CNN
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Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she saw no signs of a recession in the short term, as the US economy recovered 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 US economy and had a strong effect on the US view of the economy and jeopardized 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 reassured any recession concerns. “We are in a full employment economy. It is very natural that growth is slower. And it has for the first three quarters of this year, but it’s still doing well. We have a very strong labor market. I see no signs of a recession in this economy right now.”
Yellen’s optimism comes amid growing concern from economists and financial officials that a recession is likely sometime next year, but was based in part on elements of the latest data that showed signs of a recession. A necessary slowdown in key areas of the economy leaves a path open 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, increased at an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a change from a 1.6% drop in the first quarter of the year and a negative 0.6% in the second.
But Yellen’s opinion also underscored the complex balancing act that President Joe Biden and his top economic officials attempted over the course of this year, as they seek to highlight a swift economic recovery and big legislative victories while pledging to address the price increase.
“Inflation is very high, it’s unacceptably high, and Americans feel that every day,” Yellen said when asked how the administration squared its view of the American economy with growing discontent among voters. Yellen acknowledged it would take time for prices to come back down, and said efforts to bring them down 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 track record. When Biden was asked about the economy last week, he told reporters that it is “tough as hell,” drawing criticism from Republicans.
But Yellen agreed with the president’s assessment that the economy remains strong, standing out compared to other economies around the world.
“If you look around the world, there are a lot of economies that are really suffering from not only high inflation but also very weak economic performance, and the United States stands out. We have unemployment at a 50-year low. … We saw in the report this morning: consumer spending and investment spending continued to grow. We have strong family finances, business finances, banks that are well capitalized,” he said.
He added: “This is not an economy that is in a recession and we are still doing well.”
Yellen also acknowledged frustration within the administration that efforts to lift the US economy out of crisis have not received the credit officials believe they deserve.
“There were a number of problems that we might have had and difficulties that many American families might have faced,” Yellen said. “These are problems 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 administration push to highlight major legislative victories and the tens of billions of dollars in private-sector investment that policies have fueled toward manufacturing across the country.
It is a critical piece of an economic strategy designed to address many of the vulnerabilities and flaws exposed when COVID-19 ravaged the world, with major federal investments in infrastructure and underpinning, or creating from scratch, key pieces of supply chains. critics.
Listing a number of major private-sector investments, including the $20 billion Intel plant that opened just a few hours’ drive from Columbus, Yellen said they were “real tangible investments happening now,” though she acknowledged they would take time. a while to take effect.
Yellen promised those efforts would be felt as they ripple through the economy in the months and years to come. Asked if the administration’s overall message to Americans was one of patience, Yellen said, “Yes.”
“But you are starting to see repaired bridges come online, not in every community, but very soon. Many communities will see roads improved, bridges repaired that have been falling apart. We’re seeing a flow of money into research and development, which is really a major source of long-term strength for the US economy. And the strength of the United States will increase and we will become a more competitive economy,” she said.
Yellen also touched on the battle lines that have been drawn this week over raising the debt ceiling, a now-perpetual Washington crisis that House Republicans have once again vowed to use to leverage if they win a majority. .
“The President and I agree that the United States should not be held hostage by members of Congress who think it’s okay to compromise America’s credit rating and threaten to default on America’s Treasuries, which are the foundation of global financial markets,” Yellen said. . .
But Yellen, who has long highlighted the “destructive” nature of the clashes, has also backed the complete removal of the debt ceiling through legislation. A group of House Democrats wrote to Democratic leaders to request such action in the congressional session, but Biden rejected the idea this week.
When 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 is absolutely essential that it be done, and I would like it to happen in the way that it can happen,” added Yellen.
As the administration moves into a time period that traditionally sees top officials leave an administration, she made it clear that she did not plan to be one of them. When she was asked about the reports she had briefed the White House on where she wanted to stay next year, Yellen said it was “an accurate reading.”
“I’m very excited about the show we’re talking about,” Yellen said. “And I see in it a great strengthening of economic growth and dealing with climate change and strengthening American households. And I want to be a part of that.”
