Ahead of a slew of economic reports that will be released this week, Treasury Secretary Janet Yellen admitted that the U.S. economy is slowing but pointed to healthy hiring as proof that the country has not yet tipped into a recession.
The highest-profile report will be out on Thursday when the Commerce Department will release its first estimate of the U.S. economy’s output in the April-June quarter. Some economists are fearing that it may reveal a contraction for the second quarter in a row, which meets a rule-of-thumb definition of a recession. Other data will shed light on sales of new homes, consumer confidence, incomes, spending, and inflation.
Meanwhile, on Wednesday, the Federal Reserve is likely to announce a second-straight seventy-five basis point increase to its benchmark borrowing rate. That will put the Fed’s rate in a range of 2.25 percent to 2.5 percent, the highest level since 2018.
“The economy is slowing down. Last year it grew very rapidly at about 5.5 percent, and that succeeded in putting people back to work who had lost their jobs during the pandemic,” Yellen said on NBC's Meet the Press on Sunday.
“The labor market is now extremely strong. Even just during the last three months, job gains averaged 375,000. 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 and 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,” she continued.
“But you don’t see any of the signs now—a recession is a broad-based contraction that affects many sectors of the economy—we just don’t have that. Consumer spending remains solid. It’s continuing to grow,” she added.
“The Fed is charged with putting in place policies that will bring inflation down, and I expect them to be successful. The administration, for its part, is supplementing those Fed policies with things we can do,” she said.
“We’ve cut the deficit by a record $1.5 trillion this year, releases of gas from the Strategic Petroleum Reserve are putting some downward pressure on gas prices. we have seen gas prices just in recent weeks come down by about fifty cents, and there should be more in the pipeline. And hopefully we will pass a bill that will lower prescription drug costs and maintain current levels of health care costs,” she added.
Still, many economists believe that a recession is likely inevitable. Bank of America’s economists last week became the latest to forecast a “mild recession” later this year.
Meanwhile, Larry Summers, the treasury secretary under former President Bill Clinton, told CNN’s GPS on Sunday that “there’s a very high likelihood of recession.”
Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.