Dry Treasury. Janet Yellen acknowledges economic ‘slowdown’ but downplays recession fears
Treasury Secretary Janet Yellen acknowledged on Sunday that the United States was experiencing an economic ‘slowdown’, but played down the potential for a recession, arguing that the country is in a ‘transition’ period after rapid economic growth. .
“The economy is slowing down,” Yellen said on NBC News’ “Meet the Press,” adding that a correction is “appropriate” for a healthy economy.
“The job market is now extremely strong,” she said. “It’s not an economy in recession, but we’re in a transition period where growth is slowing down. And that’s necessary and appropriate, and we need to grow at a steady and sustainable pace. So there’s a slowdown, and businesses can see that and it’s appropriate given that people now have jobs and we have a strong job market.”
“But you don’t see any of the signs now – a recession is a generalized contraction that affects many sectors of the economy. We just don’t have that,” she added. “I would say we are seeing a slowdown.”
Yellen went on to say that a “common definition” of a recession is two consecutive quarters of negative GDP, and although economists expect to see negative growth again this quarter after seeing -1.4% in last quarter, that still wouldn’t mean the US is in a recession.
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“Even though that number is negative, we’re not in a recession right now, and we shouldn’t call it a recession,” she said.
NBC anchor Chuck Todd pushed back, saying the secretary was “splitting hairs” over the definition.
“I mean, if the technical definition is two quarters of contraction, you’re saying it’s not a recession,” Todd said.
“That’s not the technical definition,” Yellen explained. “There’s an organization called the National Bureau of Economic Research that looks at a wide range of data to decide whether or not there’s a recession, and most of the data that they’re looking at right now continues to be strong. I’d be amazed if the NBER would declare this period a recession, even though it happens to have two quarters of negative growth. We have a very strong job market. When you’re creating close to 400,000 jobs a month, that’s not not a recession.”
Yellen’s comments come as Obama’s former economic adviser Larry Summers told CNN Sunday that “there is a very high probability of a recession” and that it is “very unlikely” that the United States will experience a “soft landing”. Last month, Summers warned that a recession is “almost inevitable, probably 75%, 80% chance within the next two years, and there is certainly a real risk that it will come sooner”.
The United States has seen 13 straight months of soaring inflation since the Biden administration, including Yellen, dismissed concerns about rising costs and said the contributing factors were “transient”.
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Yellen admitted in May this year that she “was then mistaken about the path inflation would take”.
Inflation soared to 9.1% in June, marking the fastest pace of inflation since December 1981.