Janet Yellen: Treasury Secretary says she sees no signs of a recession in the US economy


Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she saw no signs of a near-term recession as the U.S. economy rebounded from six months of contraction.

During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said third-quarter GDP data released Thursday underscored the strength of the U.S. economy as policymakers push to cool sweeping and skyrocketing inflation that has had a stark effect on America’s view of the economy — threatening Democratic majorities on Capitol Hill less than two weeks after the midterm elections.

“Look, what we’re seeing right now is solid growth this quarter. Growth has obviously slowed after a very rapid recovery from high unemployment,” Yellen said when asked if the latest GDP data eased any recession worries. “We are in an economy with full employment. It is very natural that growth slows down. And it has during the first three quarters of this year, but it continues to be OK. We have a very strong labor market. I don’t see any signs of a recession in this economy at this point.”

Yellen’s optimism comes amid growing concern from economists and finance officials that a recession is likely at some point in the next year, but was based in part on elements of the latest data that showed signs that a necessary slowdown in key areas of the economy allows pave the way for a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate hikes.

Gross domestic product — the broadest measure of economic activity — rose at an annual rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. It is a turnaround 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 President Joe Biden and his top economic officials have attempted this year, as they seek to highlight a rapid economic recovery and major legislative victories while promising to tackle soaring prices.

“Inflation is very high — it’s unacceptably high, and Americans feel it every day,” Yellen said when asked how the administration squared its view of the U.S. economy with growing discontent among voters. Yellen acknowledged that prices would take time to fall, and said efforts to bring them down to levels “that people are more used to” would likely cover “the next couple of years.”

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

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

“If you look around the world, there are many economies that are really suffering not only from high inflation but very weak economic performance, and the United States stands out. We have a vacancy rate at a 50-year low. … We saw in this morning’s report – consumer spending and investment spending continued to grow. We have solid household finances, corporate finances, banks that are well capitalised, she said.

She added: “This is not an economy that is in recession and we continue to do well.”

Yellen also acknowledged frustration in the administration that efforts to pull the US economy out of the crisis have not received the credit authorities believe is deserved.

“There were more problems we could have had, and difficulties many families American families could have faced,” Yellen said. “These are problems we don’t have because of what the Biden administration has done. So often you don’t get credit for problems that don’t exist.”

Yellen traveled to Cleveland as part of an administration push to highlight the major legislative gains — and the tens of billions of dollars in private sector investment those policies have driven toward manufacturing around the country.

It is a critical part of an economic strategy designed to address many of the vulnerabilities and failures exposed as Covid-19 ravaged the world, with significant federal investment in infrastructure and shoring up – or creating from scratch – key parts of critical supply chains.

Listing a number of major private sector investments, including the $20 billion Intel facility that opened a few hours’ drive outside Columbus, Yellen said they were “real concrete investments happening now,” though she acknowledged it would take time before they come into force.

Yellen promised that these efforts would be felt as they move through the economy in the months and years ahead. Asked if the administration’s general message to Americans was patience, Yellen said, “Yes.”

“But you’re starting to see repaired bridges come online — not in every community, but pretty soon. Many communities are going to see roads improved, bridges repaired that have fallen apart. We’re seeing money flowing into research and development, which is really “an important source of long-term strength for the American economy. And America’s strength is going to increase and we’re going to be a more competitive economy,” she said.

Yellen also addressed the battle lines that have been drawn this week over raising the debt ceiling, a now-perpetual Washington crisis of its own making that House Republicans have once again vowed to use as leverage should they take the majority.

“The president and I agree that America should not be held hostage by members of Congress who think it’s okay to compromise the credit rating of the United States and threaten to default on US Treasuries, which are the bedrock of global financial markets,” Yellen said. .

But Yellen, who has long emphasized the “destructive” nature of showdowns, has also supported doing away with the debt limit entirely through legislation. A group of House Democrats wrote to Democratic leaders to request that action in Congress’ lame duck session, but Biden rejected the idea this week.

When asked about the split, Yellen said only that she and Biden agreed that it is “really up to Congress to raise the debt ceiling.”

“It’s absolutely critical that it gets done, and I’d like to see it happen in the way that it can happen,” Yellen added.

As the administration moves toward a time period that traditionally sees top officials leave an administration, she made it clear that she did not intend to be one of them. Asked about reports she had informed the White House she wanted to stay on next year, Yellen said it was “an accurate reading.”

“I feel very excited about the program that we talked about,” Yellen said. “And I see in that great strengthening of economic growth and addressing climate change and strengthening American households. And I want to be a part of that.”

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