Finance Column » Your Money This Week » Double drama this week

Double drama this week

By Mark Hamrick ·
Monday, July 29, 2013
Posted 6 am ET

A pair of key announcements looming in the week ahead has the potential to drive the financial markets and the economic outlook. They are a Federal Reserve meeting and the monthly report on the job market from the Labor Department.

Among key events on tap this week:

  • Consumer confidence index for July from The Conference Board, Tuesday at 10 a.m. (all times Eastern)
  • Second-quarter gross domestic product from the Commerce Department, Wednesday at 8:30 a.m.
  • Federal Reserve statement on monetary policy, Wednesday at 2 p.m.
  • Institute for Supply Management manufacturing index for July, Thursday at 10 a.m.
  • Monthly employment report for July from the Labor Department, Friday at 8:30 a.m.

Will the Fed signal tapering?

The Federal Reserve has said that a decision to raise short-term interest rates is a long way off. What will be watched most closely at this week's meeting involves the central bank's monthly asset purchases.

A survey of economists taken by Bloomberg News indicates that the Fed will trim monthly bond buying to $65 billion in September from the current level of $85 billion. If the prediction is accurate, then the Fed might want to announce the move at the July meeting, because there is no meeting in August.

The Fed's path after that

Among those looking for so-called tapering is Scott Anderson, chief economist for Bank of the West. Anderson thinks the Fed will adjust to $60 in monthly asset purchases in September and likely end the program next year. "It is all conditional on the unemployment rate continuing on their forecast path," Anderson says. "And if we start to deviate from that path, or we see more weakness in the labor market, then things could change. But at this point, it seems like the markets are ready for this sort of schedule and the Fed's ready to take action and pull the trigger."

Job market steady?

The job market has been picking up momentum this year, despite the headwinds of federal budget cuts and the expiration of the payroll tax cut. Economists expect the July reading to be similar to what was seen the month before, when the unemployment rate was 7.6 percent and 195,000 jobs were added to payrolls. The Fed has said it will continue asset purchases "until the outlook for the labor market has improved substantially." If the report contains a big surprise, it could affect the Fed's decision-making.

Worries about momentum

Less upbeat about the outlook is economist Nayantara Hensel, professor of industry and business at National Defense University in Washington, D.C. Her biggest concern is that federal cutbacks are now affecting the economy. "I think that we're going to see some stalling in job growth, partially because of the impact of defense spending on the economy," she says. "And the continuing need to continue to cut back, you know we are experiencing significant furloughing, and sequestration cuts between July and Sept. 30, which is leading to some cutbacks."

GDP, manufacturing

This week's first snapshot of second-quarter growth will also be closely watched. Economists think it will come in somewhere above 1 percent. That's compared to an increase of 1.8 percent in gross domestic product for the first three months of the year. Taken together, they paint a picture of subpar growth for the first half of the year. The June ISM manufacturing index stood at 50.9, just above the level of 50, which indicates growth.

This week in business history: Telephone inventor

On Aug. 2, 1922, Alexander Graham Bell died. He has been credited for inventing the telephone. In modern-day parlance, we refer to that technology as a landline. Wouldn't it be interesting to have a chat with him to gauge his reaction to the technology of more-portable smartphones?

The Scottish-born inventor was tied to the Bell Telephone Co., based in Boston, beginning in 1877. From it would spring the American Telephone and Telegraph Company, better known as AT&T.

Follow me on Twitter @hamrickisms.

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