Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she saw no signs of a recession anytime soon as the US economy rebounded 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. United as policymakers move urgently to cool widespread and rising inflation. it had a powerful effect on American views of the economy – and endangered Democratic majorities on Capitol Hill less than two weeks from the midterm elections.
“Look, what we’re seeing right now is solid growth this quarter. Growth obviously slowed after a very quick recovery from high unemployment,” Yellen said when asked if the latest GDP data added to any recession concerns. “We are in a full employment economy. It is very natural to grow slowly. And it has during the first three quarters of this year, but continues to be 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 finance officials that a recession is likely at some point next year, but was based in part on elements of the latest data that showed signs of necessary cuts in key areas of the economy leaves open. 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 annual rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. This is a change from a decrease of 1.6% in the first quarter of the year and a negative 0.6% in the second.
But Yellen’s view also highlighted the complex balancing act that President Joe Biden and his top economic officials have attempted this year, as they seek to highlight a rapid economic recovery and major legislative victories while who also promised to address rising prices.
“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 US economy with growing discontent among voters. Yellen acknowledged that prices will take time to come down, saying that efforts to get them back to levels “that people are more used to” will likely span “the next few years.”
It is a reality that has slowed efforts by the administration to take advantage of what officials consider a robust record. Biden, asked about the economy last week, told reporters it is “strong as hell,” drawing criticism from Republicans.
But Yellen agreed with the President’s assessment that the economy remains strong, standing out compared to how other economies around the world are doing.
“If you look around the world, there are many economies that are really suffering not only from high inflation but very weak economic performance, and the United States stands out. We have unemployment at the lowest level in 50 years. … 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 in recession and we continue to do well.”
Yellen also acknowledged frustration within the administration that efforts to get the American economy out of the crisis have not received the credit officers believe it deserves.
“There were several problems that we could have had, and difficulties that many American families could have faced,” said Yellen. “These are problems that we don’t have, because of what the Biden administration has done. Therefore, one often does not get credit for problems that do not 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 those policies have led to manufacturing across the country.
It is a critical piece of an economic strategy designed to address many of the vulnerabilities and deficiencies uncovered as Covid-19 swept the world, with significant federal investments in infrastructure and strengthening – or creating from scratch – key pieces of critical supply chains.
Listing a series of large private sector investments, including the $20 billion Intel plant that opened a few hours’ drive outside Columbus, Yellen said they were “real tangible investments that are happening now,” even as she acknowledged which will take time to fully take effect.
Yellen promised that those efforts will be felt as they pass through the economy in the coming months and years. Asked if the administration’s overall 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 will see improved roads, repaired bridges that have been falling apart. We are seeing money flowing into research and development, which is a really important source of long-term health for the American economy. And the strength of America will increase and we will become a more competitive economy,” she said.
Yellen also addressed the battle lines that have been drawn this week over raising the debt ceiling, a now self-perpetuating Washington crisis that House Republicans have once again vowed to use for leverage if they get the majority.
“The President and I agree that America should not be held hostage by members of Congress who think it is OK to compromise the credit rating of the United States and to threaten a default on US Treasuries , which are the foundation of global financial markets,” Yellen said. .
But Yellen, who has long emphasized the “destructive” nature of the clashes, has also supported lifting the debt ceiling entirely through legislation. A group of House Democrats wrote to Democratic leaders to demand that action in the 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 absolutely essential that it gets done, and I’d like to see it happen as quickly as it can happen,” Yellen added.
As the administration moves towards a period of time that traditionally leads top officials to leave an administration, she made it clear that she did not plan to be one of them. Asked about reports that she had informed the White House she wanted to stay in next year, Yellen said it was an “accurate reading.”
“I’m very excited about the program that we talked about,” Yellen said. “And in it I see a great strengthening of economic growth and addressing climate change and strengthening American homes. And I want to be a part of that.”