Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she saw no signs of a near-term recession as the US economy rebounded from a six-month contraction.
During a one-on-one interview in Ohio that aired on CNN’s “Erin Barnett Outfront,” Yellen said Thursday’s third-quarter GDP data underscored the strength of the U.S. economy as policymakers urgently take steps to calm rampant and rising inflation. had a sharp impact on American views of the economy – and threatened the Democratic majority on Capitol Hill with less than two weeks to go before the midterm elections.
“Look, what we’re seeing now is solid growth this quarter. “Growth has clearly slowed after a very quick recovery from high unemployment,” Yellen said when asked if the latest GDP data had eased any recession concerns. “We are in a full employment economy. It is very natural that growth will be slow. And that’s in the first three quarters of this year, but that’s okay. We have a very strong labor market. I don’t see signs of a slowdown in this economy at this point.”
Yellen’s optimism comes amid growing concern among economists and finance officials that a recession is likely at some point next year, but it was based on elements of recent data that showed signs of a necessary slowdown in key sectors of the economy. A “soft landing” is on the way, as the Federal Reserve is poised to continue its rapid pace of rate hikes.
Gross domestic product — a broad measure of economic activity — rose 2.6% at an annual rate in the third quarter, according to preliminary estimates released Thursday by the Bureau of Economic Analysis. This is a change from a 1.6% decline in the first quarter of the year and a negative 0.6% decline in the second quarter.
But Yellen’s view also underscored the complex balancing act President Joe Biden and his top economic officials have attempted over the course of this year, as they seek to tout a quick economic recovery and major legislative victories and vow to tackle rising prices.
“Inflation is too high — it’s unacceptably high and Americans feel it every day,” Yellen said when asked how the administration squares her view of the U.S. economy with growing discontent among voters. Yellen acknowledged that prices will take time to come down, saying efforts to bring them back to levels “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 take advantage of what officials see as a strong record. Asked about the economy last week, Biden told reporters it was “strong as hell,” criticizing Republicans.
But Yellen agreed with the president’s assessment that the economy remains strong, compared to how other economies around the world are fairing.
“If you look around the world, there are many economies that are suffering not only from high inflation but from very poor economic performance, and the United States stands out. Our unemployment is at a 50-year low. … As we saw in this morning’s report – consumer spending and investment spending continue to rise. We have strong family finances, business finances, banks that are well capitalized,” he said.
“This is not an economy that is in recession and we continue to do well,” he added.
Yellen also acknowledged frustration within the administration that efforts to pull the U.S. economy out of crisis are not credible to credit officials.
“We had a lot of problems, and a lot of families faced problems that any American family could face,” Yellen said. “These are problems that we don’t have, because of what the Biden administration has done. So, often nobody gets credit for a problem that doesn’t exist.”
Yellen traveled to Cleveland as part of an administration effort to highlight major legislative wins — and the tens of billions of dollars in private sector investment these policies have led to in manufacturing across the country.
It is a critical part of an economic strategy designed to address the many vulnerabilities and failures as Covid-19 ravages the world, with significant federal investments in infrastructure and building key parts of critical supply chains from scratch.
Listing a series of major private sector investments, including a $20 billion Intel plant opening a few hours’ drive outside Columbus, Yellen said they were “real real investments happening now,” even as she acknowledged they would take time to fully take effect.
Yellen promised that these efforts would be felt through the economy in the months and years ahead. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”
“But you’re seeing repaired bridges come online – not in every community, but very soon Many communities are going to see road improvements, bridges that have collapsed repaired. We see the flow of money into research and development, which is really an important source of long-term strength for the American economy. And America’s power is going to grow and we’re going to become a more competitive economy,” he said.
Yellen also addressed the battle lines drawn this week over raising the debt ceiling, a now-perpetual crisis of Washington’s own making that House Republicans have vowed to use for leverage again if they take the majority.
“The president and I agree that America should not be held hostage by members of Congress who think it’s okay to compromise the United States’ credit rating and threaten default on the U.S. Treasury, which is the foundation of global financial markets.” .
But Yellen, who has long highlighted the “destructive” nature of the showdowns, also supports eliminating the debt limit entirely through legislation. A group of House Democrats wrote to Democratic leaders to request that move during a 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’s really up to Congress to raise the debt ceiling.”
“It’s very important to do this, and I want to see it happen the way it can,” Yellen added.
As the administration moves toward a period that traditionally forces top officials to leave the administration, he made it clear that he does not plan to be one of them. Asked about the report that she told the White House she wanted to stay next year, Yellen said it was “an accurate reading.”
“I’m very excited about the program that we talked about,” Yellen said. “And I see that as a great boost to economic growth and tackling climate change and strengthening American families. And I want to be a part of it.”