory envir

et Journal su

licy, was the

f Labor Stati

to governme

ecent Senate 

dent has orde

m that protect

dollars. Tha

hicago Board

atility of S&

e-crisis perio

below). Ho

008 correspo

arket. The c

lobal financi

ges. 

in the Unite

nalytics; VDAX

o not list reg

s by the Nati

29.6 percent

al Associatio

ronment as “

urvey of eco

e main imped

stics, less th

nt regulation

hearing, we

ered a gover

ts public hea

at review is o

d Options Ex

&P 500 index

od, and while

owever, as ca

ond to virtua

correlation be

ial and econo

ed States an

X; Handelsblatt/H

gulation as th

ional Federa

t) as their lar

on for Busin

“good” for A

onomists, 65 

diment to inc

han three-ten

ns or interve

e should alw

rnment-wide

alth and safe

ongoing and

xchange Ma

x options. Fo

e it rose sign

an be seen, th

ally identical

etween these

omic conditi

nd Germany

Haver Analytics 

he main prob

ation of Inde

rgest problem

ess Econom

American bu

percent of r

creased hirin

nths of 1 perc

ention. [2]

ays be looki

e review of e

ty while also

d has already

arket Volatili

or most of th

nificantly in 

he sharp inc

l movements

e two indicat

ions, rather t

y

blem facing t

pendent Bus

m than cite r

mics, 80 perce

usinesses and

espondents c

ng. 

cent of mass

ing for ways 

existing fede

o promoting

y made subst

ity Index 

he past year 

early Augus

rease in the 

s in the VDA

tors suggest

than conditio

their busines

sinesses, mo

regulation (1

ent of 

d the overall 

concluded th

 lay-offs in t

to improve 

eral regulatio

 economic 

tantial progr

or 

st, it 

AX, 

s 

ons 

ss, 

ore 

13.9 

hat 

the 

our 

ons 

ress
These reforms will enhance the functioning of the economy and complement the increase in aggregate demand 

required to spur hiring and bring down the unemployment rate. Policy makers in the United States must address 

these fundamental concerns by putting in place a set of powerful measures to provide near-term support to the 

economy while restoring fiscal sustainability over the medium-term. 

This report originally appeared as a blog post on Treasury Notes by Dr. Jan Eberly, Assistant Secretary of the 

Treasury for Economic Policy.

[1] Similarly, recent work by Jay Livingston has shown that the unemployment rates in sectors where regulation has been increasing are actually below the 

national average. 

[2] An extended mass layoff event is defined as “the filing of 50 or more initial claims for unemployment insurance benefits from an employer during a 5-

week period, with at least 50 workers separated for more than 30 days.”