9 minutes ago
Janet Yellen
US Treasury Secretary Janet Yellen has played down the risk of a recession in the US economy.
Speaking to NBC, Yellen acknowledged that economic growth is slowing but called this a necessary transition period.
She said an economic downturn is not inevitable, citing strong employment figures and increased consumer spending as evidence of the economy’s health.
Yellen also defended recent White House policies. She said that the United States has begun selling strategic oil reserves to lower gas prices, and that raising interest rates is helping to reduce spiraling inflation.
Employment in the US remained strong in June, with 372,000 new jobs and the unemployment rate remaining steady at 3.6 percent.
It was the fourth consecutive month of job gains, exceeding 350,000 jobs.
“This is not an economy in recession, but we are in a transition period where growth is slowing and that is necessary and appropriate,” Yellen said.
However, last week’s data indicated that the labor market was declining, with new claims for unemployment benefits reaching an eight-month high.
Yellen said the administration of President Joe Biden is selling oil from the strategic reserve, noting that this has already helped bring down gas prices.
“We’ve only seen gas prices drop in recent weeks by regarding 50 cents (a gallon), and there has to be more in the pipeline,” she said.
Yellen, who previously served as Fed chair, said she hoped the bank might cool the economy enough to bring rates down, without causing a widespread economic downturn.
“I’m not saying we will definitely avoid a recession, but I think there is a path that keeps the labor market strong and leads to lower inflation,” she added.
photo released, Getty Images
Inflation in the United States rose to its highest rate since 1981, in May 2022
US gross domestic product, a broad gauge of the economy’s health, contracted at an annual rate of 1.6 percent during the first quarter, and Thursday’s report is expected to show a gain of just 0.4 percent in the second quarter, according to economists polled by Archyde.com.
Yellen said that even if the second-quarter numbers were negative, it would not be a sign of a recession, given the strength in the labor market and strong demand.
“Recession is a widespread weakness in the economy. We don’t see that now,” she said.
Some economists and analysts traditionally define a recession as two consecutive quarters of GDP contraction.
But the research group officially charged with defining recessions in the US is looking at a wide range of indicators instead, including jobs and spending.
Brian Dees, director of the White House National Economic Council, said on Twitter on Sunday that the expected second-quarter numbers would be very different, which he called “the important context.”
“The employment, spending and production data look solid,” he said.