Treasury Secretary Janet Yellen said in an exclusive interview with CNN on Thursday that she sees no signs of a recession in the near term as the US economy recovers 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 U.S. economy as policymakers urgently move to cool pervasive and rising inflation that has had a sharp effect on American views of the economy — and has endangered Democratic majorities on Capitol Hill less than two weeks from the midterm elections.
“Look, what we’re seeing now is solid growth this quarter. Growth has obviously slowed after a very quick recovery from high unemployment,” Yellen said when asked about whether the latest GDP data eased any recession worries. “We are at a full employment economy. It is very natural for growth to slow down. And it has over the first three quarters of this year, but it’s still going OK. We have a very strong labor market. I don’t see signs of a recession in this economy at this point.”
Yellen’s optimism comes amid growing concern from economists and financial officials that a recession is likely at some point in the next year, but was partly based on elements of the latest data that showed signs of a necessary slowdown in key areas of the economy a clear path 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 – rose at an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. This is a reversal from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.
But Yellen’s view also highlighted the complicated balancing act President Joe Biden and his top economic officials have attempted over the course of this year as they seek to highlight a rapid economic recovery and major legislative wins while also promising to to tackle rising prices.
“Inflation is very high — it’s unacceptably high and Americans feel it every day,” Yellen said when asked how the administration squared its view of the U.S. economy with rising discontent among voters. Yellen acknowledged that prices will take time to come down, and said efforts to bring them back to levels “that people are more used to” would likely cover “the next couple of years.”
It’s a reality that has undermined efforts by the administration to take advantage of what officials see as a robust record. Asked about the economy last week, Biden told reporters it was “strong as hell,” drawing criticism from Republicans.
But Yellen agreed with the president’s assessment that the economy remains strong and stands out compared to how other economies around the world are doing.
“If you look around the world, there are a lot of economies that are really suffering not only from high inflation but also very poor economic performance, and the United States stands out. We have unemployment at a 50 year low. … We saw in this morning’s report – consumer spending and investment spending continued to grow. We have solid household finances, business finances, banks that are well capitalized,” she said.
She added: “This is not an economy that is in recession and we continue to do well.”
Yellen also acknowledged the frustration within the administration that efforts to pull the US economy out of crisis have not received the credit officials deserve.
“There were various problems that we could have had, and problems that many families faced in American families,” Yellen said. “These are problems that 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 the major legislative victories — and the tens of billions of dollars in private sector investment that drove these policies into production across the country.
It is a critical part of an economic strategy designed to address many of the vulnerabilities and shortcomings exposed as Covid-19 ravaged the world, with significant federal investments in infrastructure and strengthening — or building from scratch create – key pieces of critical supply chains.
Listing a series of major private-sector investments, including the $20 billion Intel plant that opened a few hours’ drive outside Columbus, Yellen said these are “real tangible investments happening right now,” even as she admitted that it will take time to fully take effect.
Yellen promised that these efforts will be felt as they move through the economy in the coming months and years. Asked if the administration’s general message to Americans was one of patience, Yellen said, “Yes.”
“But you’re starting to see repaired bridges come online – not in every community, but pretty soon. Many communities are going to see roads being improved, bridges being repaired that are falling apart. We see money flowing into research and development, which is a really important source of long-term strength for the American economy. And America’s power is going to increase and we’re going to become a more competitive economy,” she said.
Yellen also addressed the battle lines drawn this week over raising the debt ceiling, a now-perpetual Washington crisis of its own making that House Republicans have once again vowed to use for leverage should they take the majority.
“The president and I agree that America should not be held hostage by members of Congress who think it is okay to jeopardize the credit rating of the United States and to threaten default on US Treasuries, which are the basis of global financial markets are not,” Yellen said.
But Yellen, who has long emphasized the “destructive” nature of the power struggles, has also backed doing away with the debt limit entirely through legislation. A group of House Democrats wrote to Democratic leaders to request that action in the deadlocked session of Congress, but Biden rejected the idea this week.
Asked about the split, Yellen said only that she and Biden agreed that it was “really up to Congress to raise the debt ceiling.”
“It’s absolutely imperative that this is done, and I’d like to see it happen in the way that it can happen,” Yellen added.
As the administration moves into a period that traditionally leads to top officials leaving an administration, she made it clear that she had no intention of being one of them. Asked about reports that she had informed the White House that she wanted to stay on next year, Yellen said it was “an accurate read.”
“I feel very excited about the program that we talked about,” Yellen said. “And I see in that great strengthening of economic growth and addressing climate change and strengthening American households. And I want to be a part of that.”