On Sunday, Janet Yellen, the Treasury Secretary of the United States, said that even though there was a slowdown in the economic growth in the country and a risk of recession exists, but added that a downturn was definitely not inevitable.
No recession for now
According to Yellen, the strong consumer spending and hiring numbers indicate that the world’s largest economy is certainly not in recession. Data showed that hiring in the US for June was quite robust, as there were 372,000 jobs created, while the unemployment rate was held at 3.6%. Moreover, it also marked the fourth consecutive month for new job additions to be higher than the 350,000 mark.
Yellen asserted that these numbers did not indicate that the economy was in recession. She added that they had now entered a period of transition where economic growth slows down and it is appropriate, as well as necessary.
Regardless, there was some data in the previous week that showed there was a softening in the labor market already. This was because jobless claims had gone up and had reached their highest level in eight months.
The US Treasury Secretary said that inflation in the country was still too high and they were trying to bring the surging prices down with the interest rate hikes coming from the US Federal Reserve. In addition, the Biden administration has also taken steps to use the Strategic Petroleum Reserve to sell oil and Yellen stated that this had already helped in bringing down gas prices.
She said that there had already been a decline in gas prices by 50 cents per gallon in recent weeks and there will be further declines in the future.
The Fed’s role
Yellen also served as the chair of the Federal Reserve previously. She said that she hoped the central bank could cool down the economy enough that prices are able to come down, but not so much that it triggers an economic recession.
She clarified that she was not definitely saying that they would avoid a recession, but that she believes there is a path that will maintain the strength of the labor market and also bring down inflation. There was a 1.6% drop in the US gross domestic product in the first quarter.
This is considered a measure of economic health and Thursday’s report is meant to show that its second-quarter gains were just 0.4%. According to Yellen, even if the figure for the second quarter turns out to be negative, it would not confirm a recession because of the strong labor demand and strength of the job market.
She stated that a recession means the economy sees broad-based weakness, but this was not the case. Traditionally, a recession has been defined by analysts, economists, and even journalists as two straight quarters of a decline in GDP. But, a wide range of indicators is also considered in other calculations, which include consumer spending and job data.