Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she sees no signs of a recession anytime soon as the US economy rebounds from a six-month recession.
During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said Thursday’s third-quarter GDP data showed the strength of the U.S. economy as policymakers rush to cool rampant and soaring inflation. dramatically affected Americans’ views on the economy and threatened the Democratic majority 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 clearly slowed after a very sharp recovery from high unemployment,” Yellen said when asked if the latest GDP data eased fears of a recession. “We’re in a full-employment economy. It’s only natural that growth will slow down. And it has. in the first three quarters of this year, but it’s still OK. We have a very strong labor market. I don’t see any signs of this economy slowing right now.
Yellen’s optimism comes amid growing concerns among economists and financial officials that a recession is possible at some point next year, but was based in part on elements of recent data that suggested a needed slowdown in key areas of the economy. path to 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 an annualized 2.6% in the third quarter, according to preliminary estimates released Thursday by the Bureau of Economic Analysis. This is a turnaround from a 1.6% decline in the first quarter of the year and a negative 0.6% in the second quarter.
But Yellen’s view also underscored the difficult balancing act that President Joe Biden and his top economic officials have attempted this year, trying to emphasize a rapid economic recovery and major legislative wins while vowing to fight inflation.
“Inflation is very high — it’s unacceptably high, and Americans feel it every day,” Yellen said when asked how the administration reconciled its view of the U.S. economy with growing voter discontent. Yellen acknowledged that it will take time for prices to come down, saying that efforts to bring them down to a level that “people are more used to” will likely span “the next couple of years.”
It’s a reality that has undercut the administration’s efforts to capitalize on what officials see as a solid record. Asked about the economy last week, Biden told reporters it was “strong as hell,” drawing criticism from 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 doing.
“If you look around the world, there are a lot of economies that are really suffering not only from high inflation, but very weak economic performance, and the United States stands out. We have the lowest unemployment rate in 50 years. … We saw in this morning’s report – consumer spending and investment spending continued to grow. We have solid household finances, business finances, banks that are well capitalized,” she said.
She added: “This is not a recession and we are still doing well.”
Yellen also acknowledged frustration within the administration that efforts to pull the US economy out of the crisis have not received credit officials’ views as justified.
“We could have had a number of problems, and many American families could have been struggling,” Yellen said. “These are problems that we don’t have because the Biden administration did. That’s why you often don’t get credit for problems that don’t exist.
Yellen traveled to Cleveland as part of an administration effort to highlight key legislative successes — and the tens of billions of dollars in private sector investment the policy has spurred into manufacturing across the country.
It is an important part of an economic strategy designed to address many of the vulnerabilities and gaps exposed as Covid-19 ravages the world by making significant federal investments in infrastructure and supporting or rebuilding key parts of critical supply chains.
Citing a series of major private-sector investments, including a $20 billion Intel plant that opened a few hours’ drive outside Columbus, Yellen said they were “real tangible investments happening now,” though she acknowledged it would take time , to take full effect.
Yellen promised that those efforts will be felt as they move through the economy in the coming months and years. Asked if the administration’s overall 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 pretty soon. Roads will be improved in many communities, bridges repaired that have collapsed. We’re seeing money flow into research and development, which is really an important source of long-term strength for the American economy .And America’s power will grow and we will become a more competitive economy,” she said.
Yellen also spoke about the battle lines this week on raising the debt ceiling, a self-inflicted perennial crisis in Washington that House Republicans have once again vowed to use to win a majority.
“The president and I agree that America must not be held hostage by members of Congress who see fit to threaten the United States’ credit rating and threaten to default on the U.S. Treasury, which underpins global financial markets,” Yellen said. .
But Yellen, who has long emphasized the “destructive” nature of the showdown, has also supported repealing the debt limit through legislation. A group of House Democrats wrote to Democratic leaders to demand such 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 up to Congress to raise the debt ceiling.”
“It’s very important that it’s done, and I’d like to see it happen the way it can happen,” Yellen added.
As the administration heads into a period that traditionally sees top officials leave the administration, she has made it clear that she does not plan to be one of them. Asked about reports she has informed the White House that she wants to stay next year, Yellen said that was an “accurate reading.”
“I feel very excited about the program that we talked about,” Yellen said. “And I see a lot of that in strengthening economic growth and addressing climate change and strengthening American households. And I want to be a part of that.”