At the risk of straining our necks by looking backward, we'll also be looking ahead this week regarding the future direction of the economy.
That's because we get a couple of opportunities to look at the Federal Reserve's view. Wednesday, the central bank releases the minutes of its most recent policy meeting. That same day, Fed Chairman Ben Bernanke talks about the outlook before the Joint Economic Committee of Congress.
- Bernanke testimony to Joint Economic Committee, 10 a.m. Wednesday (all times Eastern).
- FOMC Minutes, 2 p.m. Wednesday.
Key question for the Fed
The Fed has committed to $85 billion in monthly asset purchases to boost economic growth. Its specific pledge is good "until the labor market has improved substantially." It will be up to the Federal Open Market Committee to decide when to begin scaling back. Both the Bernanke comments and the minutes will be examined closely for indications when that might happen.
Fed members are 'antsy'
One man who has been in that policymaking position is William Ford, former president of the Federal Reserve Bank of Atlanta. Currently the Weatherford Chair of Finance at Middle Tennessee State University, Ford doesn't expect an immediate decision to scale back.
"There are some signs that members of the Federal Open Market Committee, a number of them are getting more and more antsy about what's going on with the risks they're taking," Ford says. Among those risks are the unintended consequences of the expanded balance sheet.
"They're aware they've got a ton of interest rate risk and they're making it worse day by day with these purchases," he says, adding that the total value of holdings on the Fed's balance sheet was recently put at more than $3 trillion.
If not now, when?
Minutes of the March meeting indicated that "many" members of the Federal Open Market Committee "expressed the view that continued solid improvement in the outlook for the labor market could prompt the committee to slow the pace of purchases beginning at some point over the next several meetings." So when might that happen?
Stuart Hoffman, chief economist for The PNC Financial Services Group, looks for the Fed to begin tapering its asset purchases by the fourth quarter. He says those same purchases could end by early next year. Hoffman likens that to a decision to stop giving medicine to a patient. The patient in this case is the economy, no longer in need of medical care.
Ford says a slower pace of asset purchases is dependent "on the unemployment picture getting below 7 percent." It was reported at 7.5 percent for April.
With the housing market continuing its recovery from having been the economy's central problem, we'll get two key snapshots this week.
- April existing home sales, 10 a.m. Wednesday.
- April new home sales, 10 a.m. Thursday.
Hoffman says of the dual home-sales readings: "I think we'll find both of them moved higher in the month of April, particularly existing home sales topping the 5 million annual rate." He calls the housing market "now balanced" relative to the advantages held by sellers and buyers. Hoffman says the outlook for new home sales is flat for the month at a seasonally adjusted annual rate of 400,000.
This week in business history: Levi's
Worn some blue jeans lately? If you are like most Americans, the answer is probably yes. It was May 20, 1873, that Levi Strauss and Jacob Davis were given a patent to make blue jeans with copper rivets. According to San Francisco-based Levi Strauss & Co., they would produce copper-riveted "waist overalls," the old name for jeans. It was recently announced that the company had reached an agreement to place the now iconic Levi's brand name on the new Santa Clara, Calif., stadium, which will be home to the 49ers of the NFL.