The fact that the markets stood up in the wake of Chrysler's bankruptcy's announcement is a proof that the economy has become resilient enough to weather the current setback without any further serious damage. Wachovia Securities is of the view that the economy is on the road to recovery and not in a recovery. Inventory build up and a rebound in government spending due to the implementation of stimulus measures may push the economy firmly on the track towards recovery.

Even as economists crunch economic numbers to determine the likely course the economy will chart, the Commerce Department said last week first quarter GDP fell by 6.1% compared to the 4.7% drop expected by economists. Personal consumption rose 2.2%, higher than the estimated 0.9% increase. However, the sore spot was inventories, which deducted 2.8% off growth. The GDP price index was up 2.9%, faster than the 1.8% increase expected by economists.

Although the sharp decline in GDP reported for the first quarter is as severe as that of the fourth quarter, the composition of the numbers tell different tales. According to Wachovia Securities, the significant decline in inventories in the first quarter sets the stage for a strong rebound in order growth and the output.

Manufacturing sector readings suggested that the sector continued to show contraction, but at a less rapid pace than earlier. The Institute for Supply Management's national survey showed that the index of manufacturing conditions improved to 40.1 in April from 36.3 in March. Economists had expected a more modest improvement to 38.4. The April reading marked the highest since September.

The news orders and backlog of orders indexes rose 6 points and 5 points, respectively to 47.2 and 40.5, while the employment index rose 6.3 points to 34.4. Inventories remained lean, as suggested by the 4.5 point-decline of the inventories index at the customer level. The moot point will be whether the improvement we are seeing will stall once inventories are replenished.

In another positive turn of event, the Reuters/University of Michigan's consumer sentiment index for April was revised up to 65.1 from 57.3 in March. The current conditions index was up a modest 1.7 points compared to a 4.2-point increase in the outlook index.

The Conference Board's survey also confirmed the improvement in sentiment. The board's survey showed that the consumer confidence index for April rose to 39.2 from 26.9 in March. Economists had expected a reading of 29.9 for the month. The April reading marked the highest since November 2008. The expectations index climbed 19.3 points, while the present situation index was up about 2 points.

That said, the housing sector is yet to turn in any tangible evidence of reversing the slide. The S&P Case/Shiller home price index showed an 18.63% year-over-year decline in February, slightly better than the 18.7% decline predicted by economists. The January index was revised to show a 19% drop from the 18.97% decline estimated initially. All 20 cities surveyed showed year-over-year as well as month-over-month declines.

Meanwhile, the results of the FOMC meeting came as no surprise, as the Fed maintained its key fed funds target rate unchanged at a range of 0%-0.25%. The FOMC noted that the economy continued to contract, with the pace of contraction slowing somewhat. Despite the stabilization in consumer spending, the committee noted that spending continued to be constrained by job losses, lower housing wealth and tight credit.

Overall, the central bank is of the view that economic activity is likely to remain weak for a time. That said, the committee expects sustained economic growth will resume gradually due to policy actions, fiscal and monetary stimulus and market forces. Additionally, the fed suggested that inflation may remain below rates that are consistent with economic growth and price stability.

The non-farm payroll report for April is likely to be the focus of the attention of Main Street in the unfolding week. Traders could also stay tuned to the pending home sales report for March, the Commerce Department's construction spending report for March, the ISM's services sector survey, the weekly jobless claims report and speeches by a host of Fed speakers during the week.

Apart from these reports, theoretical importance may be attached to the Federal Reserve's consumer credit report for March, the preliminary first quarter productivity & costs report and the wholesale inventories report for March.

The non-farm payrolls are likely to continue to paint a bleak picture of the labor market. The economy has lost more than 5.1 million jobs since December 2007, with the unemployment rate surging up to 8.5%, marking the highest rate since November 1983.

Although the jobless claims reports of the past two weeks showed some tentative signs of stabilization in the form of drops in first time employment claims, April is most likely to see another month of contraction in the job market. However, Danske Bank does not expect unemployment to peak until the beginning of next year, as the growth in the labor force is normally higher than the growth in employment at the beginning of an upswing.

The services sector reading of the ISM could give an idea as to how fast the economy could recover. Although recent manufacturing as well as non-manufacturing readings has shown some slowdown in the pace of contraction, they are still not out of the woods. Global Insight sees downward pressure on production, inventories and shipments

Monday

The Commerce Department's construction spending report to be released at 10 AM ET on Monday is expected to show a 1.4% decline in spending for March.

Construction spending declined 0.9% month-over-month in February, far less than the 1.9% drop expected by economists. A 1.6% drop in private construction spending was partly offset by a 0.8% increase in public construction spending. Among private construction, single-family house construction slumped 10.9%, marking the 36th straight month of declines, while multi-family construction spending declined 2.1%.

Data on Pending Home Sales, which is a leading indicator of housing market activity released by the National Association of Realtors, is due out at 10 AM ET on the same day. A pending sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale. The index is likely to remain unchanged in the month.

