Week Ahead: Yellen To Testify Before Congress

Jacquelyn Martin/APFederal Reserve Chair Janet Yellen
By Dunstan Prial

The highlight of next week's economic calendar will almost certainly be Janet Yellen's testimony before Congress, her first as the newly installed head of the Federal Reserve.

Fourth-quarter earnings are winding down as well, and there's a smattering of economic data due including reports on small-business optimism, consumer sentiment and retail sales.

Yellen will appear Tuesday morning in her first semi-annual monetary policy testimony before the House Financial Services Committee.

Given Friday's tepid jobs report, the second in a row, Yellen will undoubtedly be asked about the Fed's plans to continue gradually scaling back its long-running stimulus policies. The Labor Department reported the U.S. economy had added just 113,000 jobs in January, a little better than the 75,000 jobs added in December, but not much.

Despite the lousy December labor report, other mixed economic data and turmoil in emerging markets, the Fed voted last month to cut another $10 billion from its monthly bond purchase program known as quantitative easing.

The Fed has pointed to an array of indicators beyond the labor market -- %VIRTUAL-article-sponsoredlinks%GDP and low inflation levels, for instance -- to justify its optimism for continued economic growth. But the members of the Financial Services Committee are going to want lots of details.

The National Federation of Independent Business, which represents about three-quarters of the small businesses in the U.S., releases its NFIB Small Business Optimism Index on Tuesday. The index is a key measure of whether small businesses, which create 70 percent of American jobs, feel optimistic enough to hire.

A report on retail sales is out Thursday and reports on import and export prices and consumer sentiment are out Friday.

Fourth-quarter earnings are winding down, but these bellwether companies are scheduled to report next week: Sprint (S) on Tuesday; Deere & Co. (DE), MetLife (MET), Owens Corning (OC), CBS (CBS) and Cisco Systems (CSCO) Wednesday; and PepsiCo (PEP) on Thursday.

9 Numbers That'll Tell You How the Economy's Really Doing
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Week Ahead: Yellen To Testify Before Congress
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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