Janet Yellen has tried to head off an economic report that may confirm that the American economy is contracting
US Treasury Secretary Janet Yellen has denied that the American economy is in recession, even though a report this week may confirm it by the most common definition, saying the nation is instead going through a “necessary and appropriate” slowdown.
Yellen defended President Joe Biden’s economic policies in an NBC News interview on Sunday, arguing that a negative GDP report won’t mean that the world’s largest economy is in recession. The report is scheduled for release on Thursday and, following first-quarter contraction at an annual rate of 1.6%, the latest data may confirm that the economy is shrinking.
Two straight quarters of economic contraction is typically viewed as a recession, Yellen acknowledged, but she tried to reframe how the trend should be defined. “We could see that happen, and that will be closely watched, but I do want to emphasize: What a recession really means is a broad-based contraction in the economy,” she told host Chuck Todd. “Even if that number is negative, we are not in a recession now. I would warn that we should be not characterizing that as a recession.”
Yellen, who chaired the US Federal Reserve Bank until then-President Donald Trump declined to appoint her to a second term in 2017, argued that because of strong job growth and other favorable data points, the economy isn’t in a broad-based decline. However, Todd pointed out that unemployment claims are rising and business activity is slowing, which he suggested might be signs of a coming recession.
“This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing, and that’s necessary and appropriate,” Yellen said. “We need to be growing at a steady and sustainable pace, so there is a slowdown, and businesses can see that. And that’s appropriate, given that people now have jobs and we have a strong labor market.”
The Treasury secretary acknowledged that inflation is “way too high” – it’s at the highest rate in more than 40 years, in fact – but she expressed confidence that actions by the Federal Reserve and Biden’s policies will bring prices under control. “I’m not saying that we will definitely avoid a recession, but I think there’s a path that keeps the labor market strong and brings inflation down,” she said.
Yellen said the Russia-Ukraine conflict could push oil prices even higher. She added that she’s working with US allies to cap the prices that Russia is paid for oil, but when the next round of European Union sanctions goes into effect in December, Moscow could take some of its supplies off the market.
The US is seeing slowing economic growth and will likely experience weaker job creation in the months ahead, Yellen said. “But I don’t think that’s a recession,” she insisted. “A recession is broad-based weakness in the economy. We’re not seeing that now, and I absolutely don’t think that’s necessary.”