Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she sees no signs of a recession in the near term as the US economy has recovered from six months of contraction.
During a one-on-one interview in Ohio, which 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 urgent action to contain the ever-present and rising inflation had a profound impact on American views on the economy – and threatened Democratic majorities on Capitol Hill less than two weeks after the midterm elections.
“See, what we’re seeing right now is solid growth this quarter. Growth appears to have slowed after a very quick recovery from high unemployment,” Yellen said when asked if the latest GDP data allayed any recession worries. “We are in a full-employment economy. It’s natural for growth to slow down. And that’s for the first three quarters of this year, but it’s still okay. We have a very strong job market. I see no signs of a recession in this economy right now.”
Yellen’s optimism comes amid growing concerns from economists and tax officials that a recession is likely sometime next year, but was based in part on elements of the latest data that left signs of a slowdown in key areas of the economy needed to pave the way to a “soft landing.” , as the Federal Reserve prepares to continue its fast pace of rate hikes.
Gross domestic product — the broadest measure of economic activity — rose at an annualized rate of 2.6% in the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a reversal from a 1.6% decline in the first quarter of the year and -0.6% in the second.
But Yellen’s view also underscored the complex balancing act that President Joe Biden and his top business officials have attempted throughout this year to highlight a rapid economic recovery and major legislative victories while pledging to counter rising prices.
“Inflation is very high — it’s unacceptably high and Americans feel it every day,” Yellen said when asked how the administration was balancing its view of the US economy with rising voter discontent. Yellen acknowledged that it would take time for prices to come down and said efforts to bring them back down to levels “that people are more used to” will likely cover “the next couple of years”. .
It’s a reality that has undermined government efforts to take advantage of what officials see as a solid record. Biden, asked about the economy last week, told reporters it was “fucking strong,” drawing criticism from Republicans.
But Yellen agreed with the president’s assessment that the economy remains strong and stands out compared to other economies around the world.
“If you look around the world, there are many economies that are really suffering not only from high inflation but also from very weak economic output, and the United States stands out. We have unemployment at a 50 year low. … We saw in this morning’s report that consumer and capital spending have continued to rise. We have solid household finances, business finances and well capitalized banks,” she said.
She added: “This is not an economy that is in recession and we remain fine.”
Yellen also acknowledged frustration within the administration that efforts to pull the US economy out of the crisis have not received the credit officials believe they deserve.
“There were several issues that we could have faced and difficulties that many American families could face,” Yellen said. “These are issues that we don’t have because of what the Biden administration has done. So you often don’t get any recognition for problems that don’t exist.”
Yellen traveled to Cleveland as part of a government push to highlight key achievements of the legislation — and the tens of billions of dollars in private sector investment these policies have driven into manufacturing across the country.
It’s a critical part of an economic strategy aimed at addressing many of the vulnerabilities and shortcomings exposed as Covid-19 ravaged the world, with significant federal investment in infrastructure and the bolstering — or re-creating — of vital parts of critical supply chains.
Enumerating a number of big private sector investments, including Intel’s $20 billion plant that opened a few hours’ drive outside of Columbus, Yellen said these are “real, tangible investments that are happening now,” too if she conceded that it would take time for them to take full effect.
Yellen promised that these efforts would be felt in the economy in the months and years to come. When asked if the administration’s overall message to Americans is patience, Yellen said, “Yes.”
“But you’re starting to see repaired bridges coming online – not in every community, but pretty soon. In many communities, roads are being improved and bridges that have fallen apart are being repaired. 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 will increase and we will become a more competitive economy,” she said.
Yellen also addressed the battle lines drawn this week over the debt ceiling hike, a now ongoing crisis in Washington of her own making that House Republicans have again pledged to use as leverage if they win the majority should take over.
“The President and I agree that America should not be held hostage by members of Congress who think it okay to compromise the creditworthiness of the United States and threaten to default on US Treasuries, which are the foundation of global financial markets,” said Yellen.
But Yellen, who has long emphasized the “destructive” nature of the showdowns, has also advocated abolishing the debt limit by law altogether. A group of House Democrats wrote to Democratic leaders to call for that action in the lame duck session of Congress, but Biden dismissed the idea this week.
When asked about the split, Yellen said only that she and Biden both agreed that it was “really up to Congress to raise the debt ceiling.”
“It is absolutely necessary that it be done and I want it to be done the way it can be done,” Yellen added.
As the government moves into a period that has traditionally seen top officials leave government, it has made it clear that it has no intention of being one of them. When asked about reports she had shared with the White House that she plans to stay next year, Yellen said it was “close reading.”
“I’m very excited about the program that we’ve been talking about,” Yellen said. “And I see it as a big boost to economic growth, combating climate change and strengthening American budgets. And I want to be a part of it.”