Janet Yellen: Treasury secretary says she’s not seeing signs of a recession in the US economy



CNN

Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she sees no signs of a recession in the near term as the US economy bounces back from a six-month contraction.

During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said the third quarter GDP data released Thursday underscored the strength of the U.S. economy as the policymakers must act urgently to cool rampant and soaring inflation that is having a sharp impact on Americans’ view of the economy — and endangering the Democratic majority on Capitol Hill less than two weeks from the midterms that election.

“Look, what we’re seeing now is strong growth this quarter. Growth has apparently slowed after a rapid recovery from high unemployment,” Yellen said when asked if the worst -or GDP data quelled any recession worries. “We are in a full employment economy. It is natural that growth will slow down. And it has in the first three quarters of this year, but it continues to be OK. We have a very strong labor market. I don’t see anything which are signs of a recession in this economy at this point.”

Yellen’s optimism comes amid growing concern from economists and financial officials that a recession is likely at some point next year, but is based in part on elements of the latest data that showed signs of a necessary slowdown in the main sectors of the economy opening a path to a “soft landing” as the Federal Reserve prepares to continue its rapid rate hikes.

Gross domestic product – the broadest measure of economic activity – rose at an annual rate of 2.6% in the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a change from a decline of 1.6% in the first quarter of the year and a negative 0.6% in the second.

But Yellen’s view also underscored the complex balancing act that President Joe Biden and his top economic officials have attempted over the course of this year, as they seek to promote a rapid economic recovery. and major legislative victories while also promising to tackle rising prices.

“Inflation is very high — it’s unacceptably high and the American people feel that every day,” Yellen said when asked how the administration squared its view of the US economy with rising voter discontent. Yellen acknowledged that prices will take time to pull back, saying efforts to bring them back to levels “that people are more used to” are likely to cover “the next two years.”

It’s a reality that has undermined the administration’s efforts to capitalize on what officials consider a strong record. Biden, asked about the economy last week, told reporters it was “strong as hell,” drawing criticism from Republicans.

But Yellen agreed with the President’s assessment that the economy remains strong, which stands out compared to how other economies around the world are improving.

“If you look around the world, there are many economies that are suffering not only from high inflation but very weak economic performance, and the United States is leading the way. We have unemployment in the bottom 50 year. … We saw in the report this morning – consumer spending and investment spending continue to grow. We have strong household finances, business finances, well-capitalized banks,” he said.

He added, “This is not an economy that is in recession and we are doing well.”

Yellen also acknowledged frustration within the administration that efforts to pull the US economy out of the crisis have not received the credit officials believe they deserve.

“There are a lot of problems that we could have had, and a lot of family difficulties that American families could have had to deal with,” Yellen said. “These are problems that we don’t have, because of what the Biden administration has done. So, generally one doesn’t get credit for problems that don’t exist.

Yellen traveled to Cleveland as part of the administration’s push to highlight major legislative gains — and the tens of billions of dollars in private sector investment that the policies are pushing to create across the country.

It is a critical part of an economic strategy designed to address the many vulnerabilities and failures revealed as Covid-19 ravages the world, with significant federal investments in infrastructure and supported – or generated from at the beginning – important pieces of critical supply chains.

Listing a series of major private sector investments, including a $20 billion Intel plant that opened a few hours’ drive outside of Columbus, Yellen said they were “really tangible investments that are happening right now, ” although he admits they will take time to fully implement.

Yellen promised that those efforts will be felt in their economic performance in the coming months and years. Asked if the general message of the American administration was one of patience, Yellen said: “Yes.”

“But you’re starting to see repaired bridges coming online — not in every community, but soon. Many communities are going to see roads repaired, bridges repaired that have broken down. We’re seeing money flow. in research and development, which is really an important source of long-term economic strength in America. And America’s strength will grow and we will become a more competitive economy,” he said.

Yellen also discussed the battle lines drawn up this week over raising the debt ceiling, a now-unending crisis in Washington of self-inflicted creation by House Republicans who once again vowed to use for leverage if they get the majority.

“The President and I agree that America should not be held hostage by members of Congress who think it would be good to compromise the credit rating of the United States and threaten the default of US Treasuries, which are the basis of the financial markets in world,” Yellen said. .

But Yellen, who has long emphasized the “destructive” nature of the showdowns, also backed away from eliminating the debt limit entirely by law. A group of House Democrats wrote to Democratic leaders to request that action in the lame duck session of Congress, but Biden rejected the idea this week.

Asked about the split, Yellen said only that she and Biden agreed that “it’s up to Congress to raise the debt ceiling.”

“It is absolutely imperative that this happens, and I want it to happen the way it does,” Yellen added.

As the administration heads into a period of time that traditionally leads top officials to leave an administration, he made it clear that he does not plan to be one of them. Asked about reports that she had announced to the White House that she wanted to stay on next year, Yellen said it was “an accurate reading.”

“I feel very excited about the program that we’re talking about,” Yellen said. “And I see this as a huge boost to economic growth and addressing climate change and strengthening American homes. And I want to be a part of that.”

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