Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she saw no signs of a recession in the short term as the US 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 take action urgency to calm the pervasive and rising inflation that has had a marked effect on America’s view of the economy — and has endangered Democratic majorities 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 obviously slowed after a very rapid recovery from high unemployment,” Yellen said when asked if the latest GDP data dispelled recession fears. “We are in a full employment economy. It is quite natural for growth to slow down. And it did for 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 concerns among economists and finance officials that a recession is likely at some point over the next year, but was based in part on elements of the latest data which showed signs that a needed slowdown in key areas of the economy leaves room 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 – grew 2.6% annualized in the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. This is a reversal after a decline of 1.6% in the first quarter of the year and 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 highlight a rapid economic recovery and major legislative victories while committing to tackling soaring prices.
“Inflation is very high – it’s unacceptable and Americans are feeling it every day,” Yellen said when asked how the administration reconciled its view of the US economy with growing voter discontent. Yellen acknowledged that prices would take time to come down, saying efforts to bring them back to levels “that people are more used to” will likely cover “the next couple of years.”
It’s a reality that has undermined the administration’s efforts to build on what officials see as a strong balance sheet. 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, 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 also from very weak economic performance, and the United States stands out. We have unemployment at its highest 50 year lows. … We saw it in this morning’s report – consumer spending and investment spending continued to grow. We have strong household finance, business finance, banks well capitalized,” she said.
She added: “It’s not an economy in recession and we continue to do well.”
Yellen also acknowledged frustration within the administration that efforts to pull the U.S. economy out of the slump have not received the credit officials believe they deserve.
“There were several issues that we might have had and challenges that many American families might have faced,” Yellen said. “These are issues that 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 administrative campaign to highlight key legislative victories — and the tens of billions of dollars of private sector investment those policies have led to manufacturing across the country. .
It is a critical part of an economic strategy designed to address many of the vulnerabilities and failures laid bare when Covid-19 ravaged the world, with significant federal investments in infrastructure and strengthening – or the creation from scratch – of key elements of critical supply chains.
Listing a series of major private sector investments, including the $20 billion Intel factory opening a few hours’ drive from Columbus, Yellen said these were “real, tangible investments underway,” even though she acknowledged that it would take time for them to take full effect.
Yellen promised that these efforts would be felt throughout their journey through the economy in the months and years to come. When asked if the administration’s general message to Americans was one of patience, Yellen replied, “Yes.”
“But you are starting to see repaired bridges coming online – not in every community, but very soon. Many communities will see improved roads, repaired bridges that have collapsed. We see money flowing into research and development, which is really an important source of long-term strength for the American economy. And America’s strength will increase and we will become a more competitive economy,” she said.
Yellen also addressed the battle lines that were drawn this week on raising the debt ceiling, a now perpetual Washington crisis that House Republicans have once again pledged to use as leverage if they take the majority.
“The President and I agree that America should not be held hostage by members of Congress who think it is okay to jeopardize America’s credit rating and threaten to U.S. Treasuries, which are the foundation of global financial markets, default,” Yellen said. .
But Yellen, who has long stressed the “destructive” nature of the clashes, also backed removing the debt limit altogether through legislation. A group of House Democrats wrote to Democratic leaders demanding that action during 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 was “really up to Congress to raise the debt ceiling.”
“It’s absolutely critical that this be done, and I would love for it to happen the way it can happen,” Yellen added.
As the administration heads into a period that traditionally sees senior officials leave an administration, she has made it clear that she has no intention of being one of them. Asked about reports she had informed the White House that she wanted to stay next year, Yellen said it was “accurate reading”.
“I’m very excited about the program that we talked about,” Yellen said. “And I see it as a big boost to economic growth, fighting climate change, and strengthening American households. And I want to be a part of that.”