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



CNN

Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she saw no signs of a near-term recession as the U.S. economy rebounded from a six-month 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 took urgent steps to calm widespread and rising inflation. had a sharp impact on America’s view of the economy — and threatened the Democratic majority on Capitol Hill with less than two weeks to go before the midterm elections.

“Look, what we’re seeing right now is solid growth this quarter. Growth has clearly slowed after a very quick recovery from high unemployment,” Yellen said when asked if the latest GDP data has fueled concerns about a recession. “We’re in a full-employment economy. Slow growth is natural. And this is in the first three quarters of this year, but that’s okay. We have a very strong labor market. I don’t see signs of a slowdown in this economy at this point. ”

Yellen’s optimism came amid growing concern among economists and finance officials that a recession is likely at some point next year, but was based in part on the latest data that showed signs of a needed slowdown in key sectors of the economy. A path to a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate hikes.

According to preliminary estimates released Thursday by the Bureau of Economic Analysis, gross domestic product — a broad measure of economic activity — rose by an annualized rate of 2.6% in the third quarter. That’s a change from a 1.6% decline in the first quarter of the year and a negative 0.6% in the second.

But Yellen’s approach 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 also promising to address rising prices.

“Inflation is too high — it’s unacceptably high and Americans feel it every day,” Yellen said when asked how the administration ranks its view of the U.S. economy with growing dissatisfaction among voters. Yellen acknowledged that while prices will take time to come down, efforts to bring them back to levels “people are more accustomed to” will likely cover “the next few years.”

It’s a reality that has slowed the administration’s efforts to take advantage of what officials see as a strong record. Asked about the economy last week, Biden told reporters it was “strong as hell,” criticizing Republicans.

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

“If you look around the world, there are many economies that are suffering from not only high inflation but very poor economic performance, and the United States stands out. We have unemployment at a 50-year low. … We saw in this morning’s report – Consumer Spending and investment spending continued to grow. We have solid household finance, business finance, banks that are well capitalized,” she said.

“This is not an economy in recession and we continue to do well,” he added.

Yellen also acknowledged frustration within the administration that officials believe efforts to pull the U.S. economy out of the crisis are not getting credit.

“We had many problems that we faced, and many families faced difficulties that American families face,” Yellen said. “We don’t have these problems because of the Biden administration. So, very often nobody gets credit for problems that don’t exist.”

Yellen traveled to Cleveland as part of the administration’s push to highlight major legislative wins — and private-sector investment those policies have led to tens of billions of dollars toward construction across the country.

It’s a critical part of an economic strategy designed to address many of the vulnerabilities and failures that exist as COVID-19 ravages the world, creating significant federal investments in infrastructure and key pieces of supply chains — or from scratch.

Listing a series of major private-sector investments, including a $20 billion Intel plant opening a few hours’ drive outside Columbus, Yellen said they are “real tangible investments happening right now,” acknowledging that they will take time to have a full impact.

Yellen promised that those efforts would be felt as they coursed through the economy over months and years. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”

“But you’re starting to see repaired bridges come online — not in every community, but quickly. Many communities are going to see roads repaired, broken bridges repaired. We’re seeing money flow into research and development, which is really an important source of long-term strength for the U.S. economy. . And America’s power is growing and we’re becoming a more competitive economy,” she said.

Yellen also addressed the battle line drawn this week over raising the debt ceiling, a now-permanent Washington crisis that House Republicans have vowed to use to leverage if they take the majority.

“The president and I agree that America should not be held hostage by members of Congress who are justified in threatening to compromise the United States’ credit rating and default on U.S. Treasuries, which are the foundation of global financial markets,” Yellen said. .

But Yellen, who has long highlighted the “disastrous” nature of the showdown, also supports eliminating the debt ceiling entirely through legislation. A group of House Democrats wrote to Democratic leaders to request that action during a 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 really about raising the debt ceiling in Congress.”

“It’s absolutely imperative that this be done, and I want to see it done in a way that it can be done,” Yellen added.

As the administration moves into a period that traditionally leads top officials to leave the administration, she made it clear that she does not plan to be one of them. Asked about reports that she had informed the White House she intended to stay another year, Yellen said it was a “correct read.”

“I’m very excited about the program that we talked about,” Yellen said. “And I see in it a huge 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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