The pending home sales index rose 2.1% month-over-month in February. Notwithstanding the monthly increase, the index is still down 1.4% annually. Analysts attributed the monthly increase to the approach of the spring selling season and record mortgage rates.

Kansas City Federal Reserve Bank President Tom Hoenig is scheduled to present a luncheon address on the financial crisis in New York at 12:30 PM ET on Monday. Richmond Federal Reserve Bank President Jeffrey Lacker is due to deliver a speech on the economic outlook to business and banking executives in Charlottesville, Virginia at 2 PM.

Tuesday

Minneapolis Federal Reserve Bank President Gary Stern is expected to speak to the Business Law Institute in Minneapolis at 1:15 PM ET. San Francisco Federal Reserve Bank President Janet Yellen is due to speak on the financial turmoil at the Hass Business School at the University of California, Berkeley at 7 PM ET.

Wednesday

The ADP National Employment report, which sheds light on non-farm private employment, is scheduled to be released at 8:15 AM ET on Wednesday. The report is usually released two days prior to the Labor Department's employment report. Economists estimate a job loss of 643,000 in the private sector.

The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 1st at 10:30 AM ET on the same day.

The report for the week ended April 24th showed that crude oil inventories rose by 4.1 million barrels to 374.7 million barrels and were above the upper half of the average range.

Distillate inventories increased by 1.8 million barrels and were above the upper boundary of the average ranger. Notwithstanding a 4.7 million barrel-decline in gasoline stockpiles, they stayed in the upper half of the average range. Refinery capacity utilization averaged 82.1% over the four-weeks ended April 24th compared to 81.8% in the previous week.

Yellen is scheduled to speak via satellite at an Australian Business Economists meeting in Sydney at 5:30 PM ET.

Thursday

The Labor Department is due to release its customary jobless claims report for the week ended May 2nd at 8:30 AM ET on Thursday.

Initial jobless claims rose to 631,000 for the week ended April 25th, down 14,000 from the previous week's revised figure of 645,000. Economists expected claims to remain unchanged at 640,000.

The 4-week moving average for initial claims, a statistic that flattens out week-to-week fluctuations, declined 10,750 to a level of 637,250. The number of people receiving ongoing unemployment help, a statistic known as continuing claims, increased 133,000 to a level of 6.271 million in the week ended April 18th.

The U.S. Labor Department is also scheduled to release its preliminary report on first quarter non-farm productivity and unit labor costs at 8:30 AM on the same day. The consensus estimates call for a 0.9% increase in non-farm productivity and 2.5% growth in unit labor costs.

Non-farm productivity fell at a 0.4% sequential rate in the fourth quarter, while the consensus estimates called for a 1.1% increase in non-farm productivity. Productivity at the business sector as a whole fell 0.4%.

Unit labor costs of the non-farm business sector were up 5.7% quarter-over-quarter in the fourth quarter, while real hourly compensation surged up 15.9% and hourly compensation was up 5.3%.

Treasury Secretary Timothy Geithner is scheduled to speak to the Chicago Fed's Conference on 'Bank Structure and Competition' in Chicago at 9 AM ET.

Federal Reserve Chairman Ben Bernanke is due to offer the opening keynote address at the Chicago Fed's Conference on 'Bank Structure and Competition' at 9:30 AM ET. Bernanke's address is to be followed by a speech by FDIC Chair Sheila Blair at 1:10 PM ET.

The U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 PM ET on the same day. Consumer credit for March is likely to show a decline of $3.3 billion.

In February, consumer credit declined at an annual rate of 3.5%, with the revolving credit tied to credit card loans declining by 9.7%, while non-revolving credit rose by 0.2%.

Friday

The Labor Department is scheduled to release its monthly non-farm payroll report at 8:30 AM on Friday. The report sheds light on the number of paid employees working part time or full time in the nation's business and government establishments, the number of hours worked in the non-farm sector, the basic hourly rate for major industries and the number of unemployed as a percentage of the labor force. Economists estimate that the U.S. economy lost 620,000 jobs in April and look for an unemployment rate of 8.9%.

Non-farm employment fell by 663,000 in March, while economists had estimated a loss of 658,000 jobs. While the goods producing sector lost 305,000 jobs, the service producing sectors lost 358,000 jobs. Barring education and health services, which added 8,000 jobs, all the other sectors lost jobs, with the weakness more pronounced in the construction, manufacturing and professional and business services sectors.

The unemployment rate based on the household survey was 8.5%, up from 8.1% in the previous month. The increase was in line with expectations. Meanwhile, the average hourly earnings rose $0.03 or 0.16% to $18.50.

The Commerce Department is due to release its wholesale inventories report at 10 AM ET on the same day. Economists expect wholesale inventories at the end of March to show a 1% decline.

Wholesale inventories, which make up a quarter of business inventories, showed a bigger-than-expected monthly drop of 1.5% in February. Economists had expected a mere 0.7% monthly decline. Meanwhile, wholesale sales rose by 0.6%, rendering the wholesale inventories to sales ratio to 1.31 from a revised 1.34 in January.

Lacker is due to present a keynote address to DC Chamber of Commerce Business Summit in Washington at 1 PM ET.

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